-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A4V4l0RwSY8TPbyKCS9TqOik+sed1d4/qqCa27LmqP5SC1TauZNUM5N/9FLHKgnC LMUhzU5L7dWldsLerrwL6g== 0000950124-00-001917.txt : 20000403 0000950124-00-001917.hdr.sgml : 20000403 ACCESSION NUMBER: 0000950124-00-001917 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 42 FILED AS OF DATE: 20000331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STOCKPOINT INC CENTRAL INDEX KEY: 0001099421 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 366265000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-33784 FILM NUMBER: 591581 BUSINESS ADDRESS: STREET 1: 2600 CROSSPARK ROAD CITY: CORALVILLE STATE: IA ZIP: 52241 BUSINESS PHONE: 3196265000 MAIL ADDRESS: STREET 1: 2600 CROSSPARK ROAD CITY: CORALVILLE STATE: IA ZIP: 52241 S-1 1 FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------------- STOCKPOINT, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 7375 36-3775977 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification organization) Number) 2600 CROSSPARK ROAD CORALVILLE, IOWA 52241 (319) 626-5000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ----------------------- WILLIAM MCNALLY GENERAL COUNSEL STOCKPOINT, INC. 2600 CROSSPARK ROAD CORALVILLE, IOWA 52241 (319) 626-5000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------------- COPIES TO: THOMAS MARTIN, ESQ. JEFFREY C. ROBBINS, ESQ. KIRK COZINE, ESQ. ANNA C. LINDER, ESQ. DORSEY & WHITNEY LLP MESSERLI & KRAMER P.A. PILLSBURY CENTER SOUTH 1800 FIFTH STREET TOWERS 220 SOUTH SIXTH STREET 150 SOUTH FIFTH STREET MINNEAPOLIS, MINNESOTA 55402 MINNEAPOLIS, MN 55402 (612) 340-2600 (612) 672-3600 FAX: (612) 340-8738 FAX: (612) 672-3777 ----------------------- 2 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. ----------------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] ----------------------- CALCULATION OF REGISTRATION FEE Title of Each Class of Proposed Maximum Aggregate Amount of Securities to be Registered Offering Price (1) Registration Fee Common Stock, $.01 par value........ $45,000,000 $11,880
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. ----------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- 3 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS Subject to Completion dated March 31, 2000 SHARES [LOGO] STOCKPOINT COMMON STOCK --------------- We are an Internet services company that provides global online market analysis tools and financial information. This is the initial public offering of our common stock and no public market currently exists for our common stock. We are offering _____ shares of our common stock. We currently expect the initial public offering price will be between _____ and _____ per share. We have applied for our common stock to be quoted on the Nasdaq National Market under the symbol "STKP." INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE REGULATOR 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.
Per Share Total - ------------------------------------------------------------------------------- Public offering price $ $ - ------------------------------------------------------------------------------- Underwriting discount $ $ - ------------------------------------------------------------------------------- Proceeds, before expenses, to Stockpoint $ $ - -------------------------------------------------------------------------------
The underwriters may purchase up to ________ additional shares of common stock from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over- allotments. The underwriters expect to deliver the shares of common stock to purchasers in Newport Beach, California on or about _______________, 2000. [GRAPHIC] ROTH CAPITAL PARTNERS, INC. The date of this prospectus is ________, 2000 4 INSIDE COVER PAGE-- DESCRIPTION OF ARTWORK Text at top of page reads: "Stockpoint seamlessly integrates customizable financial content and applications into client web sites." To the right of the text is the Stockpoint logo. Below the text are 11 client web site pages. In the upper left-hand corner is the web site page of WR HAMBRECHT + CO, depicting quote information for Microsoft Corp. Below the web page there is text that reads: "WR Hambrecht + Co" and "wrhambrecht.com." Overlaying a portion of this web page is the web page of Italia-iNvest.com depicting quote information for Fiat in the Italian language. Below the web page is text that reads "GlobalNetFinancial.com, Inc." and "italia-invest.com." In the upper middle of the page is the web site page of LookSmart Ltd., depicting performance information for five individual stocks. The performance information includes Market Price, Today's Change, Shares, Current Value, $ Gain/Loss and % Gain/Loss. Above the web page, there is text that reads: "LookSmart Ltd".and "money.looksmart.com" In the upper-right corner are the web site pages of National Discount Brokers and SURETRADE, Inc. National Discount Brokers' web site page depicts "stockfinder pro" and several optional sample screens a viewer can select. The sample screens include: a Blue Chip stocks screen, Growth & Value Screen, Strong Growth Screen and High Dividend Yield Screen. The web site page of SURETRADE.COM. overlays a portion of National Discount Brokers' web page, depicting "Fund Finder Pro" with twenty two Fund objectives that a viewer can select. Below the web site page of SURETRADE.COM is text that reads: "SURETRADE, INC." and " suretrade.com." In the lower right-hand corner are the web site pages of Worldly Information Network and Barclays Global Investors. The web page of Worldly Information Network includes a graph of the Dow Jones Industrial Average and "global indexes" for the Americas, Asia and Europe. The Americas indexes include Brazil Bovespa Index, DJ Industrials, Dow Jones 20 Bond Average and Mexican Bolsa. Below the web site is text that reads: "Worldly Information Network, Inc" and "Worldlyinvestor.com". The Asia indexes include Australian All Ordinaries and Hong Kong Seng. Barclays Global Investors web site page overlays a portion of the worldlyinvestors.com's web page. The background screen of Barclays Global Investors' web site page is black, and the screen shows "Currency Calculator" and a list of currencies a viewer can choose from. Below the web site page of Barclays Global Investors, there is text that reads: "Barclays Global Investors "and" barclaysglobal.com.". In the lower middle of the page are the web site pages of A.B. Watley, Inc. and MyWay.com. The MyWay.com web site depicts AT&T Corporation and its Analyst Rating Summary, which includes Analyst Opinions and Average Recommendation. Below the web site page of MyWay.com there is text that reads "MyWay.com" and "myway.com." The web page of A.B. Watley, Inc. depicts three graphs: Equity Indices, Interest Rates and Currency tables. Right below the three tables, there is text that reads: "A.B. Watley Inc. is a wholly owned subsidiary of A.B. Watley Group Inc." Below A.B. Watley's web site page there is text that reads: "A.B. Watley Group Inc." and "abwatley.com." In the lower left-hand corner are the web site pages of Robertson Stephens and Quick & Reilly. The Robertson Stephens screen shows a graph named "The Kebdex" and a viewer can click either "Weekly" or "interactive" to view different charts. Above the web site page there is text that reads: "Robertson Stephens "and" internetstocks.com". Quick & Reilly's web site page shows a graph of "Bristol Myers Squibb Co." dated November 16, 1999. The lower half of the web site page shows "Indicators and Display" a viewer can select. Below the web site page reads "Quick & Reilly" and "quickandreilly.com." 5 TABLE OF CONTENTS Prospectus Summary......................................................... 4 Risk Factors............................................................... 7 Forward-Looking Statements................................................. 14 Use of Proceeds............................................................ 15 Dividend Policy............................................................ 15 Dilution................................................................... 16 Capitalization............................................................. 17 Selected Consolidated Financial Information................................ 18 Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................... 20 Business.................................................................. 27 Management................................................................. 38 Certain Transactions....................................................... 43 Principal Stockholders..................................................... 45 Description of Capital Stock............................................... 46 Shares Eligible for Future Sale............................................ 48 Underwriting............................................................... 50 Legal Matters.............................................................. 51 Experts.................................................................... 52 Where You Can Find More Information........................................ 52 Index to Financial Statements.............................................. F-1 ------------------------ In making a decision to buy our common stock, you should only rely on the information contained in this prospectus. We have not authorized anyone to provide you with other information. We are offering to sell these shares only where it is legal to sell them. The information in this prospectus is complete and accurate as to the date on the front cover, but the information may have changed since that date. 3 6 PROSPECTUS SUMMARY Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of this offering, we encourage you to read the entire prospectus, including the detailed information and consolidated financial statements that it contains, before making an investment decision. STOCKPOINT Stockpoint is a leading business-to-business provider of global online market analysis tools and financial information. We integrate sophisticated financial applications to provide our clients customized financial web pages that we host using our proprietary architecture. This enables our clients to outsource their financial web page production and maintenance, and provide robust financial content to their users. Our clients include traditional and online brokerage firms, commercial banks, asset managers, web portals, media companies, electronic communication networks, 401(k) sponsors and insurance companies. As of February 29, 2000, we had over 200 clients, including companies such as Barclays Global Investors, LookSmart Ltd., Quick & Reilly Group Inc. and U.S. Bancorp Piper Jaffray Inc. We offer comprehensive solutions for businesses seeking to add financial content to their web sites. With the solutions we provide and host, our clients are able to offer their users real-time stock quotes, charting capabilities, portfolio management and analysis tools, currency utilities, company research and business news. Our services create an online environment that allows our clients' users to easily analyze and manage their holdings using detailed financial information and advanced Internet technologies. In recent years, there has been a dramatic increase in the use of online financial information services and trading. Investors are increasingly looking to the Internet for information about their financial assets. According to Forrester Research Inc., in 1999 there were 5.7 million households using the Internet to execute financial transactions and obtain financial information. Forrester Research predicts that this number will increase to 21 million households by 2003, a number that would represent nearly 53% of U.S. households. In addition, both retail and institutional investors increasingly demand up-to-the-minute information on security prices and business trends, and the market analysis tools necessary to assimilate this information. Many investors are using this information to manage their financial assets more actively. Moreover, instead of resorting to a broker or other financial intermediary, individual investors now have access to online trading services that allow them to rapidly execute their own transactions at a lower cost than that previously charged. Forrester Research has projected that online investment accounts in the U.S. will grow from $374 billion of assets in 5.4 million online accounts in 1999 to $3.1 trillion of assets in 20.4 million online accounts by 2003. As a result of these developments, many companies that have an Internet presence, including web portals and media companies, have developed or are developing financial market content for their web sites in an effort to enhance their attractiveness to Internet users and to assist in user retention. In particular, many financial services companies such as commercial and investment banks, mutual fund companies and 401(K) plan sponsors are concluding that the availability of stock quotes, analysis and business information on their web sites is a prerequisite to the generation of significant web traffic and e-commerce transactions. The quality and breadth of financial information offered is rapidly becoming a differentiator among financial services providers. Our objective is to be the leading business-to-business provider of global online market analysis tools and financial information. Key elements of our strategy include: o PENETRATING VERTICAL MARKETS. We intend to rapidly expand our sales force to target businesses in industries that require robust online market analysis tools and financial information on their web sites. Our broad client experience enables us to intelligently recommend and sell new products, content and services to improve web site functionality. O CREATING A WORLDWIDE PRESENCE. We intend to expand our product offerings and international presence to serve the global online financial information needs of our clients and their users. To further our international objectives, we expect to open an office in London, England in the next few months and intend to open an office in Asia during 2000. O USING TECHNOLOGY TO LEVERAGE OUR GROWTH. We intend to develop and market innovative products and services to attract and retain clients. We also intend to establish new facilities to maintain the scalability and availability of our high quality web hosting services. o PURSUING STRATEGIC ALLIANCES OR ACQUISITIONS. We intend to accelerate our global sales and marketing efforts and technology development, and gain access to compelling content, applications and functionality, through strategic alliances and acquisitions. We intend to seek acquisitions of businesses to complement our products or services or to give us access to new markets. 4 7 Our corporate headquarters are located at 2600 Crosspark Road, Coralville, Iowa 52241 and our phone number is (319) 626-5000. Our Internet address is www.stockpoint.com. Information on our web site is not part of this prospectus. THE OFFERING Common stock offered...................... shares. Common stock to be outstanding after the offering..................... shares. Use of proceeds........................... We intend to use the net proceeds to repay most of our outstanding indebtedness, to add sales and marketing personnel, to continue Internet product development, to finance additional hosting facilities and capacity and for working capital and other general corporate purposes. Risk factors.............................. Investing in our common stock involves risks. Proposed Nasdaq National Market symbol.... "STKP." ---------------------- "Stockpoint" is our federally registered trademark. This prospectus also contains names, trademarks, service marks and registered trademarks and service marks of other companies. ---------------------- Except as otherwise noted, all information in this prospectus: o reflects the automatic conversion of all our outstanding shares of convertible preferred stock into an aggregate of 1,838,813 shares of common stock upon completion of this offering; o assumes no exercise of the underwriters' over-allotment option; and o reflects our disposition on May 29, 1999 of technology and operational assets related to the steel-making industry. The number of shares of our common stock to be outstanding immediately after this offering excludes 1,652,300 shares of common stock that we may issue on the exercise of options outstanding as of December 31, 1999 and 1,810,639 shares of common stock that we may issue on the exercise of warrants outstanding as of December 31, 1999. 5 8 SUMMARY CONSOLIDATED FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31, ------------------------------------------------------ 1997 1998 1999 ------------ ------------ ------------ STATEMENT OF OPERATIONS DATA: Revenues ..................................... $ 1,427,908 $ 2,177,946 $ 6,829,869 Cost of revenues ............................. 308,608 764,965 2,289,881 ------------ ------------ ------------ Gross profit ................................. 1,119,300 1,412,981 4,539,988 Operating expenses ........................... 4,366,476 6,856,777 7,429,328 ------------ ------------ ------------ Operating loss from continuing operations .... (3,247,176) (5,443,796) (2,889,340) Other expense primarily interest ............. (688,525) (784,546) (1,058,545) Income (loss) from discontinued operations ... (405,722) (356,946) 347,675 Gain on disposition of discontinued operations -- -- 433,133 ------------ ------------ ------------ Net loss ..................................... $ (4,341,423) $ (6,585,288) $ (3,167,077) ============ ============ ============ Basic and diluted loss per common share: Historical loss from continuing operations . $ (1.90) $ (3.15) $ (2.03) Historical net loss ........................ $ (2.10) $ (3.32) $ (1.67) Pro forma loss from continuing operations .. $ (0.73) Pro forma net loss ......................... $ (0.53) Weighted average common shares outstanding ... 2,089,701 2,106,906 2,141,404 OTHER OPERATING DATA: Contracted revenue backlog at period end (1) . $ 140,078 $ 1,458,447 $ 10,703,000
DECEMBER 31, 1999 ---------------------------------------- ACTUAL AS ADJUSTED(2) --------------- --------------- BALANCE SHEET DATA: Cash and cash equivalents.................................. $2,203,623 Working capital (deficit).................................. (2,668,644) Total assets............................................... 6,089,138 Total debt................................................. 12,292,502 Stockholders' equity (deficiency)......................... $(11,426,863)
- ----------- (1) Represents contracted revenues at period end less amounts recognized as revenue in the statement of operations. The balance of contracted revenue backlog at period end represents amounts to be recognized in the statement of operations in future periods over the duration of our contracts. (2) As adjusted to reflect the sale of shares of common stock in this offering at an assumed offering price of $ per share, after deducting the underwriting discount and estimated offering expenses payable by us, and the application of a portion of the estimated net proceeds from this offering to repay most of our outstanding indebtedness, as described in "Use of Proceeds." 6 9 RISK FACTORS Before investing in our common stock, you should be aware that there are various risks, including those described below. As a Stockpoint stockholder, you will be subject to the risks inherent in our business. The value of your investment may decline, and could result in a loss of your entire investment. You should carefully consider the following factors as well as the other information contained in this prospectus before deciding to buy our common stock. RISKS RELATED TO OUR OPERATIONS WE HAVE A HISTORY OF LOSSES AND EXPECT TO CONTINUE TO GENERATE LOSSES IN THE FUTURE. As of December 31, 1999, we had an accumulated deficit of $23.1 million, of which $19.0 million is attributable to our continuing operations. We have not achieved profitability and expect to continue to incur net losses into 2001. We expect to continue to incur significant operating expenses and, as a result, will need to generate significant revenues to achieve profitability, which may not occur. Even if we do achieve profitability, we may be unable to sustain or increase profitability on a quarterly or annual basis in the future. WE HAVE A LIMITED HISTORY IN OPERATING OUR INTERNET-BASED LICENSING BUSINESS. Our business model depends largely on our ability to license our Internet products and hosting services to third parties. We began to emphasize this model only in mid-1998. For us, this means that we have only limited experience in operating an Internet-based licensing business from which to evaluate our business prospects and analyze the risks and uncertainties that we face. We will be adversely affected if we are unsuccessful in anticipating potential business issues or in addressing unexpected issues as they arise. For you, this means that you have limited historical information from which to evaluate our prospects. WE MAY NEED MORE CASH AFTER THIS OFFERING AND WE MAY NOT BE ABLE TO OBTAIN IT. If we do not achieve or maintain significant revenues or profitability or have not accurately predicted our cash needs, or if we decide to change our business plans, we may need to raise additional funds in the future. Any required funding may not be available to us on favorable terms, if at all. If we raise additional funds by issuing equity securities, you may experience dilution in your ownership interest. If we raise additional funds by issuing debt securities, we may incur significant interest expense and become subject to covenants that could limit our ability to operate and fund our business. If additional funds are not available when required, we may be unable to effectively realize our current plans. IF WE ARE UNABLE TO ATTRACT OR RETAIN QUALIFIED DEVELOPMENT STAFF, OUR BUSINESS COULD BE HARMED. Our future success depends substantially upon the continued efforts of our software applications and web programming staff to provide the integration services necessary to timely create, implement and host web site financial content for our clients, and to update and expand our web site offerings. None of our software engineers and web programmers are bound by employment agreements. Competition for software engineers is intense, particularly in San Francisco and surrounding communities where we maintain offices, and we may not be able to retain existing or attract additional highly qualified programmers in the future. If we lose the services of a significant number of our applications staff and web programming staff or are unable to continue to attract additional applications and web programming staff with appropriate qualifications, the quality of our product offerings and our ability to retain and expand our client base could suffer. WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY OFFICERS. Our future success depends to a significant extent on the continued service and coordination of our management team. The departure of any of our officers or key employees could materially adversely affect our ability to implement our business plan. 7 10 OUR BUSINESS DEPENDS ON OUR ABILITY TO ENTER INTO AND MAINTAIN RELATIONSHIPS WITH CONTENT PROVIDERS. Our business depends on financial data and information, such as stock pricing information and financial news and research information, obtained from third-party providers through non-exclusive contractual relationships. Many of our providers compete with each other and, to some extent, with us for clients. Given the nature of our contracts with providers, we will be required to renegotiate contracts, including the contract with our key supplier, S & P Comstock, when they expire (usually one to two years). We may not be able to renew these contracts on favorable terms or at all. There is intense competition for relationships with these firms. We may have to pay significant fees to establish additional content syndication relationships, particularly if we expand, as expected, in international markets, or maintain existing relationships in the future. We may be unable to enter into relationships with these firms or sites on favorable terms or at all. Many of the financial content providers that we have contracts with or have approached also provide financial news and information to our competitors and clients. These companies may be reluctant to enter into or maintain strategic relationships with us. In addition, while we are not solely reliant on any one content provider, the loss of a key vendor could render all or a portion of our services unavailable for a period of time, which could have a negative impact on our client relationships and cause harm to our reputation. The terms of our agreements with content suppliers vary widely. The services that we provide and the methods that we utilize to do so change rapidly. Also, the law and legal practice for content supplier contracts are unsettled and constantly developing. As a result, we must periodically modify and renegotiate our vendor agreements. We attempt to operate our web site customization and hosting services in accordance with our agreements and to renegotiate them as necessary. However, we cannot assure you that our vendors will not claim that we owe additional sums or must limit our activities. IF OUR CLIENTS DO NOT BELIEVE OUR PRODUCT OFFERINGS PROVIDE THEM WITH A COMPETITIVE BENEFIT, OUR ABILITY TO ATTRACT AND RETAIN CLIENTS COULD BE ADVERSELY AFFECTED. Most of our clients generate revenue through their web sites from advertising revenue or transaction volume. To the extent that our clients believe that they do not gain a competitive benefit, whether through increased advertising revenue, transaction volume or otherwise, from the incorporation of our financial content into their web sites, our ability to attract and retain clients could be adversely affected. WE HAVE LIMITED EXPERIENCE IN RENEWING OUR LICENSE CONTRACTS AND MAY NOT BE ABLE TO RENEW A SIGNIFICANT PORTION OF THEM. Only a relatively few of our license contracts, which typically have terms that vary from one to two years, have come up for renewal. We have limited experience with the renewal process. If we are unable to renew a significant portion of our contracts with existing clients, our business and financial performance could be materially adversely affected. In particular, GlobalNetFinancial.com, Inc. represented 14% of our 1999 revenues. GlobalNetFinancial.com has recently announced an agreement with Telescan Inc., one of our competitors, under which Telescan will increase an existing ownership interest to give Telescan approximately 15% of GlobalNetFinancial.com's stock. If GlobalNetFinancial.com or any other large client does not renew its license contract with us, it could have a material adverse effect on our business and financial performance. OUR BUSINESS MAY SUFFER IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH. We have experienced rapid growth in our operations. This rapid growth has placed, and our anticipated future growth will continue to place, a significant strain on our managerial, operational and financial resources. Our current management does not have extensive experience in managing a large corporation. To manage our growth, we must continue to implement and improve our managerial controls and procedures and operational and financial systems on a timely basis. If we are unable to manage our growth effectively, our business could be materially adversely affected. OUR INTERNATIONAL OPERATIONS ARE NEW AND MAY NOT BE SUCCESSFUL. We have only recently commenced operations in a number of international markets and a key component of our strategy is to continue to expand our international operations. We have limited experience in developing and obtaining financial information relating to foreign markets and in marketing, selling and distributing our products and 8 11 services internationally. We cannot assure you that we will be able to successfully develop relationships with international content providers, or successfully market, sell and distribute our products and services internationally. There are risks in doing business in international markets which could adversely affect our business, including: o difficulties in obtaining international quote and exchange data; o regulatory requirements; o export restrictions and controls, tariffs and other trade barriers; o difficulties in staffing and managing international operations; o fluctuations in currency exchange rates; o reduced protection for intellectual property rights; o seasonal reductions in business activity; o potentially adverse tax consequences; and o political and economic instability. The growth of the Internet as a means of conducting international business has raised many legal issues, including the circumstances under which countries or other jurisdictions have the right to regulate Internet services available from service providers located elsewhere. In many cases, there are no laws, regulations, judicial decisions or governmental interpretations that clearly resolve these issues. Our costs could increase and the growth of our international operations could be harmed by any new laws or regulations, or the application or interpretation of existing laws and regulations to the Internet. INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL PERFORMANCE. We compete with an increasing number of companies that offer charting, stock quotation and business information web applications, development and hosting services. We also compete with the in-house development staffs of many of our clients. We expect both of these forms of competition to continue to intensify. Some of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger client bases and significantly greater financial, technical and marketing resources than we do. These factors may provide them with significant advantages over us. Competitive pressures could result in reduced market share, price reductions, reduced margins and increased spending on marketing and product development, any of which could adversely affect our business. FAILURE TO MAINTAIN OUR REPUTATION FOR RELIABILITY AND QUALITY MAY REDUCE THE NUMBER OF OUR CLIENTS, WHICH COULD HARM OUR BUSINESS. It is very important that we maintain our reputation as a reliable developer and host of financial content for web sites. Many events beyond our control, including slower response times than usual, systems or operations failures, errors in the transmission of quotation data or the misreporting of financial news or analysis by one or more of our content contributors, could harm our reputation. These events could result in a significant reduction in the number of our clients, which could materially adversely affect our business. UNEXPECTED INCREASES IN TRAFFIC MAY STRAIN OUR SYSTEMS. In the past, we have experienced significant spikes in traffic on the web sites that we host when there have been important financial news events. Our client base has increased over time and we are seeking to increase it further. Our web site hosting systems must accommodate a high volume of traffic, often at unexpected times. Our hosted web 9 12 sites may experience slower response times than usual, temporary interruption of service or other problems for these and other reasons. These occurrences could cause our clients to perceive our services as not being adequate and, therefore, terminate or not renew their contracts with us. This could adversely affect our business. SYSTEM FAILURES, TO WHICH WE ARE PARTICULARLY VULNERABLE BECAUSE WE CURRENTLY OPERATE ONLY ONE COMPUTER DATA CENTER, COULD ADVERSELY AFFECT OUR BUSINESS. Our systems and operations are vulnerable to damage or interruption from a variety of factors, including human error, natural disasters, power loss, telecommunication failures, break-ins, sabotage (physical or electronic), computer viruses, vandalism and similar unexpected adverse events. We currently operate only one computer data center. We do not expect to begin operating an additional facility until at least the second half of 2000. This increases our vulnerability, since localized problems at our Iowa facility, such as storm damage or localized telephone failure, could make us unable to provide our services. Unanticipated problems have caused interruptions in delivery of our services in the past and similar problems could occur in the future. Any system failure, including network, software or hardware failure, that causes an interruption in our services or a decrease in responsiveness of our hosted web sites could result in canceled client contracts, reduced revenue and harm to our reputation, brand and our relations with our providers and adversely affect our business. POTENTIAL FLUCTUATIONS IN OUR QUARTERLY FINANCIAL RESULTS MAKE FINANCIAL FORECASTING DIFFICULT. Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control. These factors include: o the number, size and timing of new license contracts sold; o the number, size and timing of license renewals and terminations; o the character of any development services required by our clients; o our ability to develop, market and introduce new and enhanced services on a timely basis; o actions taken by our competitors, including new product introduction and enhancements; and o adverse changes in the financial markets. We believe that quarter-to-quarter comparisons of our operating results may not be a good indication of our future performance. Investors should not rely on our operating results for any particular quarter as an indication of our future operating results. DIFFICULTIES ASSOCIATED WITH OUR BRAND DEVELOPMENT MAY HARM OUR ABILITY TO ATTRACT CLIENTS. We believe that maintaining and increasing awareness of the Stockpoint brand is an important aspect of our efforts to continue to attract clients. The importance of brand recognition will increase in the future because of the growing number of web sites providing financial content and information. However, our efforts to build brand awareness may not be successful. EVENTS RELATED TO OUR FORMER CHIEF EXECUTIVE OFFICER COULD AFFECT OUR REPUTATION AND HARM OUR BUSINESS. Robert Staib, our former Chief Executive Officer and a former director, was arrested in December 1998 and indicted in April 1999 for bank fraud in connection with the pledge of stock certificates he held in UAL, Inc. to secure loans to an unrelated company. Robert Staib pleaded guilty to certain allegations in March 2000 as part of an agreement settling the indictment. His sentencing is currently set for June 2000. Robert Staib has not been an officer or director of Stockpoint since his arrest in December 1998. Nevertheless, publicity related to his sentencing or other events could include references to us or to William Staib, our Chief Executive Officer and the son of Robert Staib. Publicity of this type could cause harm to our reputation and business, and our ability to obtain financing. 10 13 COURT ACTION RELATING TO A SETTLEMENT AGREEMENT WITH ROBERT STAIB COULD CHANGE THE NUMBER OF WARRANTS OUTSTANDING. We settled a dispute in December 1999 regarding the number of warrants to which Robert Staib was entitled by agreeing that some of his warrants were valid in consideration of the surrender of warrants to purchase 912,500 shares that he held. A creditor of Robert Staib is seeking to invalidate this settlement agreement. If the creditor were successful, we might have to reissue these warrants. ACQUISITIONS OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISRUPTIONS TO OUR BUSINESS AND MANAGEMENT. We may acquire products, technologies or businesses that we believe would help expand our product and service offerings. Any future acquisitions would present risks, including the difficulty of combining the technology, operations or workforce of the acquired business with our own, disruption of our ongoing operations and difficulty in realizing the anticipated financial or strategic benefits of the transaction. Acquisitions may also divert management's attention from day-to-day operations. These factors and our limited experience in negotiating, consummating and integrating acquisitions could adversely affect our business, earnings, financial condition and, ultimately, our stock price. Acquisitions that use stock as payment also could result in dilution of our per share earnings and of your voting rights. FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR BRAND-BUILDING EFFORTS AND ABILITY TO COMPETE EFFECTIVELY. We rely on a combination of trademark and copyright law, trade secret protection, confidentiality agreements and other contractual arrangements to protect our intellectual property rights. We do not rely on patented processes or technologies. The protective steps we have taken may be inadequate to deter misappropriation of our proprietary information. We may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. We have registered our trademarks in the United States and we have pending U.S. applications for other trademarks. Effective trademark, copyright and trade secret protection may not be available in every country in which we offer or intend to offer our services. Failure to adequately protect our intellectual property could harm our brand, devalue our proprietary content and affect our ability to compete effectively. Defending our intellectual property rights could also result in the expenditure of significant financial and managerial resources, which could materially adversely affect our business. WE MAY HAVE TO DEFEND AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WHICH COULD CAUSE SIGNIFICANT EXPENDITURES. Although we believe that our business activities do not infringe the intellectual property rights of others, other parties may assert infringement claims against us or claim that we have violated a patent or infringed a copyright, trademark or other proprietary right belonging to them. The services we provide make extensive use of licensed third- party content and some use of licensed third-party technology. In the license agreements with respect to these items, the licensors have generally agreed to defend, indemnify and hold us harmless with respect to any claim by a third party that any licensed content or software infringes any intellectual property right. These provisions may not be adequate to protect us from infringement claims. In particular, increasing attempts to patent software techniques and concepts may lead to an increase in claims of infringement, particularly with respect to companies involved in the Internet. We have received a claim that our use of some algorithms may require a license. Infringement claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources, which could materially adversely affect our business. DIFFICULTIES IN DEVELOPING NEW AND ENHANCED SERVICES AND FEATURES COULD HARM OUR BUSINESS. We intend to introduce additional and enhanced products and services to retain our current clients, expand the products and services our clients use and attract new clients. If our services are not favorably received or a competitor introduces a service that we are unable to provide, potential clients may choose a competitor's products or services and current clients may decline to renew their contracts with us. We may experience difficulties that could delay or prevent our introduction of new services. These difficulties may include the inability to obtain or maintain third-party technology license agreements. New services could contain errors that are discovered after introduction. If so, we may need to significantly modify the design or implementation of these services to correct any errors. If we 11 14 experience difficulties in introducing new services or if these new services do not attract significant licensing interest, our business could be materially adversely affected. WE MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CLIENT DEMANDS EVOLVE. To be successful, we must adapt to our rapidly changing market by continually enhancing the technologies used in our products and services, and introducing new technology to address the changing needs of our business and consumers. If we are unable, for technical, legal, financial or other reasons, to adapt in a timely manner to changing market conditions or business and client requirements, our business could be materially adversely affected. RISKS RELATED TO OUR INDUSTRY IF THE MARKET FOR PRODUCTS AND SERVICES RELATED TO INTERNET-BASED FINANCIAL INFORMATION DOES NOT DEVELOP AS WE ANTICIPATE, WE MIGHT NOT ACHIEVE OUR BUSINESS OBJECTIVES. The market for Internet-based financial information has only recently begun to develop. Because the market for our services is new, it is difficult to accurately predict the growth rate and ultimate size of this market. In addition, the market is rapidly evolving and is characterized by an increasing number of potential competitors. The market for our services may not continue to develop, or may develop more slowly than we expect, and our product offerings may never achieve significant market acceptance. A downturn in the financial markets could result in a decline in interest in individual investing, which could adversely affect the market for our services. In addition, U.S. financial institutions are continuing to consolidate, which may increase our clients' leverage to negotiate prices and decrease the overall potential market for some of our services. These factors, as well as other changes occurring in the financial services industry, could have a material adverse effect on our business. CONCERNS ABOUT THE SECURITY AND OPERATION OF OUR WEB SITE HOSTING SERVICES COULD INCREASE OUR EXPENDITURES OR DECREASE OUR CLIENT BASE. There have been several recent widely-publicized instances of "hackers" compromising the integrity, security and operation of web sites. We may have to incur significant costs to protect our web site or those of our clients or to alleviate problems caused by "hacking" if there is any: o perceived increase in "hacking" activity; o perception that our web site or the web sites that we host are particularly vulnerable to this kind of activity; or o instance in which our web site or one of the web sites we host is affected by this kind of activity. In addition to increased costs, any of these occurrences may decrease our ability to retain existing clients or attract new ones. OUR ABILITY TO MAINTAIN AND INCREASE OUR CLIENT BASE DEPENDS ON THE CONTINUED GROWTH IN USE AND EFFICIENT OPERATION OF THE INTERNET. Our business would be materially adversely affected if Internet usage does not continue to grow or grows slowly. Internet usage may be inhibited for a number of reasons, such as: o inadequate Internet infrastructure to support the demands placed on it as usage grows; o continued security and authentication concerns with respect to transmission over the Internet of confidential information; o privacy concerns, including those related to the placement by web sites of information on a user's hard drive without the user's knowledge or consent; o any well-publicized compromise of web site or Internet transmission security; 12 15 o inconsistent quality of Internet products and services; o limited availability of cost-effective, high-speed access to the Internet; and o significant future Internet service provider delays or outages. POTENTIAL LIABILITY FOR INFORMATION DISPLAYED ON OUR WEB SITE OR THE WEB SITES OF OUR CLIENTS MAY REQUIRE US TO DEFEND AGAINST LEGAL CLAIMS, WHICH MAY RESULT IN SIGNIFICANT EXPENSE. If any information that we publish proves to be erroneous, we might face lawsuits based on claims of losses resulting from actions taken on the basis of that information. We may also be subject to claims for defamation, libel, copyright or trademark infringement or claims based on other theories relating to the information we publish on our web site and the web sites of our clients. These types of claims have been brought, sometimes successfully, against online services as well as other print publications in the past. We could also be subject to claims based upon the content that is accessible from our web site or our clients' web sites through links to other web sites. Our insurance and contractual indemnification provisions may not adequately protect us against many of these claims. Defending against any claims like this could result in the expenditure of significant financial and managerial resources, whether our insurance covers us or not. GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD INCREASE OUR COSTS OF TRANSMITTING DATA AND LEGAL AND REGULATORY EXPENDITURES AND DECREASE OUR CLIENT BASE. Existing domestic and international laws or regulations specifically regulate communications or commerce on the Internet. Laws and regulations that address issues such as user privacy, pricing, online content regulation, taxation and the characteristics and quality of online products and services are under consideration by federal, state, local and foreign governments and agencies. Several telecommunications companies have petitioned the Federal Communications Commission to regulate Internet service providers and online services providers in a manner similar to the regulation of long distance telephone carriers and to impose access fees on such companies. This regulation, if imposed, could increase the cost of transmitting data over the Internet. It may take years to determine the extent to which existing laws relating to issues such as intellectual property ownership and infringement, libel, obscenity and personal privacy are applicable to the Internet. The Federal Trade Commission and government agencies in some states have been investigating Internet companies regarding their use of personal information. We could incur additional expenses if any new regulations regarding the use of personal information are introduced or if these agencies chose to investigate our privacy practices. Further, due to the global nature of the Internet, it is possible that some states, the United States or foreign countries might attempt to levy taxes on our activities. Any new laws or regulations relating to the Internet, or adverse application or interpretation of existing laws, could decrease the rate of growth in the use of the Internet and the demand for our products and services. RISKS RELATED TO THE OFFERING THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND THE PRICE IN THIS OFFERING MAY NOT BE INDICATIVE OF THE PRICE AFTER THE OFFERING, WHICH MAY DECLINE BELOW THE INITIAL PUBLIC OFFERING PRICE. Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters with reference to the general status of the securities market and other relevant factors. The offering price for the common stock should not be considered an indication of the actual value of the common stock and was not based on our net worth or prior earnings, of which there are none. The offering price may not be indicative of the price that will prevail in the public market after the offering. In particular, the market price of our common stock may decline below the initial public offering price. After this offering, an active trading market may not develop or be sustained. OUR STOCK PRICE MAY FLUCTUATE WIDELY. The prices at which our common stock will trade could be subject to wide fluctuations in response to changes in earnings estimates by analysts or other events or factors, many of which are beyond our control. The stock market has from time to time experienced extreme price and volume fluctuations which have often been unrelated to the 13 16 operating performance of the companies affected. These fluctuations have particularly affected securities of Internet- related companies. Investors may experience a material decline in the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company's securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation of this type is often expensive and diverts management's attention and resources. SUBSTANTIAL SALES OF OUR COMMON STOCK, OR THE PERCEPTION THAT SUBSTANTIAL SALES MAY OCCUR, COULD CAUSE OUR STOCK PRICE TO FALL AND MAKE IT DIFFICULT FOR US TO SELL ADDITIONAL SECURITIES. If our stockholders sell substantial amounts of our common stock, in the public market following this offering, the market price of our common stock could fall. These sales might also make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. After this offering, we will have _____ outstanding shares of common stock, assuming no exercise of the underwriters' over-allotment options and no exercise of outstanding options or warrants. Of these shares, the ______ shares sold in this offering will be freely tradeable, except for any shares purchased by our "affiliates," as defined in Rule 144 under the Securities Act. Other than ______ shares subject to a 180-day lock-up period, 4,010,181 of the shares of common stock outstanding prior to this offering will be freely tradeable immediately after completion of this offering except for any shares held by our affiliates. The remaining 4,750 shares will become eligible for resale 90 days after the effective date of this offering. In addition, the holders of 897,063 shares of common stock and the holders of warrants to purchase 1,598,639 shares of our common stock will be entitled to have the resale of their shares registered under the Securities Act, or to participate in subsequent registrations, or both. After the date of this prospectus, we intend to register up to _______ shares issuable upon the exercise of outstanding stock options and reserved for issuance under our stock option plans. Once we register these shares, they can be sold in the public market immediately following issuance. OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DISCOURAGE A TAKEOVER OF STOCKPOINT. Provisions of our certificate of incorporation, bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. MANAGEMENT COULD SPEND OR INVEST THE PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT AGREE. Our management will have significant discretion in applying the net proceeds of this offering, and may spend or invest the proceeds from this offering ineffectively or in ways with which you may not agree. YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION. If you purchase shares of our common stock, you will incur immediate and substantial dilution in net tangible book value per share. If the holders of outstanding options or warrants exercise those options or warrants, you will experience further dilution. WE DO NOT INTEND TO PAY DIVIDENDS. We currently intend to retain any earnings for use in the operation and expansion of our business and therefore do not anticipate paying any cash dividends in the foreseeable future. FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements. We have based these statements on our current expectations and projections about future events. These forward-looking statements include statements about: o our strategies; o the future growth of the Internet; o worldwide growth in use of Internet as a source of information for personal financial planning and transactions; o buying patterns of our clients; o trends based on our perceptions of past activity; and o other statements that are not historical facts. When used in this prospectus, the words "anticipate," "believe," "expect," "estimate" and similar expressions are generally intended to identify forward-looking statements. Our actual results may vary materially from those anticipated or implied by these forward-looking statements as a result of a number of risks and uncertainties, including the risks described in "risk factors" or elsewhere in this prospectus. 14 17 USE OF PROCEEDS We estimate our net proceeds from the sale of the shares of our common stock offered in this offering to be approximately $ million, or approximately $ million if the underwriters' over-allotment option is exercised in full, based on an assumed initial public offering price of $ per share and after deducting the underwriting discount and estimated offering expenses. We intend to use $11,370,000 of the net proceeds from this offering to repay most of our outstanding indebtedness. All repayments will include the amount of interest accrued through the date of repayment. The remaining proceeds will be used primarily to add sales and marketing personnel for our Internet business, to continue development of our Internet products, to finance additional hosting facilities and capacity and for working capital and other general corporate purposes. The amounts we actually expend for such purposes may vary and will depend on a number of factors, including the amount of our future revenues. We expect that the proceeds from this offering will be sufficient to meet our needs at least through 2001. We intend to repay the following debt outstanding as of February 29, 2000: o $4,145,000 of notes payable with two banks which bear interest at the prime rate; o $5,900,000 principal amount of debentures which bear interest at 8.75% and mature September 30, 2002; and o $1,325,000 outstanding under a line of credit with a commercial bank which bears interest at the prime rate and is secured by substantially all our assets. In addition, we may acquire businesses, products and technologies that are complementary to ours, and a portion of the net proceeds may be used for these acquisitions. We have no agreements with respect to any material acquisitions as of the date of this prospectus. Pending these uses, we intend to invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. DIVIDEND POLICY We currently intend to retain any earnings for use in the operation and expansion of our business and therefore do not anticipate paying any other cash dividends in the foreseeable future. 15 18 DILUTION If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. Pro forma net tangible book value dilution per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma net tangible book value per share of common stock immediately after completion of this offering. Our pro forma net tangible book value as of December 31, 1999 was $(11,858,203), or $(2.95) per share of common stock. Pro forma net tangible book value per share is equal to our total tangible assets less total liabilities, divided by the number of outstanding shares of common stock after giving effect to the conversion of our outstanding preferred stock into common stock in connection with this offering. After giving effect to our sale of the shares of common stock offered by this prospectus at an assumed initial offering price of $ per share and after deducting the underwriting discount and estimated offering expenses payable by us, our as adjusted pro forma net tangible book value as of December 31, 1999 would have been approximately $ , or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors purchasing shares in this offering. If the initial public offering price is higher or lower, the dilution will be greater or less, respectively. The following table illustrates this per share dilution to new investors: Assumed initial public offering price per share.............................. $ Pro forma net tangible book value per share as of December 31, 1999.......... (2.95) Increase in pro forma net tangible book value per share attributable to this offering............................................................. ----------- Pro forma net tangible book value per share after the offering.............. ----------- Dilution per share to new investors......................................... $ ===========
The following table summarizes, on the pro forma basis described above, as of December 31, 1999, the differences between the number of shares of common stock purchased from us, the total cash consideration paid to us and the average price per share paid by existing stockholders and new investors:
Total Shares Purchased Consideration Average --------------------------- ------------------------------ Price Number Percent Amount Percent Per Share ------------ ----------- --------------- ----------- ----------- Existing Stockholders 4,014,931 % $10,325,133 % $ 2.57 New Investors ------------ ----------- --------------- ----------- Total 100% 100% ============ =========== =============== ===========
The above discussion and tables exclude all options and warrants that will remain outstanding upon completion of this offering. At December 31, 1999, there were 1,652,300 shares of common stock reserved for issuance upon exercise of outstanding options with a weighted average exercise price of $4.20 per share, and 1,810,639 shares of common stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $5.86 per share. To the extent that any of these options or warrants are exercised, there will be further dilution to new investors. 16 19 CAPITALIZATION The following table sets forth our capitalization as of December 31, 1999 as follows: o on an actual basis; o on a pro forma basis to give effect to the conversion of all outstanding shares of our preferred stock into 1,838,813 shares of common stock; and o on a pro forma, as adjusted basis to reflect both the conversion of all outstanding shares of our preferred stock into common stock as described above and the application of the estimated net proceeds from this offering to repay most of our outstanding indebtedness, as described in "Use of Proceeds."
December 31, 1999 ------------------------------------------------- Actual Pro forma As Adjusted ------------ ------------ ----------- Long term debt, less current portion ...................................... $ 10,536,681 $ 10,536,681 $ -- ------------ ------------ ---------- Stockholders' equity (deficiency): Preferred Stock, no par value per share; 5,000,000 shares authorized: Convertible Series A Voting Preferred Stock, 320,000 shares issued and outstanding (convertible into 500,000 shares of common stock), no shares outstanding pro forma and as adjusted .............. 1,965,991 -- -- Convertible Series B Voting Preferred Stock, 282,720 shares issued and outstanding (convertible into 441,750 shares of common stock), no shares outstanding pro forma and as adjusted .............. 1,733,639 -- -- Convertible Series C Voting Preferred Stock, 773,254 shares issued and outstanding (convertible into 897,063 shares of common stock), no shares outstanding pro forma and as adjusted .............. 5,455,319 -- -- Common stock, $.01 par value per share; 20,000,000 shares authorized; 2,176,118 shares issued and outstanding, 4,014,931 shares outstanding pro forma, ____ shares outstanding as adjusted .............................. 21,761 40,149 Common stock warrants ................................................... 819,868 819,868 Additional paid-in capital .............................................. 3,875,620 13,012,181 Deferred stock-based compensation ....................................... (2,194,978) (2,194,978) Accumulated deficit ..................................................... (23,104,083) (23,104,083) ------------ ------------ Total stockholders' equity (deficiency) ............................... (11,426,863) (11,426,863) ------------ ------------ ---------- Total capitalization ......................................... $ (890,182) $ (890,182) $ ============ ============ ==========
17 20 SELECTED CONSOLIDATED FINANCIAL INFORMATION The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and related notes and with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. The consolidated statement of operations data for 1995 through 1999 and the balance sheet data at December 31 for each of 1995 through 1999 are derived from our audited financial statements. We reclassified our audited financial statements to give effect to sale of our process optimization software segment in May 1999. Historical results are not necessarily indicative of future results.
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------------- 1995 1996 1997 1998 1999 ------------ ------------ ------------ ------------ ------------ Statement of Operations Data (1): Revenues .......................................... $ 363,454 $ 862,488 $ 1,427,908 $ 2,177,946 $ 6,829,869 Cost of revenues .................................. 334,745 273,003 308,608 764,965 2,289,881 ------------ ------------ ------------ ------------ ------------ Gross profit ...................................... 28,709 589,485 1,119,300 1,412,981 4,539,988 Research and development .......................... 285,483 579,548 1,057,071 1,101,471 1,637,150 Sales and marketing ............................... 297,654 254,273 752,675 1,566,030 1,590,899 General and administrative ........................ 1,499,340 1,845,637 2,556,730 3,523,006 3,588,977 Deferred compensation ............................. -- -- -- 666,270 612,302 ------------ ------------ ------------ ------------ ------------ Total operating expenses ........................ 2,082,477 2,679,458 4,366,476 6,856,777 7,429,328 ------------ ------------ ------------ ------------ ------------ Operating loss from continuing operations ......... (2,053,768) (2,089,973) (3,247,176) (5,443,796) (2,889,340) Other expense, primarily interest ................. (206,570) (394,505) (688,525) (784,546) (1,058,545) ------------ ------------ ------------ ------------ ------------ Loss from continuing operations ................... (2,260,338) (2,484,478) (3,935,701) (6,228,342) (3,947,885) Discontinued operations: Income (loss) from discontinued operations ...... 726,808 (177,877) (405,722) (356,946) 347,675 Gain on disposition of discontinued operations .. -- -- -- -- 433,133 ------------ ------------ ------------ ------------ ------------ Net loss .......................................... (1,533,530) (2,662,355) (4,341,423) (6,585,288) (3,167,077) Cumulative dividends on preferred stock ........... -- -- (40,266) (409,418) (412,918) ------------ ------------ ------------ ------------ ------------ Net loss applicable to common stockholders ........ $ (1,533,530) $ (2,662,355) $ (4,381,689) $ (6,994,706) $ (3,579,995) ============ ============ ============ ============ ============ Basic and diluted income (loss) per common share (2): Loss from continuing operations ................. $ (1.10) $ (1.21) $ (1.90) $ (3.15) $ (2.03) Income (loss) from discontinued operation ....... $ 0.35 $ (0.08) $ (0.20) $ (0.17) $ 0.36 Net loss ........................................ $ (0.75) $ (1.29) $ (2.10) $ (3.32) $ (1.67) Weighted average common shares outstanding ........ 2,056,087 2,056,087 2,089,701 2,106,906 2,141,404 Pro forma basic and diluted income (loss) per common share (3): Loss from continuing operations ................. $ (0.73) Income (loss) from discontinued operations ...... $ 0.20 Net loss ........................................ $ (0.53) Weighted average pro forma common shares outstanding ....................................... 3,947,781 Other Operating Data: Contracted revenue backlog at period end (4) ...... -- $ 84,265 $ 140,078 $ 1,458,447 $ 10,703,000
18 21
DECEMBER 31, ----------------------------------------------------------------------------------------------- 1995 1996 1997 1998 1999 AS ADJUSTED(5) ------------ ------------ ------------ ------------ ------------ -------------- BALANCE SHEET DATA: Cash and cash equivalents ....... $ 612,242 $ 596,073 $ 242,609 $ 221,098 $ 2,203,623 Working capital (deficit) ....... 300,606 (186,491) (498,987) (5,350,171) (2,668,624) Total assets .................... 2,589,959 2,343,636 2,588,254 3,794,347 6,089,138 Short term debt ................. -- 10,000 -- 4,395,000 1,755,821 Long term debt .................. 3,750,000 5,750,000 5,550,000 5,900,000 10,536,681 Stockholders' equity (deficiency) (2,464,310) (5,071,034) (4,627,141) (9,745,756) (11,426,863)
(1) We have reclassified our statement of operations data for 1995 through 1999 to give effect to the sale in May 1999 of our process optimization software segment for $750,000, plus potential royalties. (2) We computed net loss per share information applicable to common stockholders by including cumulative dividends on our preferred stock. For additional information, see Note 1 to our consolidated financial statements. (3) We prepared the pro forma income (loss) per common share information for 1999 by assuming that our preferred stock was converted into common stock as of January 1, 1999, or as of the issuance date for shares of Series C preferred stock issued during 1999 in lieu of dividends. These conversions will occur automatically upon completion of this offering. We also excluded interest expense for 1999 on the debt we expect to repay with a portion of the proceeds from this offering. (4) Represents contracted revenues at period end less amounts recognized as revenue in our statement of operations. (5) As adjusted to reflect the sale of ______shares of common stock in this offering at an assumed offering price of $______ per share, after deducting the underwriting discount and estimated offering expenses payable by us, and the application of a portion of the estimated net proceeds from this offering to repay most of our outstanding indebtedness, as described in "Use of Proceeds." 19 22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis together with the "Selected Consolidated Financial Data" and our consolidated financial statements and the related notes included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ substantially from those discussed below as the result of many factors, including those discussed below and elsewhere in this prospectus, particularly in "Risk Factors." OVERVIEW We were incorporated in 1987 as Milltech HOH, Inc., an Illinois corporation, and reincorporated in 1993 as Neural Applications Corporation, a Delaware corporation. We originally developed, marketed and supported software based solutions for industrial, financial and other data intensive markets. We derived virtually all of our revenue through 1995, and a majority of our revenue from 1996 through 1998, from sales of our process optimization software solutions in the metals industry. We sold our process optimization software business in May 1999 for $750,000 plus future royalties, resulting in a gain of $450,000. We have classified our process optimization software business operating results as "discontinued operations" in our consolidated statements of operations and the related assets and liabilities as "net assets of discontinued operations" in our balance sheets. The discussion below of our results of operations relates solely to our continuing operations. During 1997, we began to shift our primary focus to the development and sale of online market analysis tools and financial information for the Internet. In March 1997, we acquired Ethos Corporation, a California company formed in July 1995 that had developed a web site featuring stock quotation capability (then "www.investorsedge.com"). This web site is the predecessor of our current Stockpoint.com web site. We accounted for the acquisition of Ethos as a pooling of interests and restated our financial statements for periods prior to the acquisition to include the combined financial information of both companies for all periods presented. Since 1997, we have placed increasing emphasis on the enhancement of our Internet business. In July 1999, to better reflect our position as an Internet applications and financial information services provider, we changed our name to Stockpoint, Inc. RESULTS OF OPERATIONS Our revenues include license fees for hosting and custom software application services for financial web sites and advertising revenues from banner ads placed on our web site and those of our clients. In addition, we have historically generated revenues from assorted data mining and financial services consulting projects for our clients. We anticipate that licensing revenues will represent the vast majority of our revenues in future periods. Our Internet business model has evolved from an initial dependence on advertising revenues from our web site to our current model, which emphasizes licensing of web site products and services to business clients. During 1997, our revenues began to shift from advertising revenues to licensing revenues. Licensing of web site products and services to business clients comprised 48% of our 1997 revenues. By 1998, 57% of our revenues were licensing revenues. In 1999, licensing revenues represented 84% of our revenues. Our license agreements typically provide for a flat fee for the agreement's term. We base this fee principally on the client's selection of site features. We also generally charge a per-view fee if page views exceed the amount stated in the contract. Our average contract size has increased from $3,500 in 1997 to $60,000 in 1999. This increase has been primarily the result of the introduction of more comprehensive product offerings and the expansion of our client base to include companies interested in licensing more sophisticated product options. In addition, beginning in 1999, we have been emphasizing two-year contracts, which increases the average licensing revenues per contract. Although we generally bill our clients up-front for a portion of our services, we recognize revenues ratably over the period of the contract. We reflect the obligation to provide the contracted services as "deferred revenue" on our balance sheet. This means that we record a liability to balance our accounts receivable or cash, depending on whether we have collected our billings. We amortize deferred revenue as we provide the services. Our licensing 20 23 contracts typically have lengths of one or two years. We recognize revenues for extensive custom development and for projects as we perform the services. Our direct cost of revenues primarily includes fees for data feeds and licenses, custom applications and development charges and maintenance of infrastructure, programming and quality assurance. We show these costs in our statement of operations as "cost of revenues." We expect that an increasing percentage of cost of revenues will be variable cost components that will increase as our volume rises. We also include the direct development and related costs associated with our data mining applications and consulting services for projects in the Internet and financial services markets in our cost of revenues. Operating expense includes research and development, sales and marketing, general and administrative and deferred compensation expense. These costs primarily include compensation and related benefits for personnel along with professional fees, travel, employee recruiting expense and occupancy costs. Deferred compensation expense results from the difference between the exercise price of vested options and the fair value of our stock at the date of grant. We expect deferred compensation costs to continue through the end of 2004 as the result of vesting of employee options granted in 1998 and 1999 at an exercise price less than the estimated fair value of our stock at that time. The following table sets forth, for the periods indicated, selected financial data expressed as a percentage of total revenues:
YEAR ENDED DECEMBER 31, ----------------------------------------- 1997 1998 1999 ------- ------- ------- Revenues ................................ 100.0% 100.0% 100.0% Cost of revenues ........................ 21.6 35.1 33.5 ------- ------- ------- Gross profit ............................ 78.4 64.9 66.5 Operating expenses: Research and development ............ 74.0 50.6 24.0 Sales and marketing ................. 52.7 71.9 23.3 General and administrative .......... 179.1 161.8 52.5 Deferred compensation ............... -- 30.6 9.0 ------- ------- ------- Total operating expenses ........... 305.8 314.9 108.8 ------- ------- ------- Operating loss from continuing operations (227.4) (250.0) (42.3) Other expense, primarily interest ....... 48.2 36.0 15.5 ------- ------- ------- Loss from continuing operations ......... (275.6)% (286.0)% (57.8)% ======= ======= =======
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998 REVENUES Revenues increased 214% from $2,200,000 for 1998 to $6,800,000 for 1999. The rapid increase in revenues was due principally to the increase in the number of corporate licensing agreements for our financial services and the increased average revenues per licensing agreement. Revenues from licenses increased 364% from $1,200,000 for 1998 to $5,800,000 for 1999. One client, GlobalNetFinancial.com, Inc., represented 10% and 14% of our total revenues for 1998 and 1999, respectively. Advertising revenues decreased 53% from $750,000 for 1998 to $300,000 for 1999. This decrease somewhat offset our higher licensing revenues. We expect that advertising revenues will account for a decreasing percentage of our future revenues. 21 24 Although less significant, revenues from our data mining and financial services consulting business increased 226% from $250,000 for 1998 to $700,000 for 1999. The increase was due to $500,000 in revenues recognized for work performed on a consulting contract received in the first quarter of 1999. This contract had a duration of one year and is now completed. We do not anticipate substantial consulting revenues during 2000. COST OF REVENUES Cost of revenues increased 199% from $800,000 for 1998 to $2,300,000 for 1999. The increase was due primarily to an increase in costs associated with higher licensing revenues, including fees and charges for data feeds from various exchanges and Internet service providers along with costs incurred for infrastructure, programming and quality assurance. As a percentage of revenues, cost of revenues declined 5% from 35.1% for 1998 to 33.5% for 1999. This decrease resulted primarily from the relatively fixed nature of some of our data costs and other fees while the number of clients we host increased. GROSS PROFIT Gross profit as a percentage of revenues increased from 64.9% for 1998 to 66.5% for 1999. Our gross profit percentage did not significantly increase because our cost of data and other fees associated with the additional license revenues remained relatively fixed as a percentage of revenues. We expect our content costs to increase as a percentage of revenues and reduce our gross profit percentage in the future. On an absolute dollar basis, gross profit increased 221% from $1,400,000 for 1998 to $4,500,000 for 1999 due primarily to higher revenues. OPERATING EXPENSES Research and Development. Research and development expense consists primarily of compensation and benefits for software programmers and developers. Research and development costs increased 49% from $1,100,000 during 1998 to $1,600,000 for 1999. The increase in these costs was due to greater client volume and the increased level of personnel necessary to support this volume. Higher wages for the computer programmers and developers necessary to expand our product offerings also contributed to the increase. Research and development costs decreased as a percentage of revenues from 50.6% for 1998 to 24.0% for 1999. We expect our research and development costs on an absolute dollar basis to continue to increase in the future as we expand our infrastructure and develop additional product offerings. Sales and Marketing. Sales and marketing expense includes compensation and benefits, commissions for our direct sales force and marketing staff, advertising, travel expenses and fees paid to a public relations firm. Sales and marketing expense remained relatively constant at $1,600,000 for 1998 and 1999. Sales and marketing costs decreased as a percentage of revenues from 71.9% for 1998 to 23.3% for 1999. On an absolute dollar basis, we expect our sales and marketing costs to rise in the future to accommodate our continued efforts to increase contracted revenues. General and Administrative. General and administrative expense consists of compensation and benefits for finance and administrative personnel, occupancy costs, professional and consulting fees, employee recruiting and relocation and travel expenses. General and administrative expense increased 2% from $3,500,000 for 1998 to $3,600,000 for 1999. This increase was due to a $600,000 increase in professional and consulting fees and a $300,000 increase in bad debt expense, partially offset by a $300,000 reduction in travel expense and a $500,000 reduction in compensation and benefit expenses. General and administrative expense decreased as a percentage of revenues from 161.8% for 1998 to 52.5% for 1999. On an absolute dollar basis, we expect our general and administrative costs to continue to increase in the future to support our planned business growth. Deferred Compensation. The deferred compensation charges we incurred in 1998 and 1999 resulted from the vesting of employee stock options granted at an exercise price below the estimated fair value of the underlying common stock on the date of grant. Deferred compensation expense decreased from $700,000 in 1998 to $600,000 for 1999 due to an accelerated vesting schedule of options in 1998. Deferred compensation decreased as a percentage of revenues from 30.6% for 1998 to 9.0% for 1999. We expect to continue to incur deferred compensation expense as these options vest in the future. 22 25 OTHER EXPENSE Other expense consists primarily of interest on debt. Interest expense increased 35% from $800,000 for 1998 to $1,100,000 for 1999 due to higher borrowing on our bank lines of credit and, to a lesser extent, interest incurred on the $5,900,000 of debentures we issued in 1998. These debentures were outstanding for only a portion of 1998. LOSS FROM CONTINUING OPERATIONS Loss from continuing operations decreased 37% from $6,200,000 for 1998 to $3,900,000 for 1999. Our total 1999 operating expense and other expense rose 11%, or $800,000 on a combined basis, over 1998. However, our $3,100,000 improvement in gross profit, primarily due to increased revenues, more than offset these increased expenses. We expect our 2000 loss from continuing operations to exceed the 1999 level due to increases in each component of our operating expenses, especially sales and marketing expenses. CONTRACTED REVENUE BACKLOG Our contracted revenue backlog, which represents total revenues contracted less revenues recognized, increased 634% from $1,500,000 at the end of 1998 to $10,700,000 at the end of 1999. We attribute this increase to our larger number of licenses under contract. Of the $10,700,000 in backlog at the end of 1999, we estimate based on the duration of our contracts that we will recognize $7,400,000 as revenue during 2000 and $2,500,000 in 2001. We expect to recognize the balance of this backlog in 2002 and 2003. COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1998 REVENUES Revenues increased 53% from $1,400,000 for 1997 to $2,200,000 for 1998. The increase in revenues was due primarily to an increase in license revenues as the result of a larger number of corporate licensing agreements and also to an increase in the average revenues per licensing agreement. Revenues from license agreements increased 79% or $500,000 from $700,000 for 1997 to $1,200,000 for 1998. Advertising revenues increased 25% from $600,000 for 1997 to $750,000 for 1998. In addition, revenues from projects related to our data mining and financial services consulting was $100,000 in 1997 and $250,000 in 1998. During 1997, we began using our new licensing strategy and de-emphasizing online advertisements and consulting services. COST OF REVENUES Our cost of revenues increased 148% from $300,000 for 1997 to $800,000 for 1998. Our cost of revenues increased as a percentage of revenues from 21.6% in 1997 to 35.1% in 1998. These increases resulted primarily from the fact that, as the number of our corporate licensing agreements increased, our data feed and Internet service provider charges increased as a percentage of revenues. GROSS PROFIT Gross profit as a percentage of revenues decreased from 78.4% in 1997 to 64.9% in 1998. This decline was due principally to an increase in data feed and Internet service provider charges. On an absolute dollar basis, gross profit increased 26% from $1,100,000 for 1997 to $1,400,000 for 1998. This increase resulted from the increase in our revenues. OPERATING EXPENSES Research and Development. Research and development costs increased $50,000 or 4% from 1997 to 1998. The increase was due to the hiring of additional staff to develop and enhance our services. Although research and development costs increased in absolute dollars in 1998, they decreased as a percentage of revenues from 74.0% in 1997 to 50.6% in 1998. This decrease as a percentage of revenues was due to the substantial increase in our revenues. 23 26 Sales and Marketing. Sales and marketing expense increased 108% from $800,000 in 1997 to $1,600,000 in 1998. We began increasing our sales and marketing efforts in late 1997 and continued to do so through 1998. In particular, we added to our direct sales force, expanded our public relations programs and increased our attendance at trade shows. General and Administrative. General and administrative expense increased 38% from $2,600,000 in 1997 to $3,500,000 in 1998. This increase was due to a $500,000 increase in compensation and benefit expenses, a $300,000 increase in travel expense and a $100,000 increase in recruiting expenses. Deferred Compensation. The $700,000 deferred compensation expense we incurred in 1998 resulted from the vesting of employee stock options granted in July 1998 at an exercise price below the estimated fair value of our common stock. OTHER EXPENSE Other expense consists primarily of interest on debt. Interest expense increased 14% from $700,000 in 1997 to $800,000 in 1998. This increase resulted from higher borrowing on our bank lines of credit and, to a lesser extent, interest incurred on the $5,900,000 of debentures we issued in 1998. These debentures were outstanding for only a portion of 1998. LOSS FROM CONTINUING OPERATIONS Loss from continuing operations increased 58% from $3,900,000 in 1997 to $6,200,000 in 1998. Although our revenues and gross profit increased during 1998, our investment in operations and increase in interest payments on debt resulted in increased losses from continuing operations. CONTRACTED REVENUE BACKLOG Contracted revenue backlog increased by 941% from $150,000 at the end of 1997 to $1,500,000 by the end of 1998. This increase was the result of growth in the number of licenses we had under contract. QUARTERLY OPERATING RESULTS FROM CONTINUING OPERATIONS The following table sets forth, for the periods presented, quarterly financial data from our statements of operations. We believe that the quarterly information has been prepared on substantially the same basis as our audited financial statements and includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information for the periods presented. You should read this information in 24 27 conjunction with the audited financial statements and notes to those statements included elsewhere in this prospectus. Our operating results in any quarter are not necessarily indicative of our future operating results.
QUARTER ENDED ------------------------------------------------------------------------------------------------------------- MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, 1998 1998 1998 1998 1999 1999 1999 1999 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Revenues ...... $ 379,089 $ 477,227 $ 462,992 $ 858,638 $ 933,118 $ 1,505,491 $ 1,992,900 $ 2,398,360 Cost of revenues 80,493 86,170 253,640 344,662 401,897 511,985 593,283 782,716 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Gross profit .. 298,596 391,057 209,352 513,976 531,221 993,506 1,399,617 1,615,644 Total operating expenses....... 1,219,925 1,387,946 2,216,778 2,032,128 1,724,191 1,518,891 1,865,800 2,320,446 Other expense . (152,030) (184,061) (215,354) (233,101) (229,585) (209,238) (323,397) (296,325) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Loss from continuing operations..... $(1,073,359) $(1,180,950) $(2,222,780) $(1,751,253) $(1,422,555) $ (734,623) $ (789,580) $(1,001,127) =========== =========== =========== =========== =========== =========== =========== ===========
Revenues have consistently increased from quarter to quarter due almost entirely to increases in licensing revenues. As our revenues have increased, the costs associated with revenue generation have risen to accommodate our growth. Gross profit on an absolute dollar basis has consistently risen due to continued higher revenues and the relatively fixed percentage for data feed and other direct costs of revenues. Although we expect this trend to continue, we expect that our costs for data and content will increase as a percentage of revenues. Gross profit as a percentage of revenues declined during the third quarter of 1998 to 45% from the second quarter 1998 gross profit percentage of 82%. This decline was due to an increase in cost of revenues associated with the development and growth of our business generated from corporate licensing agreements. The shift in our business model to corporate licensing agreements resulted in a decline in our gross profit percentage from our prior quarterly levels. Operating expenses increased in the third quarter of 1998 due principally to our repricing of employee stock options. This resulted in a deferred compensation charge of $600,000. Operating expenses declined in the fourth quarter of 1998 and succeeding first two quarters of 1999 due to a cost containment program. Expenses increased in the third and fourth quarters of 1999 to accommodate our increased licensing level. Interest expense in the third quarter of 1999 was higher due to a 200 basis point increase in the rate under our credit line retroactive to the first quarter. Interest expense in the fourth quarter of 1999 remained relatively high compared to prior quarters due to borrowing costs associated with additional debt. LIQUIDITY AND CAPITAL RESOURCES We have generated losses in every year of our operations and have financed those losses, as well as the growth of our business, through a series of private placements and bank borrowing. During 1999, the $1,300,000 of cash consumed by our continuing operating activities and $600,000 of cash consumed by our continuing investing activities was offset by $2,300,000 of cash generated, primarily from bank borrowing. We supplemented our cash flows with $1,600,000 of cash generated by our discontinued operations, including $750,000 of cash on sale of the process optimization segment. We used $1,300,000, $3,800,000 and $3,650,000 of cash in continuing operating activities during 1999, 1998 and 1997, respectively. We used this cash primarily to fund losses of $3,200,000,$6,600,000 and $4,300,000 in 1999, 1998 and 1997, respectively. We were unable to borrow under our credit agreements during 1999 until the end of the fourth quarter, when we established an additional $2,500,000 line of credit. For the first three quarters of 1999, we managed cash primarily by a net increase in accounts payable and deferred revenue. 25 28 We used cash in continuing investing activities of $600,000 (excluding $750,000 generated from the sale of discontinued operations),$800,000 and $500,000 for 1999, 1998 and 1997, respectively. We applied cash primarily to finance the costs for computer hardware and software. Financing activities, consisting primarily of the sale of securities and increased borrowing under credit arrangements, generated $2,300,000, $5,300,000 and $4,200,000 in 1999, 1998 and 1997, respectively. Our primary source of financing in 1999 was a $2,500,000 line of credit with a commercial bank completed in December 1999. Our principal sources in 1998 were $1,100,000 in net proceeds from the sale of Series C Preferred Stock and debentures and $4,150,000 net borrowing on our bank lines of credit. Our main source in 1997 was $9,800,000 of net proceeds from the sale of Series C Preferred Stock and debentures offset by $5,500,000 in repayments on our bank lines of credit. Our $2,500,000 line of credit is secured by substantially all of our assets. In addition, eight investors guaranteed this line of credit and secured it with letters of credit or the pledge of deposit accounts. For doing this, we issued 500,000 warrants to these investors. Our agreement with the investors requires us to repay the line on the earlier of completion of this offering or June 30, 2001. If we default, the investors may assume the bank's position. We are currently amortizing over the credit line term a $540,000 debt discount that represents the value of the warrants. We will incur an extraordinary charge for the remaining unamortized balance of this debt discount when we repay the line. We intend to repay these debentures in full with proceeds from this offering. In December 1999, we also renegotiated the terms of our existing credit agreements with two commercial banks. We had $4,145,000 plus $300,000 of accrued interest outstanding under these agreements, $1,145,000 of which had matured in September 1999. We negotiated an extension of these agreements to June 30, 2001 and obtained waivers of various covenant defaults. One of these commercial banks issued a standby letter of credit supporting the $5,900,000 of subordinated debentures we issued in 1997 and 1998. The renegotiated agreement requires us to repay all sums outstanding under the credit agreements, and either repay the full amount of the debentures or obtain a replacement letter of credit, contemporaneously with the closing of this offering. We intend to use a portion of the proceeds from this offering to repay these debentures. We will incur an extraordinary charge for the remaining unamortized portion of the financing costs related to our debentures when we repay them. In March 2000, we entered into an additional $500,000 line of credit secured by substantially all our assets. Three investors guaranteed this line of credit and secured it with letters of credit or the pledge of deposit accounts. For doing this, we issued 100,000 warrants to these investors. We are required to repay this line of credit by June 30, 2001. We intend to use the net proceeds of this offering to repay most of our outstanding indebtedness, to add sales and marketing personnel for our Internet business, to continue development of our Internet products, to finance additional hosting facilities and capacity and for working capital and other general corporate purposes. In addition, we will consider strategic alliances and acquisitions that we deem appropriate to enhance our business and operations. We estimate that, as a result of this public offering, we will have sufficient capital to meet our needs through at least the year 2001. IMPACT OF NEW ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as "derivatives"), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure these instruments at fair value. Recognition of gains or losses resulting from changes in the value of derivatives is based on the use of each derivative instrument and whether it qualifies for hedge accounting. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. We have not yet determined the effect of SFAS No. 133 on our consolidated financial statements. DISCLOSURES ABOUT MARKET RISK Our primary market risk exposure relates to interest rates on our variable rate debt. Our debt that bears this risk are our notes payable and line of credit in the amount of $6,620,000 outstanding at December 31, 1999. This debt bears interest at the prime rate. We expect to repay this debt with a portion of the proceeds of this offering. 26 29 BUSINESS GENERAL Stockpoint is a leading business-to-business provider of global online market analysis tools and financial information. We integrate sophisticated financial applications to provide our clients customized financial web pages that we host using our proprietary architecture. This enables our clients to outsource their financial web page production and maintenance, and provide robust financial content to their users. Our clients include traditional and online brokerage firms, commercial banks, asset managers, web portals, media companies, 401(k) sponsors, electronic communication networks and insurance companies. As of February 29, 2000, we had over 200 clients, including companies such as Barclays Global Investors, Looksmart Ltd., Quick & Reilly Group Inc. and U.S. Bancorp Piper Jaffray Inc. We offer comprehensive solutions for businesses seeking to add financial content to their web sites. With the solutions we provide and host, our clients are able to offer their users real-time stock quotes, charting capabilities, portfolio management and analysis tools, currency utilities, company research and business news. Our services create an online environment that allows our clients' users to easily analyze and manage their holdings using detailed financial information and advanced Internet technologies. We generate revenue from technology licensing, development, content and hosting fees. A substantial majority of our revenue is derived from agreements under which we provide information directly from our computer data center over the Internet to our clients' users. Most of our contracts have one or two year minimum terms with automatic renewals. We also charge for development when extensive custom development is required. INDUSTRY OVERVIEW TRENDS In recent years, the proliferation of personal computers, the widespread adoption of the Internet, and the advent of increasingly powerful and easy to use Internet navigation tools has resulted in explosive growth in the use of the Internet as a global communications tool, a source of fast and easy access to unprecedented breadth of information and an international means of commerce. Nua Ltd. estimates that the number of Internet users worldwide will grow from 304 million in 2000 to 500 million in 2003. Coincident with this revolution in the use of information technology has been a rapid trend toward individual money management. During the past ten years, high returns generated by the longest sustained positive U.S. stock market in post-war history, together with an increase in retirement assets and the number of investment options available, have caused substantial growth in the ownership of financial assets worldwide. According to the Board of Governors of the Federal Reserve System, total financial assets of U.S. households and nonprofit organizations was $21.8 trillion at the end of 1995. By the end of 1999, that number increased to $34.9 trillion. Furthermore, the Investment Company Institute estimates that in early 1999, 48.2% of all U.S. households owned equity securities directly in the form of individual stocks or indirectly through mutual funds. Taken together, these two trends have resulted in a dramatic increase in the use of online financial information services and trading. Investors are increasingly looking to the Internet for information about their financial assets. According to Forrester Research Inc., in 1999 there were 5.7 million households using the Internet to execute financial transactions and obtain financial information. Forrester Research predicts that this number will increase to 21 million households by 2003, a number that would represent nearly 53% of U.S. households. In addition, both retail and institutional investors increasingly demand up-to-the-minute information on security prices and business trends, and the market analysis tools necessary to assimilate this information. Many investors are using this information to manage their financial assets more actively. Moreover, instead of resorting to a broker or other financial intermediary, individual investors now have access to online trading services that allow them to rapidly execute their own transactions at a lower cost than that previously charged. Forrester Research has projected that online investing accounts in the U.S. will grow from $374 billion of assets in 5.4 million online accounts in 1999 to $3.1 trillion of assets in 20.4 million online accounts by 2003. The growth in electronic and online financial services has not been limited to equity trading. Commercial banks have increasingly broadened both the breadth of financial services they provide and the means of accessing those services electronically. Many banking clients now not only have online access to 27 30 account information, but also have the ability to transfer those assets between insured accounts, fixed income investments and equity investments online. ISSUES As a result of these developments, many companies that have an Internet presence, including web portals and media companies, have developed or are developing financial market content for their web sites in an effort to enhance their attractiveness to Internet users and to assist in user retention. In particular, many financial services companies such as commercial and investment banks, mutual fund companies and 401(k) plan sponsors are concluding that the availability of stock quotes, analysis and business information on their web sites is a prerequisite to the generation of significant web traffic and e-commerce transactions. The quality and breadth of financial information offered is rapidly becoming a differentiator among financial services providers. Unlike many other web page development projects, the financial information components of an Internet site require multiple skills not commonly available through a single provider. Companies must contract for not only the web graphics and display development services offered by many web site developers, but must also purchase specialized applications software to provide graphing and analysis, specialized database software to manage quote and financial information, and hardware and communications infrastructure to handle the storage and transmission of this information. Many of the available applications are inflexible, cannot be customized to the company's existing web site, or require extensive programming and customization to integrate with the other applications that will be used on the site. Even if the developer is capable of creating these applications and infrastructure, the company must purchase financial content from various suppliers to display through the system. This requires not only the integration of disparate content data, but the negotiation of individual provider contracts. Even after this cost and delay, a company must constantly monitor and revise the software and hardware tools that manage actively updated information in order for the financial information components of a web site to be competitive. As a result, any company that is considering internally adding and maintaining financial information and analysis capabilities on its web site faces a considerable and on-going expenditure of time, effort and expense. THE STOCKPOINT SOLUTION To address the demand for Internet-based financial information and analysis, we offer our clients a menu of financial applications and content. We seamlessly integrate these applications and content into our clients' sites to provide a comprehensive solution for the financial component of their Internet strategy. We host these sites on behalf of our clients, relieving them of the cost and expense of monitoring actively updated web content. Our web applications have been specifically developed to allow customization to the "look and feel" of a client's web site. In addition, we provide custom services to integrate the proprietary data maintained by our clients. All of these features can be purchased as a complete package or as individual functions and rapidly integrated into the existing features of a client's web site. We enable our clients to provide a broad range of financial information and analysis to their users. We offer delayed and real-time U.S. stock exchange quotation capabilities, as well as information on trading in international markets. We provide industry-leading charting capabilities in both traditional static image formats, and interactive Java format. We provide portfolio tracking tools that enable our clients to offer their consumers the means of actively monitoring their own portfolios. We offer international currency translation utilities that provide currency translation on a real-time basis. Through reseller relationships, we also offer company profiles, analyst and research information, live market commentary, mutual fund data and other financial news. We have specifically designed our products for ease of customization. Our software permits us to add a client's graphics and to alter the color and display layout to duplicate the look and feel used by our clients while retaining our robust product functions. Our products are modular in design to permit a client to add additional features as they need more functionality. We have also designed the products to facilitate custom extensions that can be built to make use of proprietary data or content provided by a client. As part of our comprehensive solution, we also offer web site hosting, data center and content services. We maintain sophisticated communications, processing and storage capacity and infrastructure for web pages at our 28 31 facilities. By establishing content contracts for the financial information that we host on our clients' behalf, we provide rapid access to a broad spectrum of financial data that can be displayed and manipulated by our proprietary software tools. As a result, we are able to reduce our clients' day-to-day management requirements while at the same time providing them with the actively updated financial content that they require. We believe that our comprehensive capabilities in financial information solutions for the Internet allow us to provide high quality financial information and analysis web functionality. We believe that we have developed a reputation for comprehensive, reliable and high quality financial web pages. GROWTH STRATEGY Our objective is to be the leading business-to-business provider of global online market analysis tools and financial information. Key elements of our strategy include: o PENETRATING VERTICAL MARKETS. We intend to rapidly expand our sales force to target businesses in industries that require robust online market analysis tools and financial information on their web sites. At February 29, 2000, we had contracts with over 200 companies in a number of different industries. This broad client experience enables us to intelligently recommend new products, content and services to our clients to improve their web site functionality. For example, our clients include seven of Gomez Advisors' ten top rated online brokerage firms. We plan to focus our marketing efforts on traditional and online brokerage firms, commercial banks, asset managers, web portals, media companies, electronic communication networks, 401(k) sponsors and insurance companies. O CREATING A WORLDWIDE PRESENCE. We intend to expand our product offerings and international presence to serve the global online financial information needs of our clients and their users. For example, Commonwealth Securities Limited, Australia's largest online brokerage firm, recently engaged us to provide U.S. securities data for their web site. We also supply select clients with online financial market data from Belgium, Canada, Denmark, France, Italy, the Netherlands and the United Kingdom. To further our international objectives, we expect to open an office in London, England in the next few months and intend to open an office in Asia during 2000. O USING TECHNOLOGY TO LEVERAGE OUR GROWTH. We intend to develop and market innovative products and services to attract and retain clients. We design these new products and services to enhance the user experience for our clients. For example, we recently introduced a wireless technology that enables users to view financial charts on their cell phones and some other portable devices. We also intend to establish new facilities to maintain the scalability and availability of our high quality web hosting services. o PURSUING STRATEGIC ALLIANCES OR ACQUISITIONS. We intend to accelerate our global sales and marketing efforts and technology development, and gain access to compelling content, applications and functionality, through strategic alliances and acquisitions. For example, our strategic relationships with content providers allow us to cost effectively deliver robust financial applications and content to our clients' web sites. We intend to seek acquisitions of businesses to complement our products or services or to give us access to new markets. STOCKPOINT TARGET MARKETS We focus our sales and marketing efforts in eight key online financial services markets. Depending on the scope of their current Internet financial offering, clients will either license a full finance channel or license individual tools or applications. 29 32 WEB PORTAL AND MEDIA COMPANIES Internet "portal" and media web sites either create proprietary content or aggregate content from various sources to attract and retain visitors. Most of these sites include financial content as one of the key content elements included for this purpose. Financial content is fundamentally different from other types of content because of the technological challenge of distributing an increasingly complex analysis of financial information. This complexity is attributed to an increasing rate of transactions, the number of world markets and the number of users. Many portal and media sites do not have the required technical resources or expertise to build their own investment site. They prefer to outsource this development and functionality to others, such as Stockpoint. In our experience, a typical portal or media client will tend to license a full-featured financial site as opposed to buying a la carte. Examples of these clients served by us include LookSmart Ltd. and MyWay.com, for both of whom we host a full financial channel. ONLINE BROKERAGE FIRMS We currently have contracts with seven of the online brokerages that Gomez Advisors ranks as its top ten. Online brokerages must have an established web-based investing presence and continue to offer innovative products and applications to differentiate their offerings from those of others. For example, they may license charts or stock screening functionality to augment an existing site. Over time, we believe these clients will retain outside contractors to provide additional functionality to either reduce the number of their vendor relationships or buy new products outside of their principal expertise. Examples of online brokerage clients served by us include National Discount Brokers Group Inc. and Quick & Reilly Group Inc. TRADITIONAL BROKERAGE FIRMS Traditional brokerage firms are also adding Internet functionality to their service offerings. Many traditional brokerage firms have experienced an erosion of their share of the online brokerage marketplace and perceive a potential competitive threat from growing online brokerage firms. In our experience, while online brokerage firms may license specific tools and applications, traditional brokerage firms seek more of a full scope solution which can be brought to market rapidly. Examples of online investment banks served by us include Commonwealth Securities Ltd., Robertson Stephens and U.S. Bancorp Piper Jaffray Inc. COMMERCIAL BANKS Many commercial banks are beginning to offer full scope financial portals and brokerage services. We believe that many of these banks intend to develop a more comprehensive financial solution for their consumers and will expand their offerings to include investment financial information and analytical tools. Examples of commercial banks served by us include M&T Bank Corp. and Union Bank of California N.A. MUTUAL FUNDS/ASSET MANAGEMENT These companies typically have an established web presence and license specific applications and functionality. The business objective of these clients is to differentiate themselves with a more compelling user experience or by offering a more cost effective data solution for its advisors. An example of one of these clients is Barclays Global Investors. STOCK EXCHANGES AND ELECTRONIC COMMUNICATION NETWORKS (ECNs) Although their primary focus is to facilitate trade execution, stock exchanges and ECNs are also building web sites for users to track their investments. Exchanges and ECNs have a diverse set of needs ranging from a la carte applications to full web site offerings. An example of an ECN that is our customer is MarketXT, Inc. 30 33 CORPORATIONS We provide quote information for corporate investor relations sites, including the sites of several Fortune 500 companies. Typically, these pages include the company's specific stock quote, fundamental data and access to SEC reports. An example of a corporation we serve is Coca Cola Co. 401(k) PLAN SPONSORS We provide 401(k) online tracking tools to employers. This online capability allows the employees to track the performance of their 401(k) investments in real-time. An example of a client utilizing this functionality is PricewaterhouseCoopers LLP. STOCKPOINT PRODUCT OFFERINGS Our broad menu of financial product offerings includes the following: QUOTATION FEATURES We license real-time and/or delayed stock and mutual fund quotes for securities of the following countries: Canada, Denmark, France, Italy, the Netherlands, the United Kingdom and the United States. For most of these countries, our applications provide current price, open, change, high, low, 52-week high and low, earnings per share, volume, shares outstanding, market capitalization, dividend, ex-dividend, and price/earnings ratio. Stock quotes are available either on web sites that we host or over wireless web-capable telephones. CHARTING Classic Quick Charts. We believe that our Classic Quick Charts provide easy-to-read information that distinguishes them from many competitive offerings. These fast, cleanly designed charts show price performance and volume for securities in our database. The Classic Quick Charts allow users to select time increments including, one minute, ten minutes, hourly and daily. Classic Quick Charts also include interactive features such as moving average, and the ability to plot against other stocks and indexes. Technical indicators can be added for comparison, which include Bollinger bands, moving averages convergence/divergence, on balance volume, price rate of change, relative strength, standard deviation and stochastics. Interactive Charts. This feature expands on Classic Quick Charts to provide minute-by-minute updates of charted information. We offer intraday price performance and volume on securities in our database. The intraday interactive charts allow users to select time increments including tick-by-tick, one minute, ten minutes, hourly and daily. Users have the ability to zoom in on date and time ranges by clicking and dragging on the chart, and technical indicators can be added for comparison without refreshing the chart or web page. We also provide charts containing interday information for United States and international markets over wireless web-capable telephones and other devices. PORTFOLIO TRACKING AND MANAGEMENT Our personal portfolio manager allows users to track the performance of their portfolios from their PCs. Our web-based personal portfolio manager lets users easily edit multiple portfolios and calculate current profit and loss for individual and combined portfolios. The personal portfolio manager includes a login screen, portfolio setup screen, portfolio menu screen and a data export feature. Easily customized to complement a client's web site, our personal portfolio manager serves as a tool to generate return visits by users. 31 34 We also offer the following products in this category: stock and mutual fund screening applications, automatic portfolio alerting via email, an interactive Java portfolio manager and a scrolling, personalized desktop stock ticker. INDEXES AND CURRENCY DATA We provide the major market indexes for the United States as well as for most international markets. We also permit the client to display prices of international currencies in real time and display this information in a currency table featuring cross-reference functionality. All of this data is stored by our proprietary databases in both intraday and historical formats, and can be plotted with our charting applications. NEWS AND ANALYST INFORMATION Through reseller relationships with numerous content sources, we provide an extensive offering of news and analyst information. Company Profiles. We offer company profiles from Market Guide, which feature comprehensive fundamental information on U.S. and foreign companies trading on the NYSE, NASDAQ and AMEX. Companies are continually added and updated. Analyst and Research Information. We offer this feature from Zacks Investment Research, an industry leader for analyst information. Zacks provides analyst summaries, analyst opinions, average recommendations, earnings per share, surprise percentage, consensus estimates and industry rank. Income statements and balance sheets are also available. News Wire Services. Through a relationship with Comtex Scientific Corporation, we offer full-text news stories from wire services such as Business Wire, PR Newswire, AP Online and UPI. For international news, we have a relationship with AFX News Limited. Our news service tracks news stories by category and keyword, and can automatically display charts and quotes for companies referenced in each story. SEC Filings. In October 1999, we launched a test site for our IPO Center. The IPO Center enables the user to track initial public offering filings and new issue pricings, evaluate after-market performance and review the filing history of specific investment banks. Through a service provided by Edgar Online, users can read the "Management's Discussion and Analysis of Financial Condition and Results of Operations" excerpt from SEC filings for publicly-traded companies. We have also contracted with TRW Inc. to provide real time SEC filings, although this capability is not yet available to our clients. Live Market Commentary. This feature is offered through Briefing.com, a top provider of live market commentary and analysis on the Internet, focusing on important news affecting markets and providing insight on possible trading implications. Briefing.com covers upgrades and downgrades, earnings reports, economic releases, technical trading points, market sectors and technology stocks. Mutual Fund Data. We offer mutual fund data from Value Line. The Value Line mutual fund offering contains comprehensive performance data on over 8,300 U.S. retail funds. Listing includes sector distribution, top 10 holdings, administration information, Value Line Rankings, performance (one, three, five and ten years), fund distribution and management overview. STRATEGIC RELATIONSHIPS We provide substantive content through our financial product offerings in two broad categories: quote information and market/company information. All content utilized on both Stockpoint.com and client web sites is obtained from third-party content providers. We do not currently generate any original content but instead rely on strategic contractual relationships with major vendors of electronically available financial information for our content feeds. 32 35 For pricing information, news and information, mutual fund data, analyst information and other feeds, we maintain contractual arrangements with S&P Comstock, Comtex Scientific Corporation, Briefing.com, MarketGuide, Zacks, CDA/Wiesenberger, Commodity Systems, Inc., TRW and AFX News Limited. These relationships vary in term from one month to several years, and include both variable and fixed price payment provisions. We believe that we are not solely reliant on any one content provider and that there are alternative sources for any single type of content. However, the replacement of any key vendors could render all or a portion of our services unavailable for a period of time, resulting in a significant negative impact on our client relationships and harm to our reputation. SALES AND MARKETING We currently have a sales staff of 15 employees. Our sales offices are located in San Francisco and New York City. Our sales team is assigned to one of three major domestic regions. We currently focus our sales efforts directly on target-market clients. All sales people currently receive commissions on license sales, upsells and renewals to existing clients. We expect to expand our direct sales staff and number of domestic and foreign offices over the next 12 months, including opening a London office within the next few months. During the production phase, our client services representative manages and addresses client concerns and verifies the progress of the client's project. Our two-person marketing staff currently focuses on public-relations programs. These programs have expanded our brand recognition. We have done only a limited amount of web-based or other advertising. Substantially all of our client web sites have the "Powered by Stockpoint" logo, which we believe has enhanced our brand awareness as our client base has grown. We also derive substantial name recognition and receive initial client contacts through our web site, Stockpoint.com. CUSTOMIZATION ACTIVITIES We believe that our ability to customize our applications differentiates us from our competitors. Our clients expect that their web sites will be unique and will not look the same as sites we host for our other clients. Our clients also require that the web applications we develop and host mirror the appearance of their other web pages and integrate seamlessly into their web sites. We designed our proprietary server and application software to enable us to create customized web sites without expending the enormous effort typically associated with custom development. For example, we designed our charting technology with approximately 80 configurable parameters that permit our web designers to configure chart sizes, fonts, colors, time increments and settings for moving averages, technical indicators and comparison stocks or indexes. This design enables us to customize at a reduced cost and with a faster turnaround time than would be possible by modifying the underlying program code. In some instances, our clients require that we develop customized extensions of our applications to assimilate and manipulate data that is provided by the client. For example, we provide a charting solution to clients of MarketXT Inc. that incorporates their ECN's quote and trade data. Also, we have integrated proprietary industry group data from US Bancorp Piper Jaffray Inc. to enable their clients to chart that data versus other securities. In other cases, our customization activities have led to the creation of new products. For example, through a contract with GlobalNetFinancial.com, we have created product offerings for quotes, charts and portfolios that utilize stock market data from Denmark, Italy, the Netherlands and the United Kingdom. To customize the appearance of our hosted web pages to meet our clients' needs, we maintain a staff of eight web site developers. These developers perform the web site development for clients and also establish the communications links and data transfers required to integrate clients' web sites with the pages we host on their behalf. We also maintain a staff of applications programmers who develop custom extensions of our applications to assimilate client data or provide specialized functionality. 33 36 PRODUCT DEVELOPMENT We have a three-pronged approach to product development: o CLIENT DRIVEN DEVELOPMENT. By maintaining close relationships with our clients through our client services and sales groups, we stay attuned to our clients' needs . This input, plus client directed development, largely drives the priorities of our development group. Examples of products created by customer driven development include our international index data, currency conversion functionality and expansion of our product offerings to include Great Britain and Italian equity securities. o DEVELOPMENT BASED UPON ANTICIPATED MARKET NEEDS. Since 1997, we have retained Forrester Research to assist us in predicting market trends for the Internet financial marketplace. We leverage our relationship with Forrester Research and our internal research and development and marketing groups to anticipate market needs. We then either develop or acquire products to meet these needs. Examples of products created by this type of development are our Classic Quick Charts, our Java- based scrolling stock ticker and enhancements to our personal portfolio manager application. o INNOVATIVE TECHNOLOGY DEVELOPMENT. We formed our internal research and development group to pursue innovative technology applications. We have several products under development which we believe are future upsell opportunities. These potential new products include Portfolio 2.0, E-Mail Alerts and our IPO Center. We are developing a transaction-based portfolio product, known as Portfolio 2.0. The current version of our portfolio product does not allow online investors to track transaction activity. Portfolio 2.0 will feature the ability to track transaction details of an online investor. By capturing the transaction details, it allows for (1) charting of portfolio performance versus various indexes; (2) asset allocation analysis and (3) tax lot accounting. In the future, we intend to link our transaction based portfolio product to various brokerage firms. This will enable these firms to provide electronic portfolio updates from their data centers. We are developing an alert engine for notifying users of stock activity. The E-Mail alerts will notify users of changes, based on present threshholds, in stock prices, volume and news. We have been beta testing an IPO Center on our web site, www.stockpoint.com. The IPO Center features the ability to monitor current IPO filings. The IPO center lists current filings and pricings, and enables an investor to access a summary of a company's offering by clicking on a linked ticker symbol. Within our product development and research and development groups, we have a staff of engineers that focuses on new product development. We recently transferred into this group from our consulting services division a group of engineers with expertise in artificial intelligence. STOCKPOINT.COM In addition to our licensing business, we operate Stockpoint.com, a free financial web site that serves both as a technology showcase to support our licensing business and as a proving ground for new product offerings. Stockpoint.com offers investors an online environment in which they can analyze and manage their holdings using comprehensive financial information and advanced web technologies. Stockpoint.com currently averages approximately 7,000,000 page views per month. We believe that this is enough traffic to enable the Stockpoint.com user base to provide feedback from our new products to ensure that our products meet end-user expectations and are field-tested prior to being licensed to our clients. 34 37 We do not intend to invest a significant amount of resources in promoting Stockpoint.com as a consumer site. Instead, we intend to focus on the business-to-business marketplace and to use Stockpoint.com as a complement to, rather than a competitor with, the offerings of our business clients. Although we receive some advertising-based revenues from Stockpoint.com, it is not a significant portion of our total business. We do not have any subscription-based revenues from Stockpoint.com end-users. COMPETITION We compete with a number of companies that offer charting, stock quotation and business information web applications, development and hosting services. The number of these competitors continues to grow as new entities enter various Internet-related markets as a result of the recent growth in Internet traffic and the Internet's perceived future opportunities. It is possible that new competitors may rapidly acquire a significant market share. Further, there are an increasing number of quotation, financial news and information sources that compete for the attention of consumers and advertisers that are sought by our clients. We expect both of these forms of competition to continue to increase. We compete for web site clients with a number of other providers of web-based quotation, charting and financial news applications, such as MarketWatch.com, Inc., Telescan Inc., Reuters Group PLC, Thompson Financial Services and S&P Personal Wealth. We also compete with client web site development companies and the in-house development staff of large corporations. Competitive pressures could result in reduced market share, price reductions, reduced margins and increased spending on marketing and product development, any of which could adversely affect our business, financial condition and operating results. Our ability to compete effectively depends on many factors, including the originality, timeliness, comprehensiveness and trustworthiness of our applications and hosting, the ease in use of services developed by us and the effectiveness of our sales and marketing efforts. We believe the principal competitive factors in the online services market include system performance, product differentiation, quality and quantity of content, user friendliness, price, client support, effectiveness of marketing techniques and consistency and quality of services. We believe that we compete effectively in these areas. We also believe that our strategy of focusing on business-to-business licensing of products combined with ongoing services and continued expansion of the range of our services offerings may serve to lessen the impact of future competitive pressures. There is, however, no assurance that these marketing strategies will be successful. Finally, we believe that once our online financial products are embedded in a client's web site, that client will find the difficulties inherent in replacing our products with those provided by another vendor to be a disincentive to changing providers. Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger client bases and significantly greater financial, technical and marketing resources than us. This may allow them to devote greater resources than we can to the development and promotion of their services. These competitors may also engage in more extensive research and development, undertake more far- reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential employees, outside contributors, strategic partners and advertisers. Our competitors may develop relationships with providers and develop or acquire content that is equal or superior to ours or that achieves greater market acceptance than ours. INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS We rely on a combination of copyright, trademark and trade secret laws and confidentiality procedures to protect our proprietary intellectual property rights. We generally enter into agreements that govern the assignment of inventions and the ownership and protection of proprietary information with employees and agreements that govern nondisclosure of proprietary information with clients. We also work to limit access to and distribution of our software, documentation and other proprietary information. We seek to use copyright law to protect our documentation and other written materials. We do not, however, rely on patents or patented technology to protect our proprietary information. "Stockpoint" is our federally registered trademark. 35 38 We license virtually all of the financial data that is used to provide the content at our web sites pursuant to agreements with content suppliers, the terms of which vary widely. The services that we provide and the methods that we utilize to do so change rapidly. Also, the law and legal practice for content supplier contracts are unsettled and constantly developing. As a result, we must periodically modify and renegotiate our vendor agreements. We attempt to operate our web site customization and hosting services in accordance with our agreements and to renegotiate them as necessary. However, although we do not believe we are in violation of our agreements, we cannot assure you that our vendors will not claim that we owe additional sums or must limit our activities. Some of our applications incorporate technology widely available on the Internet and from other sources. During the past two years, there has been a renewed effort to obtain protection of techniques used in software products through patent and other protections. As the number of software products and delivery techniques proliferates on the Internet, we believe that we may become subject to infringement claims. We have been notified by a patent holder that it believes our use of GIF compression algorithms incorporated into our web hosting applications may require a license. Although we do not believe that we derive substantial revenue from the use of these algorithms and can obtain a license, if one is required, without materially affecting our operations, we cannot be certain that other parties will not allege that the our technology and services violate their rights. COMPUTER AND NETWORK OPERATIONS We maintain a data center in Coralville, Iowa at which we host virtually all of the financial content for our clients' web sites. We operate multiple servers, mass storage devices and sophisticated routers and switching systems to accommodate high capacity web traffic. We use Intel-based servers with the Microsoft NT operating system that access high capacity database storage devices using SQL Server as well as our own proprietary database applications. Our data center has separate air conditioning units. The power system includes power conditioning and battery back-up. We also have a full "zero downtime" emergency generator system capable of providing emergency power to our entire Coralville facility. Data is regularly backed up and stored off-site and certain data is duplicated on separate storage devices within the data center. The building in which the data center is located is secured by 24- hour card key access. End-users access our data center through the Internet. We have two connections to the Internet. Our principal connection is a DS3 (45 Mbit) through NetINS with access through UUNET, Sprintlink and Cable & Wireless. We have contracted with UUNET for an additional DS3 connection. We use a load balancing solution for distributing client requests over our base of servers. We have designed our data center with a high degree of redundancy and interoperability. We have implemented a detailed, automated monitoring system over the data center. The system pages and alerts data center technicians immediately upon any system failures, even as traffic is switched automatically to redundant systems. Except for scheduled maintenance, our data center is available 24 hours a day, 365 days a year. We believe that our computer and communications hardware systems are adequate for existing operations. We purchase additional or upgraded hardware as required to meet any significant increases in actual or anticipated traffic. We are currently reviewing strategies for improving our disaster recovery capabilities and the responsiveness of our services to users. We plan to use a portion of the net proceeds from this offering to establish one or more additional data centers or co-location arrangements. EMPLOYEES As of February 29, 2000, we had a total of 95 employees, consisting of 30 in production, 29 in research and development, 19 in general or administrative roles and 17 in sales and marketing. All of these employees are located in the United States. None of our employees is subject to a collective bargaining agreement or represented by a labor union. We have experienced no work stoppages and believe that our relationships with our employees are good. We maintain key man life insurance on William Staib in the amount of $4,000,000, payable to us. 36 39 FACILITIES Our principal administrative, support and research and development facility, and our data center, is located in approximately 25,600 square feet of leased office space in Coralville, Iowa. We pay an annual rent of approximately $280,000 for this facility. Our lease on this facility runs through August 2004, with an option to extend for an additional five-year period. We believe that our current Iowa facilities are adequate to meet our needs for the foreseeable future. We also lease approximately 8,900 square feet of office space in San Francisco for sales and marketing and web site development personnel at an annual rent of approximately $365,000. Our lease in San Francisco runs through April 1, 2001 with an option to extend for an additional eighteen month period. In addition, we lease approximately 600 square feet of office space in New York City. The lease expires on July 31, 2000. We also plan to use a part of the proceeds from this offering to establish sales offices internationally. We are currently seeking space for an office we expect to open in London, England, in the next few months, and intend to establish additional offices in Europe and Asia during the next 12 months. LITIGATION We are not currently party to any legal proceedings. 37 40 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of Stockpoint are as follows: Name Age Position ---- --- -------- William E. Staib................ 30 Chief Executive Officer and Director Timothy S. Yamauchi............. 38 Chief Operating Officer Scott D. Porter................. 52 Chief Financial Officer Luan A. Cox..................... 29 Executive Vice President, Sales L. Christopher Dominguez........ 32 Executive Vice President Carolyn S. Mattimore............ 41 Vice President, Marketing Santosh K. Ananthraman.......... 34 Vice President, Research Naftaly J. Stramer.............. 44 Vice President, Development Harry O. Hefter................. 69 Chairman of the Board of Directors David G. Sengpiel............... 46 Director William E. Staib has served as a director since May 1992 and as Chief Executive Officer since December 1998. Mr. Staib has served as Stockpoint's Chief Technology Officer since June 1998 and as its Vice President of Technology from 1992 to 1998. In 1998, Mr. Staib was named as the "State of Iowa's Young Entrepreneur of the Year" by the U.S. Small Business Administration. In 1996, Mr. Staib led the team which developed Stockpoint's core technology for distributing and displaying historical chart and quote data on the Internet. In 1992, he was recognized for creating "One of the Six Most Outstanding Engineering Achievements in the United States" by the National Society of Professional Engineers. Mr. Staib is the inventor of one international and two U.S. patents and holds B.S. and M.S. degrees in electrical engineering from Stanford University. Mr. Staib is the son of Robert Staib, our former Chief Executive Officer. Timothy S. Yamauchi has served as Stockpoint's Chief Operating Officer since July 1998. From September 1995 to July 1998, he served as Chief Financial Officer, Secretary and Treasurer of HealthDesk Corporation, an Internet information provider in the healthcare industry. From May 1994 to June 1995, Mr. Yamauchi was Chief Financial Officer of Innofusion Corporation, a private home healthcare company. From May 1991 to May 1994, Mr. Yamauchi was Treasurer and Director of Planning for Total Pharmaceutical Care, Inc., a public home healthcare company. Mr. Yamauchi a has B.S. in business from California State University of Los Angeles and an M.B.A. from Harvard Business School. He is also a Certified Public Accountant. Scott D. Porter has served as Stockpoint's Chief Financial Officer since July 1999. From August 1998 to February 1999, Mr. Porter was the Chief Financial Officer of RSPnet.com, a provider of Internet services that was acquired by VirtualFund.com, Inc. during 1999. From April 1991 to July 1998, Mr. Porter was the President (and previously Chief Financial Officer) of Parsons Technology, which was acquired by Intuit Inc. in 1994 and by The Learning Company in 1998. Mr. Porter has a B.S. in accounting and an M.B.A. degree from the University of Colorado and is also a Certified Public Accountant. Luan A. Cox has served as Executive Vice President, Sales since November 1999. Ms. Cox joined Stockpoint in April 1998 as Director of Technology Sales and served as its Senior Vice President of Sales from July 1999 to October 1999. From April 1997 to April 1998, Ms. Cox was the Director of Business Development at Quote.com, an Internet financial services company. From April 1996 to April 1997, Ms. Cox served as Internet Director for 1-800-MUTUALS, Inc. a mutual fund company. From February 1995 to April 1996, she was an account manager for Independent Advantage Financial, an investment planning and insurance company. Prior to that time, she was a senior sales associate with Jefferson-Pilot Insurance Company. Ms. Cox graduated from the University of North Texas in 1992 with a B.B.A. in finance and has held Series 6, 7, 63 and 65 Security Licenses with the National Association of Securities Dealers. 38 41 L. Christopher Dominguez has served as an Executive Vice President of Stockpoint since July 1999. From April 1995 to July 1999, he served as Vice President of Sales of Ethos Corporation, which Stockpoint acquired in 1997. From September 1993 to September 1994, he served as Advertising Director of BuySide Magazine. Mr. Dominguez received a B.A. from Denison University. Carolyn Mattimore joined Stockpoint in August 1999 and serves as its Vice President, Marketing. From July 1996 to January 1999, Ms. Mattimore was a strategic marketing consultant for venture-backed start-up companies in the Boston, Massachusetts area. From August 1991 to July 1995, she was Vice President of Marketing for First Call, a subsidiary of Thomson Financial. She has also held a Series 7 Security License with the National Association of Securities Dealers. Ms. Mattimore has an M.P.A. from Harvard University, John F. Kennedy School of Government and a B.B.A. from St. Mary's College, Notre Dame. Santosh K. Ananthraman, has been Vice President of Research at Stockpoint since 1993. Mr. Ananthraman specializes in the areas of data mining and personalization. He has successfully directed numerous consulting projects with companies such as Nasdaq, Engineering Animation, Harley Davidson, John Deere and Daimler-Chrysler. After he received his Ph.D. from Duke University in 1993, he also served as an Adjunct Assistant Professor of Electrical and Computer Engineering at the University of Iowa from 1993 to 1998, where he taught graduate classes and co- supervised M.S. and Ph.D. students. Mr. Ananthraman served on grant review panels for the National Science Foundation and has reviewed articles for numerous research publications. He has also has published extensively in his area of expertise. He received his B.S. in electrical engineering from Regional Engineering College in India. Naftaly J. Stramer has been Vice President of Development of Stockpoint since October 1999. Between 1994 and 1999, Mr. Stramer served as Software Assurance Manager and as Manager of Development Services for Stockpoint. Prior to joining Stockpoint, Mr. Stramer served as a senior SQA engineer at Intergraph Corporation for five years. Prior to Intergraph, he was a Computer Engineer and Group Leader for Rafael, the Armament Development Authority based in Israel. Mr. Stramer holds a B.SC. in Computer Engineering from the Israel Institute of Technology. Harry O. Hefter has served as a director of Stockpoint since 1987, has served as Chairman since December 1998 and from 1987 to February 1997, and was Vice Chairman from February 1997 to December 1998. Mr. Hefter has for more than the last thirty years also served as President of the HOH group of companies in Chicago, Illinois, which provide specialized services relating to the engineering, integration and optimization of process control systems, architecture and construction management for industry and government. Mr. Hefter is a Civil Engineer with over 40 years of experience in the engineering field. David G. Sengpiel has served as a director of Stockpoint since January 1997. Since March 1999, Mr. Sengpiel has been the Chief Operating Officer of Quester I.T., Inc., a software company that provides consulting, research and training in the application of language analysis, addressing, marketing and communications issues. From August 1997 to March 1999, Mr. Sengpiel was Chief Operating Officer of CareMedic, Inc., which automates Medicare reimbursement processes. From 1995 until August 1997, Mr. Sengpiel was a Vice President with Equity Dynamics, Inc., a consulting firm, and with Pappajohn Capital Resources, a venture capital firm. From 1993 to 1995, Mr. Sengpiel was Alternative Investments Manager for Farm Bureau Life Insurance Company. Stockpoint maintains an audit committee and a compensation committee. Currently, Mr. Hefter and Mr. Sengpiel are the sole members of both committees. We also maintain a management committee consisting of Mr. Staib, Ms. Cox and Mr. Dominguez that meets regularly to coordinate operations between the Company's two principal offices and to discuss and determine strategic matters. All executive officers are chosen by the Board of Directors and serve at the Board's discretion. Directors are divided into three classes, each of which consists, as nearly as possible, of one-third of the board. In 1997, the stockholders elected two Class I directors (Messrs. Staib and Sengpiel) to serve for one-year terms, one Class II director (Mr. Hefter) to serve for a two-year term and one Class III director (currently vacant) to serve for a three-year term. At each succeeding annual meeting of stockholders thereafter, successors to the class of directors whose terms expired at that annual meeting will be elected for a three-year term and will hold office for three years. 39 42 EXECUTIVE COMPENSATION Summary Compensation. The following table sets forth the compensation earned by our Chief Executive Officer and by our other most highly compensated executive officers during the year ended December 31, 1999. This prospectus refers to these executives as the Named Executive Officers.
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS --------------------------- ---------------- SECURITIES NAME AND PRINCIPAL POSITION UNDERLYING ALL OTHER YEAR SALARY BONUS(1) OPTIONS (#) COMPENSATION (2) - ------------------------------- --------- ----------- ---------- ---------------- ------------------ William E. Staib (3) ....... 1999 $130,000 -- 200,000 $ 2,600 Director & Chief Executive Officer Timothy S. Yamauchi ........ 1999 116,458 $ 38,739 95,000 2,337 Chief Operating Officer Luan A. Cox ................ 1999 78,125 275,532 168,000 3,200 Executive Vice President, Sales L. Christopher Dominguez (4) 1999 82,916 126,660 85,000 -- Executive Vice President
(1) For Ms. Cox and Mr. Dominguez, the amounts represent sales commissions. (2) Represents 401(k) plan matching contributions by Stockpoint. (3) Mr. Staib was appointed acting Chief Executive Officer in December 1998 and elected Chief Executive Officer in June 1999. Prior to that time, he was Chief Technology Officer. (4) Mr. Dominguez was appointed Executive Vice President in July 1999. Options Granted. The following table sets forth information with respect to stock option granted during the fiscal year ended December 31, 1999 to each of the Named Executive Officers.
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK APPRECIATION FOR OPTION INDIVIDUAL GRANTS TERMS(1) --------------------------------------------------- ------------------------------------------ PERCENT OF TOTAL NUMBER OF OPTIONS SECURITIES GRANTED TO UNDERLYING EMPLOYEES OPTIONS IN FISCAL EXERCISE EXPIRATION NAME GRANTED YEAR PRICE PER DATE SHARE 0% (2) 5% 10% - ---------------------------- ------------ ------------- --------- ----------- ---------- ---------- ---------- William E. Staib ....... 200,000 16.3% $ 7.20 9/15/09 $ -- $ 906,000 $2,294,000 Timothy S. Yamauchi .... 60,000 4.9 7.20 9/15/09 -- 271,800 688,200 35,000 2.9 1.50 1/1/09 157,500 289,450 492,100 Luan A. Cox ............ 130,000 10.6 7.20 9/15/09 -- 588,900 1,491,100 38,000 3.1 1.50 1/1/09 171,000 314,260 534,280
40 43 L. Christopher Dominguez 40,000 3.3 7.20 9/15/09 -- 181,200 458,800 45,000 3.7 1.50 1/1/09 202,500 372,150 632,700
(1) The potential realizable value amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. The assumed 0%, 5% and 10% annual rates of stock appreciation from the date of grant to the end of the option term are provided in accordance with rules of the SEC and do not represent our estimate or projection of the future common stock price. Actual gains, if any, on stock option exercises are dependent on the future performance of our common stock, overall market conditions and the option holder's continued employment through the vesting period. (2) Represents value at date of grant of options granted with exercise prices that were below estimated fair value. Option Values. The following table summarizes the value of options held at December 31, 1999 by the Named Executive Officers. No options were exercised by the Named Executive Officers during 1999.
AGGREGATED OPTION VALUES AT DECEMBER 31, 1999 ------------------------------------------------------------------- VALUE OF UNEXERCISED NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT DECEMBER 31, 1999 AT DECEMBER 31, 1999 (1) -------------------------------- -------------------------------- Name EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------------------------- ------------- ---------------- ------------- ---------------- William E. Staib........................... 64,750 163,250 $ $ Timothy S. Yamauchi........................ 21,067 98,933 Luan Cox................................... 31,867 138,133 L. Christopher Dominguez................... 17,850 82,150
(1) Value is based on the difference between the per share exercise price of such options and the initial public offering price per share. EMPLOYMENT AGREEMENTS We have employment agreements with Mr. Staib, Mr. Yamauchi, Mr. Porter, Ms. Cox and Mr. Dominguez our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Executive Vice President, Sales and Executive Vice President, respectively, which provide for annual base salaries of $130,000, $150,000, $105,000, $150,000 and $150,000, respectively, and additional annual incentive compensation. The agreements also provide that, upon completion of this offering, Mr. Staib, Mr. Yamauchi, Mr. Porter, Ms. Cox and Mr. Dominguez will receive cash bonus payments of $60,000, $45,000, $35,000, $30,000 and $30,000, respectively, and that Mr. Staib's and Mr. Porter's salaries will be increased to $180,000 and $122,500, respectively. The agreements with Mr. Staib, Mr. Yamauchi, Ms. Cox and Mr. Dominguez expire in December 2000, subject to automatic annual renewals absent a 90-day notice of nonrenewal by either party. The agreement with Mr. Porter expires in March 2001, subject to automatic annual renewal absent a 90- day notice of nonrenewal by either party. In the event the employment of Messrs. Staib, Yamauchi or Dominguez is terminated "without cause" or as a result of a "constructive termination," the officer will continue to receive annual salary and health benefits for a period of nine months after termination and 40% of those options granted in September 1999 which remain unvested will vest. In the event the employment of Mr. Porter is terminated without cause or as a result of a constructive termination, Mr. Porter will continue to receive annual salary and health benefits for a period of nine months after termination. In the event of the termination of Ms. Cox's employment without cause or as a result of constructive termination, she receives $450,000 plus nine months of benefits. In addition, if termination occurs within 12 months following a change in control, the annual salary and health benefits of each of Messrs. Staib, Yamauchi and Dominguez will continue for a period of 18 months. The employment agreements with Mr. Staib, Mr. Yamauchi, Ms. Cox and Mr. Dominguez also provide that all unvested stock options held by these individuals will immediately vest upon a change in control. 41 44 STOCK OPTION PLANS In December 1995, the Board of Directors approved the 1995 Long-Term Incentive and Stock Option Plan (as amended, the "1995 Plan") and the 1995 Nonemployee Director Stock Option Plan (the "Directors' Plan"). The 1995 Plan authorizes the issuance of up to 2,000,000 shares of common stock, subject to an annual increase equal to 1 1/2 % of the outstanding shares of common stock as of the December 31 of the immediately preceding year. As of December 31, 1999, the Directors' Plan authorizes the issuance of up to 75,000 shares of common stock. Under the 1995 Plan, options that are intended to qualify as incentive stock options, options that are not intended to so qualify, stock appreciation rights, restricted stock or performance awards may be granted to full or part- time employees, officers, consultants, directors (other than nonemployee directors) or independent contractors. Under the Director's Plan, in which only nonemployee directors are eligible to participate, non-qualified stock options to purchase 5,000 shares of common stock, vesting in three equal annual installments, are automatically granted to each director eligible to participate on the date such person first becomes a director and an additional 5,000 shares, vesting one year following the date of grant, is automatically granted on the date of each annual meeting of stockholders. All options under the Directors Plan have terms of ten years and a per share exercise price equal to the fair market value of a share of common stock on the date of the grant. In July 1998, the Board of Directors exchanged all outstanding options for non-qualified options under the 1995 Plan in an identical number, at an exercise price of $1.50 per share, and on a vesting schedule identical to that of the exchanged options. At December 31, 1999, non-qualified options to purchase an aggregate of 1,612,300 shares of common stock were outstanding under the 1995 Plan with a weighted average exercise price of $4.19 per share. At December 31, 1999, options to purchase 15,000 shares of common stock were outstanding under the Directors' Plan with a weighted average exercise price of $5.33 per share. COMPENSATION OF DIRECTORS Directors are not currently paid fees for attending meetings. Harry O. Hefter receives a $20,000 consulting fee annually for management services he performs. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY As permitted by Section 145 of the Delaware General Corporation Law, our Amended and Restated Bylaws provide that we shall indemnify such persons for such liabilities in such manner under such circumstances and to such extent as permitted by Section 145. Our Board of Directors may authorize the purchase and maintenance of insurance and the execution of individual agreements for the purpose of such indemnification. We are required to advance all reasonable costs and expenses (including attorneys' fees) incurred in defending any action, suit or proceeding to all persons entitled to indemnification under the Bylaws, all in the manner, under the circumstances and to the extent permitted by Section 145. At present, there is no pending litigation or proceeding involving a director, officer or employee of Stockpoint for which indemnification has been sought. We are not aware of any threatened litigation that may result in claims for indemnification. As permitted by the Delaware General Corporation Law, our Amended and Restated Certificate of Incorporation includes a provision that eliminates the personal liability of directors for monetary damages for breach of fiduciary duty as a director except liability for (a) any breach of the director's duty of loyalty to the corporation or its stockholders, (b) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation Law or (d) any transaction from which the director derived an improper personal benefit. We maintain Directors and Officers Insurance which covers all directors and officers. The total amount of coverage is $3,000,000, including the costs of defense. 42 45 ================================================================================ CERTAIN TRANSACTIONS CONSULTING AGREEMENT In August 1999, Stockpoint and Equity Dynamics entered into a Consulting Agreement. John Pappajohn, a principal of Equity Dynamics, is one of our significant stockholders. Under the agreement, Equity Dynamics agreed to provide a minimum of 20 days per year of management, financial and other advisory services in exchange for which it is to be paid $50,000 per year and receive warrants to purchase an aggregate of 125,000 shares of common stock at an exercise price of $6.00 per share. The warrants are to expire five years from the date of the Consulting Agreement. BANK GUARANTEES We have, in large part, financed our operations through bank lines of credit and other debt facilities guaranteed by John Pappajohn and Robert Staib, our former Chief Executive Officer. We issued to Mr. Pappajohn warrants to purchase an aggregate of 537,500 shares of common stock at $4.00 per share in consideration of his guarantee of three lines of credit from April 1993 through June 1996. Robert Staib, our former Chief Executive Officer, also guaranteed a series of our credit agreements in seven transactions or renewals from November 1994 through June 1996. He also purported to pledge marketable securities as collateral for these guarantees. For these guarantees, we issued warrants to Robert Staib to purchase an aggregate of 806,250 shares of common stock at $4.00 per share, expiring at various times from January 1998 through January 2004, as well as guarantee fees aggregating $25,000. Included among these guarantees was the guarantee of two unsecured lines of credit aggregating $4,145,000 which remain outstanding and on which Robert Staib remains a guarantor. Robert Staib also guaranteed a commercial bank's obligations under several irrevocable standby letters of credit that secure $5,900,000 of our outstanding debentures and agreed to pledge marketable securities as collateral. We paid Robert Staib $50,000 in November 1997 for the guarantee and pledge, issued to Robert Staib warrants to purchase 500,000 shares of common stock at $8.00 per share and agreed to issue to Robert Staib warrants for an additional 100,000 shares during each year Robert Staib's guarantee of our line of credit remained outstanding. At the same time, we and Robert Staib entered into an Indemnification and Hold Harmless Agreement and a Reimbursement and Subordination Agreement pursuant to which we agreed to indemnify Robert Staib for losses he incurred because of his guarantees. In connection with loans he had guaranteed for an unrelated company, Robert Staib was arrested in December 1998, indicted in April 1999 for bank fraud and pled guilty to certain allegations in March 2000 as part of an agreement settling the indictment. At our request, Robert Staib ceased any involvement in our business in December 1998. Robert Staib formally resigned as our Chairman and CEO in April 1999. At the time of his arrest in December 1999, we were informed by our principal commercial lenders that they believed the collateral pledged by Robert Staib to secure our outstanding credit lines, as well as the letter of credit on the debentures, was not authentic. The lenders ceased making any further advances under our credit arrangements. We eventually restructured these credit arrangements in December 1999 under agreements that require, among other things, that they be repaid upon completion of this offering. A description of the restructured agreements is contained above under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." The banks have reserved any rights to proceed against Robert Staib under his guarantees. In September 1999, warrants to purchase 93,750 shares held by Robert Staib expired unexercised. In December 1999, we entered into an agreement with Robert Staib to settle any claims related to his employment and disputes relating to the validity of his guarantees and the warrants he had received. We agreed not to pursue any action to invalidate Robert Staib's warrants to purchase 500,000 shares of common stock at $4.00 per share in exchange for his cancellation and return of all 700,000 warrants previously issued at $8.00 per share and the remaining 212,500 warrants issued at $4.00 warrant per share. We also agreed to pay Robert Staib $60,000 upon completion of this offering in settlement of all other claims, including claims for reimbursement of expenses incurred during his employment. Under an order in connection with involuntary bankruptcy proceedings instituted against him, Robert Staib was required to notify the federal bankruptcy court for the District of Iowa of the settlement agreement. Robert Staib's 43 46 counsel formally requested that the bankruptcy court approve the settlement agreement in mid-December. One of Robert Staib's creditors, however, has filed two motions to set aside the settlement. There currently is a hearing scheduled before the bankruptcy court to be held on or about May 1, 2000 regarding these motions and the validity of the agreement. If the bankruptcy court determined that the settlement was invalid, and although we would continue to contest the validity of all the warrants, it is possible that the 912,500 warrants that Robert Staib has surrendered for cancellation will have to be reissued. BRIDGE LOAN FINANCING We entered into a $2,500,000 line of credit with a commercial bank in December 1999. This line of credit is secured by substantially all of our assets, as well as guaranteed, and secured by letters of credit or deposit accounts pledged by, eight investors, including John Pappajohn. In consideration of the guarantees and pledges, we issued to the investors warrants to purchase 20 shares of common stock for each $100 of the credit line that the investors guaranteed (or warrants to purchase a total of 500,000 shares of common stock). The warrants expire in December 2004 and may be exercised at any time prior to then at a price of $7.50 per share. The exercise price, however, is subject to adjustment to the price, if lower, (1) at which we issue shares of our common stock in a private transaction (excluding shares issued under employee options, outstanding warrants and certain other instruments), (2) equal to 50% of the price at which we conduct a bona fide public offering or (3) equal to 50% of the consideration received per share in any business combination in which we engage while the warrants are outstanding. If the exercise price is adjusted the number of shares covered by each warrant will also be adjusted to the number obtained by multiplying the number of shares initially issuable by the initial exercise price and dividing the result by the adjusted exercise price. If we complete a public offering of our common stock pursuant to a firm commitment underwriting at a price less than $15 per share, then the exercise price will be adjusted to 50% of the public offering price and the number of shares which can be purchased will be equal to $3,750,000 divided by the new exercise price. The Agreement pursuant to which the investor guarantees were received requires that the line be repaid by June 30, 2001 and provides that the investors may purchase, and may assume the bank's position under, the credit agreement in the event of certain defaults. Mr. Pappajohn received warrants to purchase 250,000 shares in consideration of the guarantee of $1,250,000 of the line of credit. We entered into a $500,000 line of credit with a commercial bank on March 30, 2000. This line of credit is secured by substantially all of our assets, as well as guaranteed, and secured by letters of credit or deposit accounts pledged by, three investors. In consideration of the guarantees and pledges, we issued to the investors warrants to purchase 20 shares of common stock for each $100 of the credit line that the investors guaranteed (or warrants to purchase a total of 100,000 shares of common stock). The warrants expire in March 2005 and may be exercised at any time prior to that date at a price of $10.00 per share. The exercise price, however, is subject to adjustment to the price, if lower, (1) at which we issue shares of our common stock in a private transaction (excluding shares issued under employee options, outstanding warrants and certain other instruments), (2) equal to 50% of the price at which we conduct a bona fide public offering or (3) equal to 50% of the consideration received per share in any business combination (excluding a pooling of interest transaction) in which we engage while the warrants are outstanding. If the exercise price is adjusted the number of shares covered by each warrant will also be adjusted to the number obtained by multiplying the number of shares initially issuable by the initial exercise price and dividing the result by the adjusted exercise price. If we complete a public offering of our common stock pursuant to a firm commitment underwriting at a price less than $20 per share, then the exercise price will be adjusted to 50% of the public offering price and the number of shares which can be purchased will be equal to $1,000,000 divided by the new exercise price. The Agreement pursuant to which the investor guarantees were received requires that the line be repaid by June 30, 2001 and provides that the investors may purchase, and may assume the bank's position under, the credit agreement in the event of certain defaults. 44 47 PRINCIPAL STOCKHOLDERS The following table sets forth information regarding the beneficial ownership of our common stock as of March 2, 2000 by (a) each person known by us to beneficially own more than 5% of our outstanding common stock, (b) each director, (c) each Named Executive Officer and (d) all directors and executive officers as a group. Except as otherwise noted, each stockholder has sole voting and investment power with respect to the shares set forth opposite that stockholder's name. This table lists applicable percentage ownership based on 4,014,931 shares of common stock outstanding as of March 2, 2000, after giving effect to the conversion of all outstanding shares of preferred stock, and also lists applicable percentage ownership based on _______ shares outstanding immediately following the completion of this offering.
PERCENT OF OUTSTANDING SHARES NUMBER ----------------------------------- NAME OF BENEFICIAL OWNER OF SHARES ACTUAL AFTER OFFERING - ------------------------------------------ ----------------- -------------- ----------------- Harry O. Hefter........................... 1,000,000 24.9% 180 North Wabash Avenue Chicago, Illinois 60601 John Pappajohn (1)........................ 874,967 19.0% 2116 Financial Center Des Moines, Iowa 50309 U.S. Bank National Association as trustee (2)............................ 748,500 16.6% 601 Second Avenue South Minneapolis, MN 55402 William E. Staib (3)...................... 377,084 9.2% Edgewater Private Equity Fund............. 250,000 6.2% 900 Michigan Avenue, 14th Floor Chicago, Illinois 60601 L. Christopher Dominguez (4).............. 62,555 1.5% Luan A. Cox (5)........................... 49,066 1.2% Timothy S. Yamauchi (6)................... 35,683 * David Sengpiel (7)........................ 31,000 * 512 58th Street West Des Moines, Iowa 50266 All directors and officers as a group (10 persons)(8)........................ 1,584,705 36.9%
- ------------ * Less than 1%. (1) Includes 592,500 shares of common stock issuable on exercise of outstanding warrants; 37,500 shares of common stock and 13,700 shares of Series A Preferred Stock owned by Halkis Ltd., an entity of which Mr. Pappajohn is the sole proprietor; 37,500 shares of common stock and 13,700 shares of Series A Preferred Stock owned by Thebes Ltd., an entity of which Mr. Pappajohn's wife is the sole proprietor; and 37,500 shares of common stock and 13,700 shares of Series A Preferred Stock owned by Mr. Pappajohn's wife. Mr. Pappajohn disclaims any beneficial ownership in any shares owned by Thebes and his wife. (2) Includes 248,500 shares held by U.S. Bank National Association, trustee of the Robert B. Staib Voting Trust dated December 3, 1999, established for the benefit of Robert Staib. Also includes 500,000 shares of common stock issuable upon the exercise of outstanding warrants held by Robert Staib. Upon exercise of these warrants, the shares will be automatically deposited into the Trust. In December 1999, under the terms of an agreement between Robert Staib and us, Robert Staib agreed to cancel and return 912,500 shares of common stock issuable upon the exercise of warrants. A creditor of Robert Staib is seeking to invalidate the settlement agreement that underlies these arrangements in a bankruptcy court. If the court did so, we might have to reissue these warrants. See "Certain Transactions." (3) Includes 77,084 shares of common stock subject to stock options exercisable within 60 days of March 2, 2000. (4) Includes 32,983 shares of common stock subject to stock options exercisable within 60 days of March 2, 2000 and 16,421 shares issuable upon the exercise of warrants. (5) Includes 49,066 shares of common stock subject to stock options exercisable within 60 days of March 2, 2000. (6) Includes 35,683 shares of common stock subject to stock options exercisable within 60 days of March 2, 2000. (7) Includes 21,000 shares of common stock subject to stock options exercisable within 60 days of March 2, 2000 and 10,000 shares of common stock issuable upon the exercise of outstanding warrants. (8) Includes 193,466 shares of common stock subject to stock options exercisable within 60 days of March 2, 2000 and 26,421 shares of common stock issuable upon the exercise of outstanding warrants. 45 48 DESCRIPTION OF CAPITAL STOCK Our authorized capital stock consists of 25,000,000 shares of capital stock, of which 20,000,000 shares are common stock, $.01 par value per share, and 5,000,000 shares are shares of preferred stock, no par value, undesignated as to rights and preferences. As of February 29, 2000, 2,176,118 shares of common stock were issued and outstanding and held by approximately 189 stockholders of record, and 1,375,974 shares of preferred stock were issued and outstanding and held by approximately 164 stockholders. Upon the closing of this offering, all outstanding shares of preferred stock will convert into an aggregate of 1,838,813 shares of common stock. COMMON STOCK The holders of our common stock are entitled to one vote per share on all matters to be voted upon by our stockholders. If Stockpoint is liquidated or dissolved, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to any prior distribution rights of any preferred stock then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable. Subject to the prior rights and preferences of any outstanding preferred stock, the holders of the common stock are entitled to receive ratably any dividends by the Board of Directors out of funds legally available for dividends. See "Dividend Policy." PREFERRED STOCK The Board of Directors is authorized, without further stockholder approval, to issue the undesignated shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares. The Board of Directors has authority to issue preferred stock in one or more series and to fix voting power (full or limited, or no voting power), and the designations, preferences and relative, participating, optional or other special rights and qualifications or restrictions of the undesignated preferred stock as the Board of Directors shall determine, without further vote or action by the stockholders. These rights include the dividend rights, conversion rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series. Issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of Stockpoint without further action by the stockholders and may adversely affect voting and other rights of holders of our common stock. WARRANTS At February 29, 2000, we had outstanding warrants to purchase 1,810,639 shares of common stock with an average weighted exercise price of $5.86 per share. These warrants expire between March 2000 and December 2004. REGISTRATION RIGHTS After this offering, the holders of 897,063 shares of common stock will be entitled to rights with respect to the registration of those shares under the Securities Act as follows: o Demand Registration Rights: At any time one year or more after the effective date of an initial public offering of our common stock, the holders of at least 51% of the eligible securities then outstanding may, on one occasion only, demand in writing that we, at our expense and subject to certain limitations, file a registration statement covering the sale of those securities. At the request of the holders of a majority of the securities to be registered, the method of disposition of the securities will be an underwritten public offering. We will select the managing underwriter of any public offering. o Piggyback Registration Rights: From and after the date on which one year has elapsed from the date we first consummate a public offering of our common stock, each time we determine to proceed with the actual preparation and filing of a registration statement other than certain limited purpose registration statements, we will give written notice of our determination to all record holders of eligible securities, who will have the right to include those securities in the registration statement, subject to certain conditions and restrictions. 46 49 o S-3 Registration Rights: At any time one year or more after the effective date of an initial public offering, and provided that we qualify for use of the relevant form, holders of a majority of the outstanding eligible securities may request, on one occasion only, that we file at our expense subject to certain limitations, a registration statement on Form S-3 covering the sale of the eligible securities. The holders of warrants to purchase a total of 1,598,639 shares of our common stock have rights to require us to include those shares in any registration statement, other than a registration statement filed in connection with an initial public offering, that we file prior to the expiration date of the relevant warrant. These rights include the right to require us to use our best efforts to qualify the warrant shares for sale in the states any warrantholder designates. We will bear the entire cost and expense of any registration like this other than the fees of counsel for the warrantholders and any registration fees, transfer taxes or underwriting discounts or commissions applicable to the warrant shares. DELAWARE LAW PROVISIONS WITH POTENTIAL ANTI-TAKEOVER EFFECTS As a Delaware corporation, we are subject to the provisions of Section 203 of the Delaware General Corporation Law. Section 203, subject to certain exemptions, prohibits a Delaware corporation from engaging in any of a broad range of "business combinations" and "control share acquisitions" involving an "interested" stockholder, or any affiliate or associate of such interested stockholder, for a period of three years following the date that such stockholder became an interested stockholder, unless: o prior to such date, the Board of Directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; o upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced excluding, for purposes of determining the number of shares outstanding, those shares owned (i) by persons who are directors and also officers and (ii) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or o on or subsequent to such date, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. A "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the stockholder. For purposes of Section 203, an "interested stockholder" is a person who, together with affiliates and associates, owns (or within three years prior, did own) 15% or more of the corporation's voting stock. These provisions may have the effect of discouraging, delaying, deferring or preventing a change in control of Stockpoint. LISTING We have applied for quotation of our common stock on the Nasdaq National Market under the symbol "STKP." TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock will be Norwest Bank Minnesota, National Association. 47 50 SHARES ELIGIBLE FOR FUTURE SALE Prior to this offering, there has been no public market for our common stock. We cannot make any predictions regarding the effect, if any, that future sales of substantial amounts of our common stock, or the perception that those sales might occur, could have on the market price for our common stock. Nevertheless, sales of substantial amounts of our common stock in the public market could adversely affect the prevailing market price. These factors could also make it more difficult for us to raise additional equity capital in the future. Upon completion of this offering, we will have outstanding a total of shares of our common stock, assuming no exercise of the underwriters' option to purchase additional shares and no exercise of outstanding options. All of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act unless the shares are purchased by "affiliates" as that term is defined in Rule 144 under the Securities Act. The remaining 4,014,931 shares of common stock held by existing stockholders are "restricted securities" as that term is defined in Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, rules that are summarized below. 4,010,181 of the shares held by existing stockholders were acquired more than two years ago. All of those shares, except shares held by persons who are "affliates" of Stockpoint under SEC rules and the ______ shares subject to lockup agreements with the underwriters, will be eligible for immediate sale in the public markets under Rule 144(k). The remaining 4,750 shares will become eligible for resale 90 days after the effective date of this offering under Rule 701. LOCK-UP AGREEMENTS Our directors, executive officers, five percent stockholders and certain other holders of our common stock have entered into "lock-up" agreements providing that they will not sell, offer to sell, contract to sell, hypothecate, pledge, grant any option to sell or otherwise dispose of, directly or indirectly, any shares of common stock or securities convertible into or exerciseable or exchangeable for common stock for a period of 180 days after the date of this prospectus without the prior written consent of Roth Capital Partners, Inc., the lead managing underwriter. Although Roth Capital Partners, Inc. may release the shares subject to the lock-up agreements in whole or in part at any time it has no current plan to do so. RULE 144 In general, under Rule 144 as currently in effect, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of: o 1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or o the average weekly trading volume of the common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. RULE 144(k) Under Rule 144(k), a person who has not been one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell those shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. RULE 701 In general, under Rule 701 as currently in effect, each of our employees, consultants or advisors who purchases shares from us in connection with a compensatory stock plan or other written agreement is eligible to resell 48 51 those shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144. REGISTRATION RIGHTS The holders of 897,063 shares of our common stock and holders of warrants to purchase an aggregate of 1,598,639 shares of our common stock have various rights with respect to the registration of their shares under the Securities Act. Registration of these shares would result in their becoming freely tradeable without restriction, except for shares purchased by affiliates. See "Description of Capital Stock--Registration Rights." STOCK OPTIONS After the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register all shares of common stock issuable under our stock option plans. See "Management -- Stock Option Plans." This Form S-8 registration statement is expected to be become effective immediately upon filing and shares covered by that registration statement will then be eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates. 49 52 UNDERWRITING Stockpoint has entered into an underwriting agreement with the underwriters named below. Roth Capital Partners, Inc. is acting as the representative of the underwriters. The underwriting agreement provides for the purchase of a specific number of shares of common stock by each of the underwriters. The underwriters' obligations are several, which means that each underwriter is required to purchase a specified number of shares, but is not responsible for the commitment of any other underwriter to purchase shares. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase the number of shares of common stock set forth opposite its name below:
UNDERWRITER NUMBER OF SHARES - ----------- ---------------- Roth Capital Partners, Inc. ............................... ----------------- Total .................................................... =================
This is a firm commitment underwriting. This means that the underwriters have agreed to purchase all of the shares offered by this prospectus, other than those covered by the over-allotment option described below, if any are purchased. Under the underwriting agreement, if an underwriter defaults in its commitment to purchase shares, the commitments of non-defaulting underwriters may be increased or the underwriting agreement may be terminated, depending on the circumstances. The representative has advised us that the underwriters propose to offer the shares directly to the public at the public offering price that appears on the cover of this prospectus. In addition, the representative may offer some of the shares to securities dealers at that price less a concession of $ per share. The underwriters may also allow to dealers, and those dealers may reallow, a concession not in excess of $ per share to other dealers. After the shares are released for sale to the public, the representative may change the offering price and other selling terms at various times. The underwriters have informed us that they do not intend to confirm sales to accounts over which they exercise discretionary authority. We have granted to the underwriters an over-allotment option. This option, which is exercisable for up to 30 days after the date of this prospectus, permits the underwriters to purchase a maximum of additional shares of our common stock to cover over-allotments. If the underwriters exercise all or part of this option, they will purchase the shares covered by the option at the public offering price that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total price to public will be $ million and the total proceeds to Stockpoint will be approximately $ million. The underwriters have severally agreed that, to the extent they exercise the over-allotment option, each of the underwriters will purchase a number of shares proportionate to its initial amount reflected in the table above. The following table provides information regarding the amount of the discount to be paid to the underwriters by us:
---------------------------------------------------- No Exercise of Full Exercise of Over-Allotment Option Over-Allotment Option ----------------------- ------------------------ Per Share............ Total................
We estimate that the total expenses of the offering, excluding the underwriting discount, will be approximately $______________. We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act of 1933. 50 53 We, each of our directors, executive officers, five percent stockholders and certain other holders of our common stock have agreed pursuant to "lock-up" agreements not to sell, offer to sell, contract to sell, hypothecate, pledge, grant any option to sell or otherwise dispose of, directly or indirectly, any shares of common stock or securities convertible into or exerciseable or exchangeable for common stock for a period of 180 days after the date of this prospectus without the prior written consent of Roth Capital Partners, Inc. Although Roth Capital Partners, Inc. may release the shares subject to the lock-up agreements in whole or in part at any time, it has no current plan to do so. Prior to this offering, there has been no public market for the common stock. Consequently, the offering price for the common stock will be determined by negotiations between us and the representative of the underwriters and is not necessarily related to our asset value, net worth or other established criteria of value. The factors to be considered in these negotiations, in addition to prevailing market conditions, will include the history of and prospects for the industry in which we compete, an assessment of our management, our prospects, our capital structure and other factors as are deemed relevant. Rules of the Securities and Exchange Commission may limit the ability of the underwriters to bid for or purchase shares before the distribution of shares is completed. However, the underwriters may engage in the following activities in accordance with those rules: o Stabilizing transactions - The representatives may make bids or purchases for the purpose of pegging, fixing or maintaining the price of the shares, so long as stabilizing bids do not exceed a specified maximum. o Over-allotments and syndicate covering transactions - The underwriters may create a short position in the shares by selling more shares than are set forth on the cover page of this prospectus. If a short position is created in connection with this offering, the representative may engage in syndicate covering transactions by purchasing shares in the open market. The representative may also elect to reduce any short position by exercising all or part of the over-allotment option. o Penalty bids - If the representative purchases shares in the open market in a stabilizing transaction or syndicate covering transaction, they may reclaim a selling concession from the underwriters and selling group members who sold those shares as part of this offering. Stabilization and syndicate covering transactions may cause the price of the shares to be higher than it would be in the absence of these transactions. The imposition of a penalty bid might also have an effect on the price of the shares if it discourages resales of the shares. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of the shares. These transactions may occur on the Nasdaq National Market or otherwise. If transactions of this kind are commenced, they may be discontinued without notice at any time. LEGAL MATTERS Dorsey & Whitney LLP, Minneapolis, Minnesota, will pass upon the validity of the issuance of shares of common stock offered by this prospectus for Stockpoint. Messerli & Kramer P.A. will pass upon certain legal matters in connection with the offering for the underwriters. 51 54 EXPERTS The consolidated financial statements of Stockpoint as of December 31, 1998 and 1999 and for the years ended December 31, 1997, 1998 and 1999 included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on Form S-1 with respect to the shares of common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information contained in the registration statement and the exhibits and schedules that are another part of the registration statement. In particular, statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete, and in each case we refer you to the copy of that contract or other document to the extent filed as an exhibit to the registration statement for a more complete description. For further information on Stockpoint and our common stock, you should review the registration statement, including exhibits and schedules. You may read and copy all or any portion of the registration statement or any reports, statements or other information we file at the SEC's public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, DC, 20549 and at the regional offices of the SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of these documents upon payment of a duplicating fee by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings, including the registration statement, are also available on the SEC's web site at http://www.sec.gov. Upon completion of this offering, we will be required to file periodic reports, proxy statements and other information with the SEC. These documents will be available for inspection and copying as described above. In addition, upon approval of our application for quotation of our common on the Nasdaq National Market, those reports, proxy statements and other information will also be available for inspection at the offices of Nasdaq Operations, 1735 K Street, NW, Washington, DC 20006. We intend to furnish our stockholders with annual reports containing financial statements audited by our independent auditors and to make available to our stockholders quarterly reports containing unaudited financial data for the first three quarters of each fiscal year. 52 55 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Independent Auditors' Report................................ F-2 Consolidated Balance Sheets as of December 31, 1998 and 1999...................................................... F-3 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1998 and 1999.......................... F-5 Consolidated Statements of Stockholders' (Deficiency) for the Years Ended December 31, 1997, 1998 and 1999.......... F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1998 and 1999.......................... F-7 Notes to Consolidated Financial Statements.................. F-8
F-1 56 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Stockpoint, Inc.: We have audited the accompanying consolidated balance sheets of Stockpoint, Inc. (formerly Neural Applications Corporation) and subsidiary as of December 31, 1998 and 1999, and the related consolidated statements of operations, stockholders' (deficiency), and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Stockpoint, Inc. and subsidiary at December 31, 1998 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. As discussed in Note 13 to the consolidated financial statements, the Company discontinued the operations of its metals segment on May 28, 1999, when it sold the technology and operational assets of the metals segment. The gain on sale and results prior to the sale are included in discontinued operations in the accompanying consolidated financial statements. /s/ Deloitte & Touche LLP Cedar Rapids, Iowa February 8, 2000 F-2 57 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1999
1998 1999 ---------- ---------- ASSETS (NOTES 2 AND 9) CURRENT ASSETS: Cash and cash equivalents............................. $ 221,098 $2,203,623 Accounts receivable, less allowance for doubtful accounts of $58,208 for 1998 and $150,000 for 1999............................................... 1,118,310 1,859,852 Prepaid expenses and other assets..................... 146,323 247,201 Net current assets of discontinued operations (Note 13)................................................ 804,201 -- ---------- ---------- Total current assets............................... 2,289,932 4,310,676 ---------- ---------- SOFTWARE, EQUIPMENT AND FURNITURE: Purchased software.................................... 214,473 322,665 Equipment............................................. 1,388,863 1,886,301 Furniture and fixtures................................ 56,360 67,227 ---------- ---------- Total.............................................. 1,659,696 2,276,193 Less accumulated depreciation......................... (571,133) (929,071) ---------- ---------- Software, equipment and furniture, net........... 1,088,563 1,347,122 ---------- ---------- OTHER ASSETS: Software development costs, less accumulated amortization of $191,654 for 1998 and $204,519 for 1999 (Note 1)...................................... 28,645 15,780 Deferred financing costs, less accumulated amortization of $108,865 for 1998 and $215,512 for 1999............................................... 387,207 415,560 ---------- ---------- Total other assets................................. 415,852 431,340 ---------- ---------- Total.............................................. $3,794,347 $6,089,138 ========== ==========
See notes to consolidated financial statements. F-3 58
PRO FORMA (NOTE 14) 1998 1999 1999 ------------ ------------ ------------ (UNAUDITED) LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) CURRENT LIABILITIES: Lines of credit (Note 2)............. $ 4,145,000 $ 1,750,000 Forgivable loan (Note 2)............. 250,000 -- Accounts payable..................... 796,370 1,566,781 Deferred revenue..................... 1,498,181 2,808,181 Accrued installation and warranty costs............................. 46,282 296,086 Other accrued liabilities............ 833,956 552,451 Customer deposits.................... 70,314 -- Current portion of capital lease (Note 8).......................... -- 5,821 ------------ ------------ Total current liabilities......... 7,640,103 6,979,320 ------------ ------------ LONG-TERM LIABILITIES: Long-term debt, net of debt discount and less current portion (Note 2)................................ 5,900,000 10,508,421 Capital lease, less current portion (Note 8).......................... -- 28,260 ------------ ------------ Total long-term liabilities....... 5,900,000 10,536,681 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Notes 2, 7, 8 and 9) STOCKHOLDERS' (DEFICIENCY) (Note 11): Preferred stock, no par value; 5,000,000 shares authorized: Convertible Series A Preferred Stock, 320,000 shares issued at December 31, 1998 and 1999 ($2,000,000 liquidation value, convertible into 500,000 shares of common stock) (Note 4), no pro forma shares outstanding................ 1,965,991 1,965,991 $ -- Convertible Series B Preferred Stock, 282,720 shares issued at December 31, 1998 and 1999 ($1,767,000 liquidation value, convertible into 441,750 shares of common stock) (Note 4), no pro forma shares outstanding................ 1,733,639 1,733,639 -- Convertible Series C Preferred Stock, 773,254 shares issued at December 31, 1998 and 1999 ($6,762,602 liquidation value, convertible into 897,063 shares of common stock) (Note 4), no pro forma shares outstanding................ 5,455,319 5,455,319 -- Common stock, $.01 par value per share; 20,000,000 shares authorized; 2,129,701 and 2,176,118 shares issued at December 31, 1998 and 1999, respectively (Note 5), 4,014,931 pro forma shares outstanding............. 21,297 21,761 40,149 Common stock warrants (Note 7)......... -- 819,868 819,868 Additional paid-in capital............. 2,609,759 3,875,620 13,012,181 Deferred compensation (Note 6)......... (1,594,755) (2,194,978) (2,194,978) Accumulated deficit.................... (19,937,006) (23,104,083) (23,104,083) ------------ ------------ ------------ Total stockholders' (deficiency).................... (9,745,756) (11,426,863) $(11,426,863) ------------ ------------ ============ Total.................................. $ 3,794,347 $ 6,089,138 ============ ============
See notes to consolidated financial statements. F-4 59 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1997 1998 1999 ----------- ----------- ----------- CONTINUING OPERATIONS: REVENUES (Note 10)....................... $ 1,427,908 $ 2,177,946 $ 6,829,869 COST OF REVENUES (excluding deferred compensation of $86,257 for 1998 and $124,337 for 1999).................. 308,608 764,965 2,289,881 ----------- ----------- ----------- GROSS PROFIT............................. 1,119,300 1,412,981 4,539,988 ----------- ----------- ----------- OPERATING EXPENSES: Research and development (excluding deferred compensation of $61,176 for 1998 and $114,005 for 1999)......... 1,057,071 1,101,471 1,637,150 Sales and marketing (excluding deferred compensation of $58,229 for 1998 and $137,552 for 1999).................. 752,675 1,566,030 1,590,899 General and administrative (excluding deferred compensation of $460,608 for 1998 and $236,408 for 1999)..... 2,556,730 3,523,006 3,588,977 Deferred compensation (Note 6)......... -- 666,270 612,302 ----------- ----------- ----------- Total operating expenses............ 4,366,476 6,856,777 7,429,328 ----------- ----------- ----------- OPERATING LOSS FROM CONTINUING OPERATIONS............................. (3,247,176) (5,443,796) (2,889,340) OTHER EXPENSE, PRIMARILY INTEREST........ (688,525) (784,546) (1,058,545) ----------- ----------- ----------- LOSS FROM CONTINUING OPERATIONS.......... (3,935,701) (6,228,342) (3,947,885) DISCONTINUED OPERATIONS (Note 13): Income (loss) from operations.......... (405,722) (356,946) 347,675 Gain on disposition.................... -- -- 433,133 ----------- ----------- ----------- NET LOSS................................. (4,341,423) (6,585,288) (3,167,077) CUMULATIVE DIVIDENDS ON PREFERRED STOCK.................................. (40,266) (409,418) (412,918) ----------- ----------- ----------- NET LOSS APPLICABLE TO COMMON STOCKHOLDERS........................... $(4,381,689) $(6,994,706) $(3,579,995) =========== =========== =========== BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE -- HISTORICAL: Loss from continuing operations..... $ (1.90) $ (3.15) $ (2.03) Income (loss) from discontinued operations........................ (0.20) (0.17) 0.36 ----------- ----------- ----------- Net loss............................ $ (2.10) $ (3.32) $ (1.67) =========== =========== =========== BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE -- PRO FORMA (UNAUDITED) (Note 14): Loss from continuing operations..... $ (.73) Income from discontinued operations........................ .20 ----------- Net loss............................ $ (.53) ===========
See notes to consolidated financial statements. F-5 60 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
SUBSIDIARY CONVERTIBLE CONVERTIBLE CONVERTIBLE SERIES A SERIES A SERIES B SERIES C COMMON ADDITIONAL PREFERRED PREFERRED PREFERRED PREFERRED COMMON STOCK PAID-IN STOCK STOCK STOCK STOCK STOCK WARRANTS CAPITAL ---------- ----------- ----------- ----------- ------- -------- ---------- BALANCE AT DECEMBER 31, 1996....... $ 100,000 $1,965,991 $1,733,639 $ -- $20,897 $ -- $ 118,734 Issuance of 694,618 shares of Convertible Series C Preferred Stock, net of issue costs of $414,684......................... -- -- -- 4,885,316 -- -- -- Redemption of subsidiary Series A Preferred Stock................ (100,000) -- -- -- -- -- -- Net loss......................... -- -- -- -- -- -- -- --------- ---------- ---------- ---------- ------- -------- ---------- BALANCE AT DECEMBER 31, 1997....... -- 1,965,991 1,733,639 4,885,316 20,897 -- 118,734 Issuance of 78,636 shares of Convertible Series C Preferred Stock, net of issue costs of $29,997.......................... -- -- -- 570,003 -- -- -- Deferred compensation.............. -- -- -- -- -- -- 2,491,425 Amortization of deferred compensation (including $230,400 allocated to discontinued operations)...................... -- -- -- -- -- -- -- Cashless exercise of warrants for 40,000 shares of common stock.... -- -- -- -- 400 -- (400) Net loss..................... -- -- -- -- -- -- -- --------- ---------- ---------- ---------- ------- -------- ---------- BALANCE AT DECEMBER 31, 1998....... -- 1,965,991 1,733,639 5,455,319 21,297 -- 2,609,759 Issuance of 4,750 shares of common stock............................ -- -- -- -- 47 -- 4,703 Deferred compensation.............. -- -- -- -- -- -- 1,261,575 Amortization of deferred compensation (including $49,050 allocated to discontinued operations)...................... -- -- -- -- -- -- -- Issuance of common stock warrants......................... -- -- -- -- -- 819,868 -- Cashless exercise of warrants for 41,667 shares of common stock.... -- -- -- -- 417 -- (417) Net loss..................... -- -- -- -- -- -- -- --------- ---------- ---------- ---------- ------- -------- ---------- BALANCE AT DECEMBER 31, 1999....... $ -- $1,965,991 $1,733,639 $5,455,319 $21,761 $819,868 $3,875,620 ========= ========== ========== ========== ======= ======== ========== DEFERRED ACCUMULATED COMPENSATION DEFICIT ------------ ----------- BALANCE AT DECEMBER 31, 1996....... $ -- $ (9,010,295) Issuance of 694,618 shares of Convertible Series C Preferred Stock, net of issue costs of $414,684......................... -- -- Redemption of subsidiary Series A Preferred Stock................ -- -- Net loss......................... -- (4,341,423) ----------- ------------ BALANCE AT DECEMBER 31, 1997....... -- (13,351,718) Issuance of 78,636 shares of Convertible Series C Preferred Stock, net of issue costs of $29,997.......................... -- -- Deferred compensation.............. (2,491,425) -- Amortization of deferred compensation (including $230,400 allocated to discontinued operations)...................... 896,670 -- Cashless exercise of warrants for 40,000 shares of common stock.... -- -- Net loss..................... -- (6,585,288) ----------- ------------ BALANCE AT DECEMBER 31, 1998....... (1,594,755) (19,937,006) Issuance of 4,750 shares of common stock............................ -- -- Deferred compensation.............. (1,261,575) -- Amortization of deferred compensation (including $49,050 allocated to discontinued operations)...................... 661,352 -- Issuance of common stock warrants......................... -- -- Cashless exercise of warrants for 41,667 shares of common stock.... -- -- Net loss..................... -- (3,167,077) ----------- ------------ BALANCE AT DECEMBER 31, 1999....... $(2,194,978) $(23,104,083) =========== ============
See notes to consolidated financial statements. F-6 61 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1997 1998 1999 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................... $(4,341,423) $(6,585,288) $(3,167,077) Adjustments to reconcile net loss to net cash flows from operating activities of continuing operations: (Income) loss from discontinued operations....... 405,722 356,946 (347,675) Gain on disposition of discontinued operations... -- -- (433,133) Depreciation and amortization.................... 243,187 361,495 521,015 Noncash expense related to stock options and warrants....................................... -- 896,670 858,810 Net changes in assets and liabilities: Accounts receivable.............................. (66,648) (508,159) (741,542) Prepaid expenses and other assets................ (81,581) (6,477) 9,953 Accounts payable................................. 136,874 404,099 770,411 Deferred revenue................................. 133,137 900,954 1,310,000 Accrued liabilities and customer deposits........ (60,808) 388,846 (102,015) ----------- ----------- ----------- Net cash flows from operating activities of continuing operations....................... (3,631,540) (3,790,914) (1,321,253) Net cash flows from discontinued operations.... (407,746) (727,083) 835,009 ----------- ----------- ----------- Net cash flows from operating activities....... (4,039,286) (4,517,997) (486,244) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for software, equipment and furniture........................................ (477,919) (749,923) (623,487) Expenditures for software development costs........ -- (38,597) -- Proceeds from sale of discontinued operations...... -- -- 750,000 ----------- ----------- ----------- Net cash flows from investing activities....... (477,919) (788,520) 126,513 ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings under bank lines of credit........................................... -- 5,055,000 2,475,000 Payments on borrowings under bank lines of credit........................................... (5,510,000) (910,000) -- Payments on capital lease.......................... -- -- (2,494) Payments for bank line of credit fees.............. -- -- (135,000) Payments for issuance costs of debentures.......... (411,575) (29,997) -- Payments for issuance costs of preferred stock..... (414,684) (29,997) -- Proceeds from issuance of Convertible Series C Preferred Stock.................................. 5,300,000 600,000 -- Proceeds from issuance of debentures............... 5,300,000 600,000 -- Proceeds from issuance of common stock............. -- -- 4,750 Redemption of subsidiary Series A Preferred Stock............................................ (100,000) -- -- ----------- ----------- ----------- Net cash flows from financing activities....... 4,163,741 5,285,006 2,342,256 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................................ $ (353,464) $ (21,511) $ 1,982,525 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....... 596,073 242,609 221,098 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR............. $ 242,609 $ 221,098 $ 2,203,623 =========== =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid during the year for interest............. $ 699,021 $ 663,110 $ 936,018 =========== =========== =========== NONCASH INVESTING AND FINANCING ACTIVITIES: Equipment purchased by capital lease............... $ -- $ -- $ 36,575 Issuance of common stock warrants for consulting services......................................... -- -- 279,868 Issuance of common stock warrants in connection with bank line of credit......................... -- -- 540,000
See notes to consolidated financial statements. F-7 62 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS -- In July 1999, Neural Applications Corporation amended its certificate of incorporation to change its name to Stockpoint, Inc. (which individually or collectively with its wholly-owned subsidiary discussed below is referred to herein as the "Company"). The Company operates in a single business segment. The Company is a provider of financial information and market analysis components for Internet web sites. The Company integrates sophisticated financial content and applications to provide its clients customized web sites that the Company hosts using its proprietary data base architecture. In doing so, the Company enables organizations such as brokerages, commercial and investment banks, mutual funds, 401(k) plans, portals and media companies to outsource essential web site functionality. The Company also engages in projects to provide data mining applications and financial services consulting to businesses related to their Internet web sites. PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the accounts of Stockpoint, Inc. and its wholly-owned subsidiary. Prior to June 1999, such subsidiary was Ethos Corporation, which was acquired by the Company on March 6, 1997 (see Note 11). In June 1999, Ethos Corporation was merged into the Company. Simultaneously, certain assets were contributed to a newly formed subsidiary named Neural, Inc. Intercompany accounts and transactions have been eliminated. BASIS OF PRESENTATION -- The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has had recurring operating losses since inception, which has resulted in an accumulated deficit of $23,104,083 at December 31, 1999. Management is continuing its efforts to market the Company's existing products and services and develop new products and services to enable the Company to achieve a revenue base that can support its operations. Management believes that existing capital resources and financing available under the Company's line of credit will be adequate to satisfy minimum capital requirements for at least twelve months. USE OF ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the allowance for doubtful accounts and accrued installation and warranty costs. FAIR VALUE OF FINANCIAL INSTRUMENTS -- The fair value of accounts receivable, accounts payable, customer deposits, and notes payable approximate the carrying values of the instruments due to the short-term maturities of such instruments or, for long-term notes payable, due to no significant change in interest rates since their issuance. CONCENTRATION OF CREDIT RISK -- The Company's financial instruments that are subject to concentration of credit risk consist primarily of cash and cash equivalents and trade F-8 63 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 accounts receivable which are generally not collateralized. The Company's policy is to place its cash and cash equivalents with high credit quality financial institutions in order to limit the amount of credit exposure. The Company's trade accounts receivable are primarily with customers in the financial services industry. The Company maintains allowances for probable credit losses. CONCENTRATION OF SOURCES OF CONTENT -- The Company obtains financial data and information, such as stock pricing information, financial news, and research information, from a limited number of content providers through nonexclusive contractual relationships with terms that usually range from one to two years. The Company may not be able to renew these contracts on favorable terms or a change in content providers could cause significant service disruptions which would adversely affect the business. CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include interest earning deposits with original maturities of ninety days or less. PURCHASED SOFTWARE, EQUIPMENT, AND FURNITURE -- Purchased software, equipment, and furniture are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives (three to five years) of the related assets. The Company reviews such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SOFTWARE DEVELOPMENT COSTS -- Software development costs for products and significant product enhancements incurred subsequent to the establishment of their technological feasibility and prior to their general release to customers are capitalized. The ultimate recovery of the costs is dependent on the Company's ability to successfully complete the products or enhancements under development and to achieve a level of market acceptance, which will generate revenues and profits in amounts sufficient to permit such recovery. The Company evaluates the recoverability of capitalized software development costs by project on a periodic basis. The Company begins amortizing software development costs when the products and product enhancements are released to customers. Amortization expense was $55,064, $29,948 and $12,865 for the years ended December 31, 1997, 1998 and 1999, respectively. Capitalized software development costs are amortized pro rata based upon revenue earned over total anticipated revenue from the related products or product enhancement or straight-line over three years, whichever method results in the greatest amortization expense. DEFERRED FINANCING COSTS -- Incremental costs directly attributable to the Company's line of credit agreement and private placement offering of debentures have been deferred and are being amortized as interest expense over the life of the line of credit agreement and debentures, respectively. PRODUCT SUPPORT AND WARRANTY COSTS -- Estimated costs anticipated to be incurred during the product support and warranty period related to the Company's discontinued metals segment (see Note 13) was accrued when revenue from the system sale was F-9 64 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 recognized. The Company remains liable for such costs for systems sold prior to the sale of the metals segment. REVENUE RECOGNITION AND DEFERRED REVENUE -- Revenues from Internet advertising, license, and maintenance and support agreements are recognized ratably over the periods of the agreements. Revenues from services for projects and Internet development agreements are recognized as project or development time is incurred. Deferred revenue represents amounts billed to customers as permitted by the agreements which have not yet been recognized as revenue. DEBT DISCOUNT -- Original issue debt discount associated with the value assigned to detachable common stock warrants issued in connection with the Company's line of credit is being amortized as interest expense over the life of the line of credit agreement. INCOME TAXES -- Deferred income taxes are provided to recognize the tax effect of temporary differences between the basis of assets and liabilities for tax and financial statement purposes. A valuation allowance is provided to reduce deferred tax assets to the amount considered realizable. STOCK-BASED COMPENSATION -- The Company measures stock-based compensation cost with employees as the excess of the fair value of the Company's common stock at date of grant over the amount the employee must pay for the stock. The Company measures stock-based compensation with other than employees as the fair value of the goods or services received or the fair value of the equity instrument issued, whichever is more reliably measurable. If compensation cost for stock option grants to employees had been determined based on fair value at the grant dates consistent with the method prescribed by Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation," the Company's net loss applicable to common stockholders and net loss per share would have been the pro forma amounts indicated below:
YEARS ENDED DECEMBER 31, ----------------------------------------- 1997 1998 1999 ----------- ----------- ----------- Net loss applicable to common stockholders: As reported............................ $(4,381,689) $(6,994,706) $(3,579,995) Pro forma.............................. (4,442,009) (7,018,879) (3,651,326) Net loss per common share: As reported............................ $ (2.10) $ (3.32) $ (1.67) Pro forma.............................. (2.13) (3.33) (1.71)
The Company's calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions: seven year expected life of option; stock volatility of zero; risk-free interest rates of 6.25%, 5.5% and 6.0% in 1997, 1998 and 1999, respectively; and no dividends during the expected term. The pro forma amounts for F-10 65 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 compensation cost may not be indicative of the effects on net loss applicable to common stockholders and net loss per common share for future years. NET LOSS PER COMMON SHARE INFORMATION -- The Company's net loss per common share is based upon the weighted average number of common shares outstanding during the years presented. Equivalent shares in the form of convertible preferred stock, stock options and warrants are excluded from the calculation since they are antidilutive. The Company's net loss per common share is calculated as follows:
YEARS ENDED ----------------------------------------- 1997 1998 1999 ----------- ----------- ----------- Loss from continuing operations.......... $(3,935,701) $(6,228,342) $(3,947,885) Cumulative dividends on preferred stock.................................. (40,266) (409,418) (412,918) ----------- ----------- ----------- Loss from continuing operations applicable to common stockholders...... (3,975,967) (6,637,760) (4,360,803) Income (loss) from discontinued operations............................. (405,722) (356,946) 780,808 ----------- ----------- ----------- Net loss applicable to common stockholders........................... $(4,381,689) $(6,994,706) $(3,579,995) =========== =========== =========== Basic and diluted loss per common share: Loss from continuing operations........ $ (1.90) $ (3.15) $ (2.03) Income (loss) from discontinued operations.......................... (0.20) (0.17) 0.36 ----------- ----------- ----------- Net loss............................... $ (2.10) $ (3.32) $ (1.67) ----------- ----------- ----------- Weighted average common shares outstanding............................ 2,089,701 2,106,906 2,141,404 =========== =========== =========== Potential common shares excluded from per share computation because they were antidilutive: Convertible preferred stock......... 1,636,368 1,773,940 1,838,813 Options............................. 422,150 588,650 1,652,300 Warrants............................ 1,686,750 2,186,889 1,810,639 ----------- ----------- ----------- Total............................... 3,745,268 4,549,479 5,301,752 =========== =========== ===========
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The recognition of gains or losses resulting from changes in the values of derivatives is based on the use of each derivative instrument and whether it qualifies for hedge accounting. SFAS No. 137 deferred the effective date of SFAS No. 133 to fiscal years beginning after F-11 66 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 June 15, 2000. The Company has not yet determined the effect of SFAS No. 133 on the consolidated financial statements. SFAS No. 132, "Employers' Disclosures About Pensions and Other Postretirement Benefits" is not applicable to the Company's operations. RECLASSIFICATION -- Certain reclassifications have been made to prior years amounts to conform with the current period presentation. 2. NOTES PAYABLE Notes payable are summarized as follows:
DECEMBER 31, -------------------------- 1998 1999 ----------- ----------- Debentures, 8.75%, due September 30, 2002, collateralized by irrevocable letters of credit to pay principal and accrued interest in an amount equal to 107% of the principal amount of the debentures, waiver of collateral violation with bank providing the irrevocable letters of credit only exists through June 30, 2001 as discussed below..... $ 5,900,000 $ 5,900,000 Prior lines of credit, 8.25%, restructured to notes payable in December 1999............................ 4,145,000 -- Notes payable to banks, interest rate at prime (8.5% at December 31, 1999), $1,145,000 due June 30, 2001 and $3,000,000 due November 2, 2002, waiver of collateral violation with banks only exists through June 30, 2001 as discussed below.................... -- 4,145,000 Line of credit, interest rate at prime (8.5% at December 31, 1999), due June 30, 2001, collateralized by substantially all of the Company's assets.............................................. -- 2,475,000 Note payable to the Iowa Department of Economic Development, forgivable loan, 6%, see repayment terms below, collateralized by certain software, equipment and furnishings, and accounts receivable.......................................... 250,000 250,000 Unamortized debt discount............................. -- (511,579) ----------- ----------- Total notes payable, net of discount.................. 10,295,000 12,258,421 Less current portion.................................. 4,395,000 1,750,000 ----------- ----------- Long-term debt, net of discount....................... $ 5,900,000 $10,508,421 =========== ===========
The Company's debentures are due earlier, at the Company's option, if the Company completes a public offering of its common stock at a price of at least $8.00 per share and generates net proceeds of at least $15,000,000. The debentures also prohibit the Company from pledging any of its existing assets to collateralize any indebtedness without the consent of a majority of the holders of the debentures. During 1999, the Company F-12 67 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 obtained a waiver from the debenture holders which allows the Company to pledge up to $3,000,000 of Company assets. The irrevocable letters of credit related to the debentures and the prior lines of credit, which were restructured to notes payable as discussed below, are collateralized by a pledge of marketable securities held by the Company's former chairman of the Board of Directors and chief executive officer. The lenders alleged that the marketable securities were counterfeit and in December 1998 informed the Company that the Company would not be able to borrow any additional amounts available under the lines of credit. Due to the uncertainty regarding the validity of the pledge, the Company classified the borrowings under the lines of credit as current at December 31, 1998. On December 3, 1999, the lines of credit were terminated and the balances outstanding were restructured to notes payable. Under the terms of the restructuring agreement, the lenders agreed to waive any events of default existing on December 3, 1999 under the lines of credit and the irrevocable letters of credit related to the debentures through June 30, 2001. Accordingly, these amounts have been classified as long-term at December 31, 1999. The notes payable require repayment and either (a) the debentures must be repaid, (b) a replacement letter of credit must be obtained or (c) cash collateral equal to 120% of the letters of credit must be provided if before June 30, 2001 the Company completes a strategic transaction. A strategic transaction is defined as an initial public offering of an equity security by the Company, a sale of substantially all of the Company's assets, or any other strategic transaction including a merger or joint venture involving a major component of the Company's business. Covenants under the notes payable require, among others, that the Company will not incur any other debt or liens except for the new bank line of credit discussed below; not declare or pay any dividends; not redeem any capital stock; and limit annually its capital leases, capital expenditures, and salaries of certain employees to specified levels. The Company was in compliance with these covenants as of December 31, 1999. In December 1999, the Company obtained from a bank a new $2,500,000 line of credit, which expires on June 30, 2001. A group of guarantors entered into credit support agreements with the bank as additional collateral for the line of credit. The Company granted to the guarantors warrants for the purchase of 500,000 shares of the Company's common stock at an exercise price of $7.50 per share as consideration for their credit support. The value assigned to the warrants, shown as debt discount, has been based on the estimated rate of interest that would have been required for the line of credit if the credit support had not been obtained. The warrants expire in December 2004. The warrants also provide for an adjustment to the exercise price, and the number of common shares which can be purchased, if the Company completes a public offering of its common stock pursuant to a firm commitment at a price less than $15 per share. The exercise price in such event will be adjusted to 50% of the public offering price and the number of shares of common stock which can be purchased will be equal to $3,750,000 divided by the new F-13 68 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 exercise price. The Company also granted to the guarantors the right to name one representative to the Company's Board of Directors. Covenants under the line of credit and guaranty agreements require, among others, that the Company will prepay the obligation to the extent of the proceeds from any sale of the Company's assets or any equity or debt issuance; prepay the obligation upon any consolidation, merger, or transfer of substantially all assets of the Company; obtain approval before entering into capital leases above annual specified levels; and make draws under the line of credit only in accordance with the Company's cash flow budget. The Company was in compliance with these covenants as of December 31, 1999. In January 2000, the Company repaid $1,750,000 of the balance outstanding under the line of credit as required by the cash flow budget provision of the agreement. Accordingly, this amount has been classified as a current liability at December 31, 1999. During February 2000, the Company obtained final approval of the terms for repayment of its forgivable loan with the Iowa Department of Economic Development ("Department"). Prior to such approval, the loan was due and payable as of June 30, 1999. The Department agreed to forgive $170,000 of principal and $63,600 of accrued interest on the loan. Such amounts will be recorded as other income in the first quarter of the Company's 2000 calendar year. The remaining principal balance will be repaid, with interest at 6%, in approximately equal monthly installments during 2002 through 2004. The forgivable loan has been reclassified to long-term at December 31, 1999. 3. INCOME TAXES Due to the Company's history of operating losses, a valuation allowance was provided for the Company's net deferred tax asset at December 31, 1998 and 1999 and no tax benefit was recognized for the years ended December 31, 1997, 1998 and 1999. F-14 69 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 The tax effects of significant items comprising the Company's net deferred tax asset and the related valuation allowance are as follows:
DECEMBER 31, -------------------------- 1998 1999 ----------- ----------- Deferred tax assets: Accounts receivable, net of allowance................. $ 23,200 $ 64,500 Inventories........................................... 568,100 Accrued vacation pay.................................. 41,100 64,000 Accrued warranties.................................... 12,000 107,000 Nonqualified stock options............................ 358,100 660,700 Stock warrants........................................ 69,500 Other accrued liabilities............................. 15,700 Accrual to cost method adjustment..................... 296,700 Net operating loss carryforward....................... 6,429,000 7,011,000 ----------- ----------- Total deferred tax assets............................. 7,743,900 7,976,700 ----------- ----------- Deferred tax liabilities: Software development costs............................ (16,700) (7,300) Fixed assets and other intangibles.................... (36,000) (111,200) ----------- ----------- Total deferred tax liabilities........................ (52,700) (118,500) ----------- ----------- Net deferred tax asset................................ 7,691,200 7,858,200 Valuation allowance................................... (7,691,200) (7,858,200) ----------- ----------- Net deferred tax asset recognized..................... $ -- $ -- =========== ===========
As of December 31, 1999, the Company has a net operating loss carryforward for federal and state income tax purposes of approximately $20,623,000. The net operating loss carryforward will expire from 2008 to 2014. 4. PREFERRED STOCK The Board of Directors has the authority to issue preferred stock in one or more series and to determine the price, voting powers, preferences, dividend rights, conversion rights, and other rights or restrictions without further stockholder approval. The Company sold 320,000 shares of Series A preferred stock in April 1993 and 282,720 shares of Series B preferred stock in June 1994 at a price of $6.25 per share. The Series A and Series B preferred stockholders are entitled to vote with the common stock stockholders as a single class with each share of Series A and Series B preferred stock being entitled to the number of votes equal to the number of shares of common stock into which it is convertible. Each share of Series A and Series B preferred stock is convertible, at the holder's option, into 1.5625 shares of common stock. Antidilution rights also exist for the Series A and Series B preferred stockholders. F-15 70 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 The Series A or Series B preferred stock will also automatically convert into common stock (a) immediately upon the closing of an initial public offering of common stock if the aggregate proceeds are greater than or equal to $5,000,000 or (b) upon approval of the holders of two-thirds or more of the outstanding Series A or Series B preferred stock. No dividends are payable on the Series A and Series B preferred stock unless the Company, in its sole discretion, declares a dividend with respect to its common stock, or on any series of preferred stock ranking equal to or junior to the Series A and Series B preferred stock. Upon liquidation, dissolution, or winding up, after the payment of any amounts in respect of any series of preferred stock entitled to a liquidation preference over the Series A and Series B preferred stock, the holders of the Series A and Series B preferred stock are entitled to receive an amount per share equal to $6.25 plus any declared but unpaid dividends on such shares, prior to any payment to the holders of the common stock. If assets available for distribution are insufficient to pay holders of Series A and B stock, then such holders shall share ratably in any distribution of assets of the Company in proportion to amounts that would have been payable with respect to their shares if all amounts were paid. The Company sold 694,618 and 78,636 shares of Series C preferred stock during 1997 and 1998, respectively, at a price of $7.63 per share. The holders of the Series C preferred stock are entitled to vote, on the basis of one vote for each share of common stock issuable upon conversion, with the holders of the common stock, Series A preferred stock, and Series B preferred stock, on all matters upon which shareholders have the right to vote. In addition, the approval of the holders of at least a majority of the Series C preferred stock will be required (i) to authorize or issue any shares of any class or series of the Company's capital stock (or securities convertible into shares of the Company's capital stock) having a preference as to dividends or liquidation senior to the Series C preferred stock, (ii) to merge or consolidate with any corporation where the surviving corporation has any class of stock that would rank prior to the Series C preferred stock, (iii) to amend, alter or repeal any provisions of the certificate of designation governing the Series C preferred stock, so as to adversely affect the rights or preferences of Series C preferred stock, (iv) to declare or pay any dividend or make any other distribution on any class of capital stock of the Company other than a dividend paid on the Series C preferred stock and (v) to issue any convertible debt security that provides for the payment of interest or other distributions. In the event of the dissolution, liquidation or winding up of the Company, holders of the Series C preferred stock will be entitled to receive $7.63 per share plus all accumulated and unpaid dividends, before any distribution is made to holders of the common stock or preferred stock ranking junior to the Series C preferred stock. The Series C preferred stock will rank on a par with the Series A preferred stock and Series B preferred stock in the event of liquidation, however, the Series C preferred stock is senior to the Series A and B preferred stock with respect to dividends. The Series C preferred stock bears dividends, cumulative whether or not earned, at the rate of $0.534 per share per annum. Such dividends will be payable, if and when F-16 71 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 declared out of funds legally available, on March 31 and September 30 of each year. Dividends not paid on the date when due will not thereafter be payable in cash, subject to optional redemption, as described below, but shall thereafter only be convertible into shares of common stock, as described below. The aggregate cumulative unpaid dividends at December 31, 1999 were $862,602. The Series C preferred stock, with an initial conversion value of $7.63 per share, and all accumulated but unpaid dividends on the Series C preferred stock, will be convertible, at the option of the holder at any time after issuance, into common stock at the rate of $7.63 per common share. The conversion rate for the Series C preferred stock is subject to adjustment from time to time in the event of certain stock dividends, stock divisions and combinations of the common stock, and the issuance of any common stock at a price, or of any other securities convertible into or exercisable to purchase common stock at a price, less than the conversion price then in effect. If the Company issues securities at a price less than the conversion price then in effect, the conversion price adjusts based on a weighted average of the stock outstanding. In the case of a consolidation or merger of the Company with or into any other corporation, or in case of any sale or transfer of all or substantially all of the assets of the Company, a holder of Series C preferred stock is entitled, thereafter, to receive upon conversion the consideration which the holder would have received had he or she converted immediately prior to the occurrence of the event. The conversion price of the Series C preferred stock at December 31, 1999 is $7.54. The Series C preferred stock, and any dividends accumulated thereon, will be automatically converted into common stock at the then current conversion rate in the event of (i) the closing of an underwritten public offering of the common stock at a price of not less than $8.00 per share that generates net proceeds to the Company of not less than $15,000,000, or (ii) the vote of holders of at least two-thirds of the outstanding shares of Series C preferred stock. On or after September 30, 2004, the Company may, at its option, redeem all or any portion of the Series C preferred stock at a cash redemption price equal to $7.63 per share plus all accumulated but unpaid dividends to the date fixed for redemption. In case of the redemption of less than all of the then outstanding shares of Series C preferred stock, the Company shall effect such redemption pro rata. Any holder of Series C preferred stock may elect to convert such shares into common stock up to the date fixed for redemption. Each holder of the Series A, Series B and Series C preferred stock is also a party to a Registration Rights Agreement granting to such holder the right to require the Company to register the common stock issuable upon conversion of the Series A, Series B and Series C preferred stock upon completion of an initial public offering of the Company's common stock. All expenses of the registration, other than underwriting discounts and commissions, incurred in connection with such registration shall be borne by the Company. F-17 72 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 5. COMMON STOCK Holders of common stock are entitled to one vote per share on all matters submitted to a vote by the stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably any dividends, as may be declared from time to time by the Board of Directors out of funds legally available therefor, and will be entitled to receive pro rata all assets of the Company available for distribution, after payment of liabilities and any prior distribution rights of preferred stock, upon liquidation. 6. STOCK OPTIONS During April 1993, the Board of Directors adopted the 1993 Stock Incentive Plan (the "1993 Plan"). Under the 1993 Plan, options or other awards may be granted to purchase up to an aggregate of 500,000 shares of the Company's common stock. During December 1995, the Company's stockholders approved the 1995 Long Term Incentive and Stock Option Plan (the "1995 Plan"). Under the 1995 Plan, options or other awards may be granted to purchase up to 585,345 shares of the Company's common stock. Awards granted under the 1993 and 1995 Plans may be options that are intended to qualify as incentive stock options, options that are not intended to so qualify, stock appreciation rights ("SARs"), restricted stock or performance awards. Incentive stock options may only be granted to full-time or part-time employees; other awards may be granted to full-time or part-time employees, officers, consultants, directors (other than nonemployee directors) or independent contractors. A committee appointed by the Board of Directors determines the exercise price (subject to the restriction that the exercise price of incentive stock options must be not less than 100% of fair market value on the date of grant), term (provided that the term of options may not exceed ten years) and other conditions of all awards under the 1993 and 1995 Plans. On July 20, 1998, the 1993 Stock Incentive Plan was rescinded, upon the exchange of all outstanding options granted under the 1993 Plan for options in an identical number, at an exercise price of $1.50 per share, and on a vesting schedule identical to that of the options previously granted under the 1993 Plan. At the same time, the Board of Directors amended the 1995 Plan to increase the number of shares of common stock on which options or other awards may be exercised from 585,345 to 1,000,000. Also, on July 20, 1998, the Company cancelled all outstanding options granted under the 1995 Plan and issued options in an identical number, and on a vesting schedule identical to that of the options previously granted, at an exercise price of $1.50 per share. In September 1999, the Board of Directors amended the 1995 Plan to change the authorized number of shares of common stock on which options or other awards may be exercised to 2,000,000 plus shares equal to one and one-half percent of the number of shares of common stock outstanding as of the December 31 immediately preceding the year in which such options may be granted and to change the vesting schedule for all outstanding options and future awards of options with 20% of the total grant to vest on the F-18 73 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 first anniversary of the award and 1.67% of the total grant to vest each month thereafter until fully vested. The fair value of the Company's common stock for 1997, as determined in good faith by the Company's Board of Directors, was equal to or below the exercise price of options granted in 1997 and, therefore, no compensation expense was recognized related to stock options. The fair value of the Company's common stock as of July 20, 1998 and as of the date of other options granted during the remainder of 1998 and through August 31, 1999, as determined in good faith by the Company's Board of Directors, was $6.00 per share. The fair value of the Company's common stock as of September 15, 1999, as determined by an independent appraisal, was $7.20 per share which the Company has used to value stock options granted from September 1, 1999 through December 31, 1999. The Company has recognized compensation expense of $896,670 and $661,352 during 1998 and 1999 (including amounts allocated to discontinued operations of $230,400 and $49,050), respectively, based on the vesting period of the options and the difference between the exercise price of the options and the fair value of the Company's common stock. Options outstanding and exercisable at December 31, 1999 were as follows:
OPTIONS OUTSTANDING - --------------------------------------------------------------------- WEIGHTED AVERAGE REMAINING OPTIONS EXERCISABLE CONTRACTUAL ------------------- EXERCISE PRICE SHARES LIFE (IN YEARS) SHARES -------------- --------- --------------- ------------------- $1.50................................ 826,300 8.18 272,892 $6.00................................ 113,500 9.59 -- $7.20................................ 672,500 9.71 103,200 --------- ---- ------- 1,612,300 8.91 376,092 ========= ==== =======
F-19 74 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 A summary of stock option activity under the 1993 and 1995 Plans is as follows:
WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE FAIR OPTION OPTION OPTIONS OPTION PRICE VALUE PRICE OPTIONS PRICE OUTSTANDING PER SHARE PER SHARE PER SHARE EXERCISABLE PER SHARE ----------- ------------ ---------- --------- ----------- --------- Balance at December 31, 1996........... 303,645 $ 4.00 $4.00 89,900 $ 4.00 Granted at premium......... 165,000 8.00 $ 6.00 8.00 Cancelled.......... (76,495) 4.00-8.00 5.05 --------- Balance at December 31, 1997........... 392,150 4.00-8.00 5.48 114,200 4.63 Cancelled.......... (392,150) 4.00-8.00 5.48 Reissued at discount........ 392,150 1.50 6.00 1.50 Granted at discount........ 210,000 1.50 6.00 1.50 Cancelled.......... (48,500) 1.50 1.50 --------- Balance at December 31, 1998........... 553,650 1.50 1.50 199,260 1.50 Granted at discount........ 440,050 1.50 6.00 1.50 Granted at market.......... 98,500 6.00 6.00 6.00 Granted at discount........ 15,000 6.00 7.20 6.00 Granted at market.......... 672,500 7.20 7.20 7.20 Exercised.......... (4,750) 1.50 1.50 Cancelled.......... (162,650) 1.50 1.50 --------- Balance at December 31, 1999........... 1,612,300 1.50-7.20 4.19 376,092 3.07 =========
At December 31, 1999, an additional 419,646 are available for future grants under the 1995 Plan. F-20 75 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 The Board of Directors also granted to the members of the Company's former Scientific Advisory Board options to purchase a total of 25,000 shares of the Company's common stock at a purchase price of $4.00 per share which expire in August 2000. During December 1996, the Company's stockholders approved the Nonemployee Director Stock Option Plan (the "Directors' Plan"). The Company has reserved 75,000 shares of common stock for issuance upon exercise of options granted under the Directors' Plan. Only nonemployee directors of the Company are eligible to participate in the Directors' Plan and only non-qualified stock options may be granted. Each director eligible to participate in the Directors' Plan is automatically granted an option to purchase 5,000 shares of common stock on the date such person first becomes a director; this option vests in three equal installments beginning on the first anniversary of grant. Each director eligible to participate in the Directors' Plan who has served since the date of the last annual meeting of stockholders and will continue to serve is automatically granted an option to purchase 5,000 shares of common stock on the date of each annual meeting of stockholders; this option vests in its entirety on the date one year after the date of grant. All options granted under the Directors' Plan have terms of ten years and a per share exercise price equal to the fair market value of a share of common stock on the date of grant. At December 31, 1999, options to purchase 15,000 shares of common stock have been granted under the Directors' Plan at an exercise price of $4.00-$6.00, with 8,333 shares exercisable at December 31, 1999. F-21 76 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 7. COMMON STOCK WARRANTS A summary of common stock warrant activity is summarized as follows:
WEIGHTED AVERAGE WARRANT WARRANT WARRANT PRICE PRICE SHARES PER SHARE PER SHARE ------- --------- --------- Balance at December 31, 1996................... 1,374,750 $ 4.00 $4.00 Warrants granted to six employees and consultants in connection with the merger with Ethos Corporation (see Note 11)...... 312,000 8.00 8.00 --------- Balance at December 31, 1997................... 1,686,750 4.00-8.00 4.74 Warrants granted to the Company's former chief executive officer in consideration of his pledge of marketable securities as security for the irrevocable letter of credit, which serves as collateral for the debentures (Note 2)....................... 500,000 8.00 8.00 Warrants granted to the Company's former chief executive officer in consideration of his pledge of marketable securities as collateral for prior bank lines of credit (Note 2).................................. 100,000 8.00 8.00 Warrants granted to placement agent in consideration of services provided related to the debenture/preferred stock private placement................................. 30,139 8.00 8.00 Warrants expired............................. (10,000) 4.00 4.00 Warrants exercised........................... (120,000) 4.00 4.00 --------- Balance at December 31, 1998................... 2,186,889 4.00-8.00 5.72 Warrants granted to the Company's former chief executive officer in consideration of his pledge of marketable securities as collateral for prior bank lines of credit (Note 2).................................. 100,000 8.00 8.00 Warrants granted to financial consultant for services rendered......................... 30,000 4.00 4.00 Warrants granted to consultant for consulting contract.................................. 125,000 6.00 6.00 Warrants granted for guarantee on new line of credit (Note 2)........................... 500,000 7.50 7.50 Warrants expired............................. (93,750) 4.00 4.00 Warrants exercised........................... (125,000) 4.00 4.00 Warrants to the Company's former chief executive officer cancelled............... (912,500) 4.00-8.00 7.07 --------- Balance at December 31, 1999................... 1,810,639 4.00-8.00 5.86 =========
F-22 77 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 At December 31, 1999, the weighted average remaining life of the warrants is 3.9 years and 1,810,639 warrants were exercisable at a weighted average price of $5.86 per share. The warrants also provide for registration rights similar to those granted the preferred stockholders (see Note 4) and antidilution rights. The Company has valued warrants issued to consultants during 1999 at approximately $280,000 and has recognized expense over the term of the consulting agreements of $197,458 for the year ended December 31, 1999 for the difference between the exercise price of the warrants and the fair value of warrants granted. The warrants exercised during 1998 and 1999 provided for a cashless exercise under which the warrant holder received 40,000 and 41,667 shares of common stock, respectively, based on the $6.00 per share fair value of the Company's common stock. In December 1999, the Company entered into a settlement and general release agreement with its former chairman of the board and chief executive officer ("executive"). The agreement cancels warrants held by the executive to purchase 700,000 and 212,500 shares of the Company's stock at $8.00 and $4.00 per share, respectively (the executive retained 500,000 warrants at $4.00 per share); cancels the executive's right to receive 300,000 of additional warrants at an exercise price of $8.00 per share (100,000 of which would have been granted on January 1, 2000); requires the Company to pay the executive $60,000 at the earliest of an initial public offering or June 30, 2001 in consideration of the executive entering into the agreement; and provides both the Company and the executive a general release from all claims between the parties. The executive is also required to place all common stock and Series B preferred stock of the Company owned by the executive, and any shares of stock in the Company acquired by the executive upon exercise of warrants, into a voting trust controlled by an independent third party. The agreement has been filed with the bankruptcy court as the executive is in involuntary bankruptcy, however, a creditor of the executive has filed a motion in the bankruptcy proceedings to set aside the settlement agreement. 8. LEASES The Company leases its offices and certain equipment under operating leases. Rental expense incurred under operating leases was $390,534, $398,500 and $401,769 for the years ended December 31, 1997, 1998, and 1999, respectively. In October 1993, the Company entered into an operating lease with Liberty Growth, L.C., ("Liberty") for the lease of a 25,600 square foot building (the "Facility") which was completed in July 1994. Liberty erected the Facility in accordance with plans and specifications agreed upon between Liberty and the Company and provided furniture, fixtures, and equipment in the Facility as specified in the lease. The lease was for an initial term of five years, beginning September 1994, with options given to the Company to extend for two additional terms of five years each. The Company exercised the first renewal option in September 1998. The monthly rental upon renewal will be adjusted to reflect Liberty's actual mortgage interest cost as discussed below. The lease provides that the Company will pay for all taxes, insurance, utilities, alterations and improvements, and F-23 78 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 repair and maintenance on or with respect to the Facility, furniture, fixtures and equipment. The monthly rental of $23,248 effective March 1999 ($23,840 previously) is the sum of the following: a. payments of principal (based on a 20 year loan amortization period) and interest on Liberty's mortgage loan on the Facility (the "Mortgage Loan"); the interest rate under the mortgage loan is 8% for the first five years and on the fifth and tenth anniversaries of the loan is subject to adjustment by the bank based on comparable interest rates with a 7% minimum and 12% maximum rate; b. the amount of the annual land lease rental on the underlying real estate; and c. an amount equal to 14% times the difference between (i) the cost to Liberty of all improvements constructed or purchased by Liberty and the furniture, fixtures and equipment, and (ii) the original principal amount of the Mortgage Loan. Under the terms of the lease, the Company has an option, exercisable effective January 1, 1998 and continuing through the termination or expiration of the lease, to purchase the Facility and furniture, fixtures and equipment at a purchase price to be determined by appraisal, but in no event less than Liberty's cost as established for purposes of calculating the rent payable under the lease. In May 1999, the Company subleased part of the building rented from Liberty. The sublease is for an eighteen month term, terminating October 31, 2000. Sublease receipts were $50,400 the year ended December 31, 1999. The Company's capital lease, its estimated aggregate minimum annual payments under all operating leases with initial noncancellable lease terms in excess of one year and its noncancellable sublease receipts are as follows as of December 31, 1999:
NONCANCELLABLE NONCANCELLABLE CAPITAL OPERATING SUBLEASE YEAR ENDED DECEMBER 31, LEASES LEASES RECEIPTS ----------------------- ------- -------------- -------------- 2000....................................... $ 9,529 $ 687,003 $72,000 2001....................................... 9,529 390,639 -- 2002....................................... 9,529 282,435 -- 2003....................................... 9,529 278,976 -- 2004....................................... 6,353 185,984 -- ------- ---------- ------- Minimum lease payments..................... 44,469 $1,825,037 $72,000 ========== ======= Less amounts representing interest......... 10,388 ------- Present value of minimum lease payments.... 34,081 Current portion of capital lease obligations.............................. 5,821 ------- Capital lease obligations due after one year..................................... $28,260 =======
F-24 79 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 9. CONTINGENT LIABILITIES On June 10, 1994, the Company entered into an Agreement For Private Development with the City of Coralville, Iowa (the "City"). The Company and Liberty jointly received a $175,000 Economic Development Grant from the City during 1994. According to the agreement, these proceeds were used by Liberty to reduce the costs of the building (see Note 8). The Company pays property taxes to the City based on the assessed value of the property and the City will use such property taxes to pay debt service on the bonds which were issued by the City for this grant. The Company has guaranteed that commencing January 1, 1998 to January 1, 2004, it will make every effort to maintain an employment level of at least 100 full time jobs. The Company at December 31, 1999 maintained an employment level of 79 full time jobs. If the Company is in default of any terms of the agreement, the City may take action to recover the grant paid to the Company. As of December 31, 1999, management believes that the Company was in compliance with the terms of the agreement. The Company anticipates that its property tax payments will be sufficient to pay the debt service costs on the bonds. On June 30, 1994, the Company entered into an Industrial New Jobs Training Agreement with Kirkwood Community College ("Kirkwood"). The term of the agreement is ten years. Based on an estimate of new jobs that the Company would create ("New Employees"), Kirkwood issued bonds in the amount of $200,000 and the proceeds were to be used to reimburse approximately $150,000 of the Company's training costs incurred between June 30, 1994 and August 1, 1997 with the remaining $50,000 to be used by Kirkwood to cover administrative costs of the agreement. Any amounts received by the Company under this agreement are to be repaid using a portion of the New Employees' state income taxes which have been withheld by the Company ("New Jobs Withholding Credits"). The New Jobs Withholding Credits are credits available under the New Jobs Training Act of the State of Iowa and are not the result of any additional costs incurred by the Company, but are a defined portion of the Company's current tax withholding obligation. The Company will make repayments by paying New Jobs Withholding Credits to Kirkwood for ten years and Kirkwood will use the New Jobs Withholding Credits to pay the debt service on the bonds. As of December 31, 1999, the Company has received $77,224 from Kirkwood. Kirkwood has incurred $47,353 of administrative costs, and the Company has repaid $145,455 through New Jobs Withholding Credits. If the Company is in default of any terms of the agreement, Kirkwood may take action to collect any payments due under the agreement. Kirkwood has a lien on certain Company assets including accounts receivable, equipment, patents and contract rights. The lien is subordinated to the security interests granted under the notes payable to the Department. F-25 80 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 10. MAJOR CUSTOMER SALES Sales to major customers from continuing operations, comprising 10% or more of total revenue for the year were as follows:
YEARS ENDED DECEMBER 31, -------------------------- 1997 1998 1999 ---- ---- ---- Customer A............................................... -- 10% 14% Customer B............................................... -- 10 -- Customer C............................................... 25% 16 --
11. MERGER WITH ETHOS CORPORATION On March 6, 1997 the Company negotiated an agreement and plan of merger with Ethos Corporation ("Ethos"), a California corporation engaged in Internet publication and interactive financial services, to acquire all of the outstanding shares of common stock of Ethos in exchange for 289,701 shares of the Company's common stock. Also, the holders of Ethos' redeemable preferred stock were paid $100,000 for the redemption of such preferred stock. The Company also entered into certain employment/consulting agreements and noncompetition agreements with Ethos' employees and consultants which involved the issuance of 312,000 warrants to purchase the Company's common stock exercisable at $8.00 per share, and the issuance of 65,000 options to purchase the Company's common stock exercisable at $8.00 per share, all of which will vest over one to five year periods depending on the agreement. The transaction was accounted for as a pooling of interests. The financial statements for periods prior to the merger have been restated to include the combined financial information of the companies for all periods presented. The following data summarizes the separate results of operations of the Company and Ethos for the period before the combination was consummated.
REVENUES LOSS FROM FROM CONTINUING CONTINUING OPERATIONS OPERATIONS ---------- ---------- Period from January 1, 1997 to March 6, 1997: Stockpoint, Inc........................................ $28,620 $(544,717) Ethos Corporation...................................... $74,442 $ (6,554)
12. 401(k) PLAN The Company maintains a 401(k) retirement plan covering substantially all of its employees. The Company will match an employee's contribution to the plan up to 2% of the employee's salary. The Company contributed $49,156 and $47,428 to the plan under the matching program for the years ended December 31, 1998 and 1999, respectively. There were no Company contributions to the plan for the year ended December 31, 1997. F-26 81 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 13. DISCONTINUED OPERATIONS On May 28, 1999, the Company sold the technology and operational assets related to products sold to the steelmaking industry (metals segment) for $750,000. The Company also entered into a royalty agreement with the buyer whereby royalties, ranging from 6% to 10%, will be paid on sales or licenses of the software only portions of certain products. Royalties will be paid for 10 years or until $3,000,000 is paid. The asset purchase agreement was retroactive to April 2, 1999. The accompanying statements of operations have been reclassified so that the results for the metals segment's operations are classified as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been reclassified in the balance sheet as "net assets of discontinued operations." As the sale closed less than a year subsequent to December 31, 1998, the net assets of the discontinued operations have been classified as current assets as of December 31, 1998. The statements of cash flows and related notes to the consolidated financial statements have also been reclassified to conform to the discontinued operations presentation. Summary operating results of the discontinued operations are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------- 1997 1998 1999 ---------- ---------- ---------- Revenues.................................... $1,708,427 $2,160,104 $1,747,809 Operating expenses.......................... 2,114,149 2,517,050 1,400,134 ---------- ---------- ---------- Income (loss) from discontinued operations................................ $ (405,722) $ (356,946) $ 347,675 ========== ========== ==========
A summary of the net assets of the discontinued operations are as follows:
DECEMBER 31, 1998 ------------ Current assets: Costs and estimated earnings in excess of billings on uncompleted contracts.................................. $126,831 Inventories............................................... 395,908 Prepaid expenses.......................................... 1,000 -------- Net current assets..................................... 523,739 -------- Software and equipment, net................................. 198,895 Patents, net................................................ 68,400 Software development costs, net............................. 13,167 -------- Net noncurrent assets.................................. 280,462 -------- Net assets............................................. $804,201 ========
F-27 82 STOCKPOINT, INC. (FORMERLY NEURAL APPLICATIONS CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 14. PRO FORMA INFORMATION (UNAUDITED) The pro forma stockholders' deficiency information presented as of December 31, 1999 has been prepared assuming that the Company's preferred stock had been converted into common stock as of December 31, 1999 which conversion will occur automatically upon completion of the initial public offering contemplated in this prospectus. The pro forma income (loss) per common share information presented for the year ended December 31, 1999 has been prepared assuming that 1) the Company's preferred stock had been converted into common stock as of January 1, 1999 or as of their issuance date for shares of Series C preferred stock issued in lieu of dividends resulting in the elimination of dividends and 2) debt outstanding during 1999 that is expected to be repaid with a portion of the proceeds from this offering had been repaid as of January 1, 1999 resulting in reduced interest expense. The Company's pro forma net loss per share is calculated as follows:
YEAR ENDED 1999 ----------- Pro forma net loss: Historical loss from continuing operations................ $(3,947,885) Exclude interest on debt to be repaid..................... 1,064,420 ----------- Loss from continuing operations........................... (2,883,465) Income from discontinued operations....................... 780,808 ----------- Net loss.................................................. $(2,102,657) =========== Pro forma basic and diluted income (loss) per common share: Loss from continuing operations........................... $ (0.73) Income from discontinued operations....................... 0.20 ----------- Net loss.................................................. $ (0.53) =========== Weighted average common shares outstanding -- historical.... 2,141,404 Preferred stock converted into common shares -- pro forma... 1,806,377 ----------- Weighted average common shares outstanding -- pro forma..... 3,947,781 ===========
15. SUBSEQUENT EVENT (UNAUDITED) The Company entered into an additional $500,000 line of credit with a bank on March 30, 2000. The line of credit is collateralized by substantially all of the Company's assets. The line of credit bears interest at the prime rate and expires on June 30, 2001. A group of guarantors entered into credit support agreements with the bank as additional collateral for the line of credit. The Company granted to the guarantors warrants to purchase 100,000 shares of the Company's common stock at an exercise price of $10.00 per share as consideration for their credit support. * * * * * F-28 83 - ------------------------------------------------------------------------------- ________ SHARES [LOGO] STOCKPOINT COMMON STOCK ---------------- PROSPECTUS ---------------- ROTH CAPITAL PARTNERS, INC. __________________, 2000 UNTIL ________, 2000, THE 25TH DAY AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - -------------------------------------------------------------------------------- 84 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the costs and expenses payable by Stockpoint in connection with the registration of the common stock hereunder. All amounts are estimated, except for the SEC registration fee and the NASD filing fee. SEC registration fee............................................. $ 11,880 NASD filing fee.................................................. 5,000 Nasdaq National Market listing fee............................... 70,000 Legal fees and expenses.......................................... 150,000 Accountants' fees and expenses................................... 70,000 Printing expenses................................................ 150,000 Blue sky fees and expenses....................................... 5,000 Transfer Agent and Registrar fees and expenses................... 5,000 Miscellaneous.................................................... 33,120 -------- Total...................................................... $500,000 ========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law allows for the indemnification of officers, directors and any corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act. Our Amended and Restated Bylaws provide for indemnification of such persons for such liabilities in such manner under such circumstances and to such extent as permitted by the Delaware General Corporation Law. We have also purchased directors and officers liability insurance, which covers matters arising under the Securities Act. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Since January 1997, we have issued and sold the following securities that were not registered under the Securities Act: (1) From January 1997 through March 2000, we granted options to purchase an aggregate of 1,513,849 shares of common stock under our stock option plans to executive officers, directors and employees. (2) In March 1997, in connection with the acquisition of Ethos Corporation, we issued an aggregate of 289,701 shares of common stock to 12 shareholders of Ethos and warrants to purchase an aggregate of 312,000 shares of common stock to six employees and consultants. (3) Between November 1997 and January 1998, we sold to accredited investors an aggregate of 773,255 shares of Series C convertible preferred stock for an aggregate purchase price of $5,900,000 and senior secured debentures in an aggregate principal amount of $5,900,000. Upon the closing of this offering, all of the outstanding shares of Series C convertible preferred stock will convert into an aggregate of 897,063 shares of common stock. (4) In April 1998, we issued warrants to purchase an aggregate of 30,139 shares of common stock at an exercise price of $8.00 per share to Donald Muller and Securities Corporation of Iowa for services provided in connection with the sale of the Series C convertible preferred stock. II-1 85 (5) In April 1998, we issued warrants to purchase an aggregate of 500,000 shares of common stock at an exercise price of $8.00 per share to Robert Staib in consideration of his personal guarantee of a letter of credit supporting our senior secured debentures and pledge of marketable securities as collateral. (6) We issued warrants to purchase an aggregate of 312,500 shares of common stock to John Pappajohn in consideration of his personal guarantee of our credit agreements from May 1995 through June 1996. In June and September 1998, we sold 40,000 shares of common stock to John Pappajohn upon the cashless exercise of his outstanding warrants. (7) In November 1998 and November 1999, we issued to Robert Staib warrants to purchase an aggregate of 200,000 shares of common stock at an exercise price of $8.00 per share in consideration of his guarantee and pledge relating to the letter of credit supporting our outstanding debentures. The warrants were subsequently canceled under the terms of a settlement agreement in December 1999. (8) In March 1999, we issued warrants to purchase an aggregate of 30,000 shares of common stock at an exercise price of $4.00 per share to Dominion & Co. for consulting services provided. (9) In August 1999, we issued warrants to purchase an aggregate of 125,000 shares of common stock at an exercise price of $6.00 per share to Equity Dynamics, Inc. under the terms of a consulting agreement. John Pappajohn is a principal of Equity Dynamics, Inc. (10) In September 1999, we sold an aggregate of 41,667 shares of common stock to John Pappajohn upon the cashless exercise of his outstanding warrants. (11) In connection with a bridge financing completed in December 1999, we issued warrants to purchase an aggregate of 500,000 shares of common stock at an exercise price of $7.50 per share, subject to adjustment, to eight investors in consideration of their guarantees and pledges. (12) In connection with a bridge financing completed in March 2000, we issued warrants to purchase an aggregate of 100,000 shares of common stock at an exercise price of $10.00 per share, subject to adjustment, to 3 investors in consideration of their guarantees and pledges. The sale and issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, Regulation D promulgated thereunder or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each transaction represented their intentions to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof. All recipients either received or had access to, through employment or other relationships with Stockpoint, adequate information about us. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits NUMBER DESCRIPTION ------ ----------- 1.1 Form of Underwriting Agreement. 2.1 Asset Purchase Agreement dated as of April 2, 1999 among Systems Alternatives, Inc., Registrant and The David J. Joseph Company. 2.2 Amendment dated as of May 25, 1999 to the Asset Purchase Agreement dated as of April 2, 1999 among Systems Alternatives, Inc., Registrant and The David J. Joseph Company. 3.1 Amended and Restated Certificate of Incorporation of the Registrant. II-2 86 3.2 Certificate of Amendment of Certificate of Incorporation of the Registrant. 3.3 Amended and Restated Bylaws of the Registrant. 4.1 Specimen of Common Stock Certificate. 4.2 Registration Rights Agreement dated as of August 15, 1997 among Registrant and the Purchasers named therein. 4.3 Trust Indenture dated as of August 1, 1997 between Registrant and First Trust & Savings Bank. 4.4 Robert B. Staib Voting Trust dated December 3, 1999. 4.5 Master Agreement dated as of December 3, 1999 among Registrant and John Pappajohn, Gerald M. Kirke, Iowa Farm Bureau Federation, Derace Schaffer, Matthew P. Kinley, Dominion Securities Inc., Michael J. Richards, Joseph Dunhan as the Guarantors, and Equity Dynamics, Inc., as the Agent for the Guarantors. 4.6 Form of Stock Purchase Warrant issued December 3, 1999. 4.7 Registration Rights Agreement dated as of December 3, 1999 by and among the Registrant and the Purchasers listed therein. 4.8 Master Agreement dated as of March 30, 2000 among Registrant and Zeke Investment Partners, Matthew P. Kinley, Joseph Dunham as the Guarantors, and Equity Dynamics, Inc., as the Agent for the Guarantors. 4.9 Form of Stock Purchase Warrant issued December 3, 1999. 4.10 Registration Rights Agreement dated as March 30, 2000 by and among the Registrant and the Purchasers listed therein. 4.11 Form of Lock-up Agreement. 5.1* Opinion of Dorsey & Whitney LLP. 10.1 1995 Long-Term Incentive and Stock Option Plan. 10.2 1995 Nonemployee Director Stock Option Plan. 10.3 Employment Agreement, dated December 20, 1999, between Registrant and William E. Staib. 10.4 Employment Agreement, dated December 20, 1999, between Registrant and Timothy S. Yamauchi. 10.5 Employment Agreement, dated December 20, 1999, between Registrant and Luan Cox. 10.6 Employment Agreement, dated December 20, 1999, between Registrant and L. Christopher Dominguez. 10.7 Sublease dated May 24, 1999 between Registrant and Systems Alternatives International LLC for office space located at 2600 Crosspark Road, Coralville, Iowa. 10.8 Lease dated September 30, 1999 between The Robert Dollar Building Associates, Ltd. and Registrant for office space located at 311 California Street, San Francisco, California. 10.9 Consulting Agreement dated August 24, 1999 between Registrant and Equity Dynamics, Inc. 10.10 Master Note dated as of November 28, 1997 of Registrant in favor of The Northern Trust Company. 10.11 Master Note dated as of September 14, 1998 of Registrant in favor of The Northern Trust Company. 10.12 Reimbursement and Subordination Agreement dated as of August 1, 1997 between Robert B. Staib and Registrant. II-3 87 10.13 Indemnification and Hold Harmless Agreement dated February 27, 1996 between Robert B. Staib and Registrant. 10.14 Amendment dated August 1, 1997 to Indemnification and Hold Harmless Agreement dated February 27, 1996 between Robert B. Staib and Registrant. 10.15 Restructuring Agreement dated as of December 3, 1999 among Registrant, The Northern Trust Company and Iowa State Bank & Trust. 10.16 S&P ComStock Information Distribution License Agreement dated September 23, 1999 between S&P ComStock, Inc. and Registrant. 10.17 Employment Agreement dated March 1, 2000 between Registrant and Scott D. Porter. 10.18 First Amendment to Restructuring Agreement dated as of March 29, 2000 among the Registrant, The Northern Trust Company and Iowa State Bank & Trust. 10.19 Settlement Agreement and General Release dated December 3, 1999, by and between Robert B. Staib and the Registrant. 23.1 Consent of Deloitte & Touche LLP. 23.2* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1). 24.1 Power of Attorney. 27.1 Financial Data Schedule. - --------------- * To be filed by amendment. (b) Financial Statement Schedules Not applicable. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in those denominations and registered in those names as required by the underwriters to permit prompt delivery to each purchaser. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 88 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Coralville, State of Iowa, on March 30, 2000. Stockpoint, Inc. By: /s/ William E. Staib ____________________________________ William E. Staib Chief Executive Officer and Director Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on March 30, 2000 by the following persons in the capacities indicated: SIGNATURE TITLE --------- ----- /s/ William E. Staib _____________________________________ Chief Executive Officer and Director William E. Staib (principal executive director) /s/ Scott D. Porter _____________________________________ Chief Financial Officer (principal Scott D. Porter financial and accounting officer) * _____________________________________ Chairman of the Board of Directors Harry O. Heffer * _____________________________________ Director David G. Sengpiel /s/ William E. Staib *By ___________________________________ Attorney-in-Fact II-5 89 EXHIBIT INDEX NUMBER DESCRIPTION PAGE - ------ ----------- ---- 1.1 Form of Underwriting Agreement. 2.1 Asset Purchase Agreement dated as of April 2, 1999 among Systems Alternatives, Inc., Registrant and The David J. Joseph Company. 2.2 Amendment dated as of May 25, 1999 to the Asset Purchase Agreement dated as of April 2, 1999 among Systems Alternatives, Inc., Registrant and The David J. Joseph Company. 3.1 Amended and Restated Certificate of Incorporation of the Registrant. 3.2 Certificate of Amendment of Certificate of Incorporation of the Registrant. 3.3 Amended and Restated Bylaws of the Registrant. 4.1 Specimen of Common Stock Certificate. 4.2 Registration Rights Agreement dated as of August 15, 1997 among Registrant and the Purchasers named therein. 4.3 Trust Indenture dated as of August 1, 1997 between Registrant and First Trust & Savings Bank. 4.4 Robert B. Staib Voting Trust dated December 3, 1999. 4.5 Master Agreement dated as of December 3, 1999 among Registrant and John Pappajohn, Gerald M. Kirke, Iowa Farm Bureau Federation, Derace Schaffer, Matthew P. Kinley, Dominion Securities Inc., Michael J. Richards, Joseph Dunham as the Guarantors, and Equity Dynamics, Inc., as the Agent for the Guarantors. 4.6 Form of Stock Purchase Warrant issued December 3, 1999. 4.7 Registration Rights Agreement dated as of December 3, 1999 by and among the Registrant and the Purchasers listed therein. 4.8 Master Agreement dated as of March 30, 2000 among Registrant and Zeke Investment Partners, Matthew P. Kinley, Joseph Dunham as the Guarantors, and Equity Dynamics, Inc., as the Agent for the Guarantors. 4.9 Form of Stock Purchase Warrant issued March 30, 2000. 4.10 Registration Rights Agreement dated as March 30, 2000 by end among the Registrant and the Purchasers listed therein. 4.11 Form of Lock-up Agreement. 5.1* Opinion of Dorsey & Whitney LLP. 10.1 1995 Long-Term Incentive and Stock Option Plan. 10.2 1995 Nonemployee Director Stock Option Plan. 10.3 Employment Agreement, dated December 20, 1999, between Registrant and William E. Staib. 10.4 Employment Agreement, dated December 20, 1999, between Registrant and Timothy S. Yamauchi. 10.5 Employment Agreement, dated December 20, 1999, between Registrant and Luan Cox. 10.6 Employment Agreement, dated December 20, 1999, between Registrant and L. Christopher Dominguez. II-6 90 10.7 Sublease dated May 24, 1999 between Registrant and Systems Alternatives International LLC for office space located at 2600 Crosspark Road, Coralville, Iowa. 10.8 Lease dated September 30, 1999 between The Robert Dollar Building Associates, Ltd. and Registrant for office space located at 311 California Street, San Francisco, California. 10.9 Consulting Agreement dated August 24, 1999 between Registrant and Equity Dynamics, Inc. 10.10 Master Note dated as of November 28, 1997 of Registrant in favor of The Northern Trust Company. 10.11 Master Note dated as of September 14, 1998 of Registrant in favor of The Northern Trust Company. 10.12 Reimbursement and Subordination Agreement dated as of August 1, 1997 between Robert B. Staib and Registrant. 10.13 Indemnification and Hold Harmless Agreement dated February 27, 1996 between Robert B. Staib and Registrant. 10.14 Amendment dated August 1, 1997 to Indemnification and Hold Harmless Agreement dated February 27, 1996 between Robert B. Staib and Registrant. 10.15 Restructuring Agreement dated as of December 3, 1999 among Registrant, The Northern Trust Company and Iowa State Bank & Trust. 10.16 S&P ComStock Information Distribution License Agreement dated September 23, 1999 between S&P ComStock, Inc. and Registrant. 10.17 Employment Agreement dated March 1, 2000 between Registrant and Scott D. Porter. 10.18 First Amendment to Restructuring Agreement dated as of March 29, 2000 among the Registrant, The Northern Trust Company and Iowa State Bank & Trust. 10.19 Settlement Agreement and General Release dated December 3, 1999, by and between Robert B. Staib and the Registrant. 23.1 Consent of Deloitte & Touche LLP. 23.2* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1). 24.1 Power of Attorney. 27.1 Financial Data Schedule. - ------------------ * To be filed by amendment. II-7 EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 Exhibit 1.1 __________ SHARES* STOCKPOINT, INC. COMMON STOCK UNDERWRITING AGREEMENT _____________, 2000 ROTH CAPITAL PARTNERS, INCORPORATED As Representative of the several Underwriters c/o Roth Capital Partners, Incorporated 24 Corporate Plaza, Suite 200 Newport Beach, California 92660 Ladies and Gentlemen: Stockpoint, Inc., a Delaware corporation (the "Company"), proposes to issue and sell ___________ shares (the "Firm Shares") of the Company's Common Stock, $.01 par value per share (the "Common Stock"), to you and to the several other Underwriters named in Schedule I hereto (collectively, the "Underwriters"), for whom you are acting as representative (the "Representative"). The Company has also agreed to grant to you and the other Underwriters an option (the "Option") to purchase up to an additional ________ shares of Common Stock (the "Option Shares") on the terms and for the purposes set forth in Section 1(b). The Company has also agreed to sell to Roth Capital Partners, Incorporated a Warrant (the "Warrant") to purchase ________ of Common Stock (the "Warrant Shares") on the terms and for the purposes set forth in Section 1(c) hereof. The Firm Shares, the Option Shares and the Warrant Shares are hereinafter collectively referred to as the "Shares." The Company confirms as follows its agreements with the Representative and the several other Underwriters. _______________________ *Plus an option to purchase up to an additional ___________ shares to cover over-allotments. 2 1. Agreement to Sell and Purchase. (a) On the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions of this Agreement, (i) the Company agrees to issue and sell the Firm Shares to the several Underwriters and (ii) each of the Underwriters, severally and not jointly, agrees to purchase from the Company the respective number of Firm Shares set forth opposite that Underwriter's name in Schedule I hereto, at the purchase price of $______ for each Company Share. (b) Subject to all the terms and conditions of this Agreement, the Company grants the Option to the several Underwriters to purchase, severally and not jointly, up to the maximum number of Option Shares hereto at the same price per share as the Underwriters shall pay for the Firm Shares. The Option may be exercised only to cover over-allotments in the sale of the Firm Shares by the Underwriters and may be exercised in whole or in part at any time (but not more than once) on or before the 30th day after the date of this Agreement upon written or telegraphic notice (the "Option Shares Notice") by the Representative to the Company no later than 12:00 noon, California time, at least two and no more than five business days before the date specified for closing in the Option Shares Notice (the "Option Closing Date"), setting forth the aggregate number of Option Shares to be purchased and the time and date for such purchase. On the Option Closing Date, the Company will issue and sell to the Underwriters the number of Option Shares set forth in the Option Shares Notice and each Underwriter will purchase such percentage of the Option Shares as is equal to the percentage of Firm Shares that such Underwriter is purchasing, as adjusted by the Representative in such manner as they deem advisable to avoid fractional shares. (c) Subject to all the terms and conditions of this Agreement, the Company agrees on the Closing Date (as defined in Section 2 below) to sell, for $100.00, the Warrant to Roth Capital Partners, Incorporated to purchase, severally and not jointly, the Warrant Shares from the Company at a price per share equal to 120% of the initial public offering price per share. On the Closing Date, the Company shall issue the Warrant, in such denominations as shall be designated by Roth Capital Partners, Incorporated, in the form attached hereto as Schedule II. 2. Delivery and Payment. Delivery of the Firm Shares shall be made to the Representative for the accounts of the Underwriters against payment of the purchase price by certified or official bank checks or by wire transfers payable in same-day funds to the order of the Company for the Firm Shares to be sold by it at the office of Roth Capital Partners, Incorporated, 24 Corporate Plaza, Suite 200, Newport Beach, California 92660, at 10:00 a.m., California time, on the third (or, if the purchase price set forth in Section 1(b) hereof is determined after 4:30 p.m., Washington D.C. time, the fourth) business day following the commencement of the offering contemplated by this Agreement, or at such time on such other date, not later than seven business days after the date of this Agreement, as may be agreed upon by the Company and the Representative (such date is hereinafter referred to as the "Closing Date"). -2- 3 To the extent the Option is exercised, delivery of the Option Shares against payment by the Underwriters (in the manner specified above for the Company) will take place at the offices specified above for the Closing Date at the time and date (which may be the Closing Date) specified in the Option Shares Notice. Certificates evidencing the Shares shall be in definitive form and shall be registered in such names and in such denominations as the Representative shall request at least two business days prior to the Closing Date or the Option Closing Date, as the case may be, by written notice to the Company. For the purpose of expediting the checking and packaging of certificates for the Shares, the Company agrees to make such certificates available for inspection at least 24 hours prior to the Closing Date or the Option Closing Date, as the case may be. The cost of original issue tax stamps, if any, in connection with the issuance and delivery of the Firm Shares and Option Shares by the Company to the respective Underwriters shall be borne by the Company. The Company will pay and save each Underwriter and any subsequent holder of the Shares harmless from any and all liabilities with respect to or resulting from any failure or delay in paying Federal and state stamp and other transfer taxes, if any, which may be payable or determined to be payable in connection with the original issuance or sale to such Underwriter of the Shares. 3. Representations and Warranties of the Company. The Company represents, warrants and covenants to each Underwriter that: (a) A registration statement (Registration No. 333-________) on Form S-1 relating to the Shares, including a preliminary prospectus and such amendments to such registration statement as may have been required to the date of this Agreement, has been prepared by the Company under the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations (collectively referred to as the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, and has been filed with the Commission. The term "preliminary prospectus" as used herein means a preliminary prospectus as contemplated by Rule 430 or Rule 430A of the Rules and Regulations included at any time as part of the registration statement. Copies of such registration statement and amendments and of each related preliminary prospectus have been delivered to the Representative. If such registration statement has not become effective, a further amendment to such registration statement, including a form of final prospectus, necessary to permit such registration statement to become effective will be filed promptly by the Company with the Commission. If such registration statement has become effective, a final prospectus containing information permitted to be omitted at the time of effectiveness by Rule 430A of the Rules and Regulations will be filed promptly by the Company with the Commission in accordance with Rule 424(b) of the Rules and Regulations. The term "Registration Statement" means the registration statement as amended at the time it becomes or became effective (the "Effective Date"), including financial statements and all exhibits and any information deemed to be included by Rule 430A and includes any registration statement relating to the offering contemplated by this Agreement and filed pursuant to Rule 462(b) of the Rules and Regulations. The term "Prospectus" means the prospectus as first filed with the Commission -3- 4 pursuant to Rule 424(b) of the Rules and Regulations or, if no such filing is required, the form of final prospectus included in the Registration Statement at the Effective Date. Any reference herein to the terms "amend," "amendment" or "supplement" with respect to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Securities Exchange Act of 1934, as amended (the "Exchange Act") after the Effective Date, the date of any preliminary prospectus or the date of the Prospectus, as the case may be, and deemed to be incorporated therein by reference. (b) No order preventing or suspending the use of any preliminary prospectus has been issued by the Commission. On the Effective Date, the date the Prospectus is first filed with the Commission pursuant to Rule 424(b) (if required), at all times subsequent to and including the Closing Date and, if later, the Option Closing Date and when any post-effective amendment to the Registration Statement becomes effective or any amendment or supplement to the Prospectus is filed with the Commission, the Registration Statement and the Prospectus (as amended or as supplemented if the Company shall have filed with the Commission any amendment or supplement thereto), including the financial statements included in the Prospectus, did and will comply with all applicable provisions of the Act and the Rules and Regulations and will contain all statements required to be stated therein in accordance with the Act and the Rules and Regulations. On the Effective Date and when any post-effective amendment to the Registration Statement becomes effective, no part of the Registration Statement, the Prospectus or any such amendment or supplement did or will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. At the Effective Date, the date the Prospectus or any amendment or supplement to the Prospectus is filed with the Commission and at the Closing Date and, if later, the Option Closing Date, the Prospectus did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The foregoing representations and warranties in this Section 3(b) do not apply to any statements or omissions made in reliance on and in conformity with information relating to any Underwriter furnished in writing to the Company by the Representative specifically for inclusion in the Registration Statement or Prospectus or any amendment or supplement thereto. (c) The Company does not own, and at the Closing Date and, if later, the Option Closing Date, will not own, directly or indirectly, any shares of stock or any other equity or long-term debt securities of any corporation or have any equity interest in any corporation, firm, partnership, joint venture, association or other entity. The Company is, and at the Closing Date and, if later, the Option Closing Date, will be, a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The Company has, and at the Closing Date and, if later, the Option Closing Date, will have, full power and authority to conduct all the activities conducted by it, to own or lease all the assets owned or leased by it and to conduct its business as described in the Registration Statement and the Prospectus. The Company is, and at the Closing Date and, if later, the Option Closing Date, will be, duly licensed or qualified to do business and in good standing as a foreign corporation in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such license or -4- 5 qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not materially and adversely affect the Company or its business, properties, business prospects, condition (financial or other) or results of operations. The Company is not, and at the Closing Date and, if later, the Option Closing Date, will not be, engaged in any discussions or a party to any agreement or understanding, written or oral, regarding the acquisition of an interest in any corporation, firm, partnership, joint venture, association or other entity where such discussions, agreements or understandings would require amendment to the Registration Statement pursuant to applicable securities laws other than as described in the Prospectus. Complete and correct copies of the articles of incorporation and of the by-laws of the Company and all amendments thereto have been delivered to the Representative, and no changes therein will be made subsequent to the date hereof and prior to the Closing Date or, if later, the Option Closing Date. (d) All of the outstanding shares of capital stock of the Company have been duly authorized, validly issued and are fully paid and nonassessable and were issued in compliance with all applicable state and federal securities laws; the Firm Shares and the Option Shares issued by the Company (if any) have been duly authorized and when issued and paid for as contemplated herein will be validly issued, fully paid and nonassessable; and no preemptive or similar rights exist with respect to any of the Shares or the issue and sale thereof. The description of the capital stock of the Company in the Registration Statement and the Prospectus is, and at the Closing Date and, if later, the Option Closing Date, will be, complete and accurate in all respects. Except as set forth in the Prospectus, the Company does not have outstanding, and at the Closing Date and, if later, the Option Closing Date, will not have outstanding, any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or any contracts or commitments to issue or sell, any shares of capital stock, or any such warrants, convertible securities or obligations. No further approval or authority of stockholders or the Board of Directors of the Company will be required for the transfer and sale of the Firm Shares and the Option Shares as contemplated herein. (e) The financial statements and schedules included in the Registration Statement or the Prospectus present fairly the financial condition of the Company as of the respective dates thereof and the results of operations and cash flows of the Company for the respective periods covered thereby, all in conformity with generally accepted accounting principles applied on a consistent basis throughout the entire period involved, except as otherwise disclosed in the Prospectus. No other financial statements or schedules of the Company are required by the Act or the Rules and Regulations to be included in the Registration Statement or the Prospectus. Deloitte & Touche LLP (the "Accountants"), who have reported on such financial statements and schedules, are independent accountants with respect to the Company as required by the Act and the Rules and Regulations. The summary financial and statistical data included in the Registration Statement present fairly the information shown therein and have been compiled on a basis consistent with the financial statements presented therein. (f) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus and prior to the Closing Date and, if later, the Option -5- 6 Closing Date, except as set forth in or contemplated by the Registration Statement and the Prospectus, (i) there has not been and will not have been any change in the capitalization of the Company (other than in connection with the exercise of options to purchase the Company's Common Stock granted pursuant to the Company's stock option plans from the shares reserved therefor as described in the Registration Statement), or any material adverse change, or any development involving a prospective material adverse change, in or affecting the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company, arising for any reason whatsoever, (ii) the Company has not incurred nor will it incur, except in the ordinary course of business as described in the Prospectus, any material liabilities or obligations, direct or contingent, nor has the Company entered into nor will it enter into, except in the ordinary course of business as described in the Prospectus, any material transactions other than pursuant to this Agreement and the transactions referred to herein, (iii) the Company has not sustained any material loss or interference with the business or properties from fire, flood, windstorm, accident or other calamity, whether or not covered by insurance, (iv) the Company has not and will not have paid or declared any dividends or other distributions of any kind on any class of its capital stock and (v) there has not been any issuance of warrants, options, convertible securities or other rights to purchase or acquire capital stock of the Company. (g) The Company is not, will not become as a result of the transactions contemplated hereby, and does not intend to conduct its business in a manner that would cause it to become, an "investment company" or an "affiliated person" of; or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. (h) Except as set forth in the Registration Statement and the Prospectus, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened or contemplated against or affecting the Company or any of its officers in their capacity as such, nor any basis therefor, before or by any Federal or state court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, wherein an unfavorable ruling, decision or finding might, individually or in the aggregate, materially and adversely affect the Company or the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company. (i) The Company has, and at the Closing Date and, if later, the Option Closing Date, will have, performed all the obligations required to be performed by it, and is not, and at the Closing Date, and, if later, the Option Closing Date, will not be, in default, under any contract or other instrument to which it is a party or by which its property is bound or affected, which default might materially and adversely affect the Company or the business, properties, business prospects, condition (financial or other) or results of operations of the Company. To the best knowledge of the Company, no other party under any contract or other instrument to which it is a party is in default in any respect thereunder, which default might materially and adversely affect the Company or the business, properties, business prospects, condition (financial or other) or results of operations of the Company. The Company is not and at the Closing Date and, if later, the Option - 6 - 7 Closing Date, will not be, in violation of any provision of its articles of incorporation or by-laws or other organizational documents. (j) No consent, approval, authorization or order of, or any filing or declaration with, any court or governmental agency or body is required for the execution and delivery by the Company of this Agreement and consummation by the Company of the transactions on its part contemplated herein, except such as have been obtained under the Act or the Rules and Regulations and such as may be required under state securities or Blue Sky laws or the by-laws and rules of the National Association of Securities Dealers, Inc. (the "NASD") in connection with the purchase and distribution by the Underwriters of the Shares. (k) The Company has full corporate power and authority to enter into this Agreement. This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with the terms hereof. The performance of this Agreement and the consummation of the transactions contemplated hereby will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of; or constitute a default under, or give any party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, the articles of incorporation or by-laws of the Company, any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument to which the Company is a party or by which the Company or any of its properties is bound or affected, or violate or conflict with any judgment, ruling, decree, order, statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Company. (l) The Company has good and marketable title to all properties and assets described in the Prospectus as owned by it, free and clear of all liens, charges, encumbrances or restrictions, except such as are described in the Prospectus or are not material to the business of the Company. The Company has valid, subsisting and enforceable leases for the properties described in the Prospectus as leased by it. The Company owns or leases all such properties as are necessary to its operations as now conducted or as proposed to be conducted, except where the failure to so own or lease would not materially and adversely affect the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company. (m) There is no document or contract of a character required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement which is not described or filed as required. All such contracts to which the Company is a party have been duly authorized, executed and delivered by the Company, constitute valid and binding agreements of the Company and are enforceable against and by the Company in accordance with the terms thereof. -7- 8 (n) No statement, representation, warranty or covenant made by the Company in this Agreement or made in any certificate or document required by Section 5 of this Agreement to be delivered to the Representative was or will be, when made, inaccurate, untrue or incorrect in any material respect. (o) Neither the Company nor any of its directors, officers or controlling persons has taken, directly or indirectly, any action designed, or which might reasonably be expected, to cause or result, under the Act or otherwise, in, or which has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares. (p) No holder of securities of the Company has rights to the registration of any securities of the Company because of the filing of the Registration Statement, which rights have not been waived by the holder thereof as of the date hereof. (q) The Company has filed a registration statement pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to register the Common Stock, and has filed an application to list the Shares to be sold by the Company hereunder on the Nasdaq National Market ("NNM"), and has received notification that the listing has been approved, subject to notice of issuance of such Shares. (r) Except as disclosed in or specifically contemplated by the Prospectus (i) the Company has sufficient trademarks, trade names, patent rights, mask works, copyrights, licenses, approvals and governmental authorizations to conduct its business as now conducted, (ii) the Company has no knowledge of any infringement by it of trademarks, trade name rights, patent rights, mask work rights, copyrights, licenses, inventions, trade secrets or other similar rights of others, where such infringement could have a material and adverse effect on the Company or the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company, (iii) the Company has no knowledge of any infringement by any third party of the trademarks, trade name rights, patent rights, mask work rights, copyrights, licenses, inventions, trade secrets or other similar rights of the Company, where such infringement could have a material and adverse effect on the Company or the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company and (iv) there is no claim being made against the Company, or to the best of the Company's knowledge, any employee of the Company, regarding trademark, trade name, patent, mask work, copyright, license, inventions, trade secret or other infringement which could have a material and adverse effect on the Company or the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company. (s) The Company has filed all federal, state, local and foreign income tax returns which have been required to be filed and has paid all taxes and assessments received by it to the extent that such taxes or assessments have become due. The Company has no tax deficiency which has been or, to the best knowledge of the Company, might be asserted or threatened against it which could have a material and adverse effect on the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company. -8- 9 (t) The Company owns or possesses all authorizations, approvals, orders, licenses, registrations, other certificates and permits of and from all governmental regulatory officials and bodies, foreign and domestic necessary to conduct its business as contemplated in the Prospectus, except where the failure to own or possess all such authorizations, approvals, orders, licenses, registrations, other certificates and permits would not materially and adversely affect the Company or the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company. There is no proceeding pending or threatened (or any basis there for known to the Company) which may cause any such authorization, approval, order, license, registration, certificate or permit to be revoked, withdrawn, canceled, suspended or not renewed; and the Company is conducting its business in compliance with all laws, rules and regulations applicable thereto (including, without limitation, all applicable federal, state and local environmental laws and regulations) except where such noncompliance would not materially and adversely affect the Company or the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company. (u) The Company maintains insurance of the types and in the amounts generally deemed adequate for its business, and consistent with insurance coverage maintained by similar companies and businesses, and as required by the rules and regulations of all governmental agencies having jurisdiction over the Company, including, but not limited to, insurance covering real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect. (v) Neither the Company has nor, to the best of the Company's knowledge, any of its employees or agents at any time during the last five years (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof. (w) The Company has obtained and delivered to the Representative written agreements, in form and substance satisfactory to the Representative, of each of its directors, executive officers and such other stockholders as requested by the Representative that no offer, sale, assignment, transfer, encumbrance, contract to sell, grant of an option to purchase or other disposition of any Common Stock or other capital stock of the Company will be made for a period of 180 days after the date of the Prospectus (the "Lock-Up Period"), directly or indirectly, by such holder otherwise than hereunder or with the prior written consent of Roth Capital Partners, Incorporated, and that each such shareholder will conduct all offers and sales of the Company's capital stock through Roth Capital Partners, Incorporated during the Lock-Up Period and for 180 additional days thereafter. (x) The Company has not distributed and will not distribute any prospectus or other offering material in connection with the offering and sale of the Shares other than any preliminary -9- 10 prospectus or the Prospectus or other materials permitted by the Act to be distributed by the Company. (y) The Company is in compliance with all provisions of Florida Statutes Section 517.075 (Chapter 92-198, laws of Florida). The Company does not do any business, directly or indirectly, with the government of Cuba or with any person or entity located in Cuba. (z) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to records is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (aa) Other than as contemplated by this Agreement, the Company has not incurred any liability for any finder's or broker's fee or agent's commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. (bb) There has been no unlawful storage, treatment or disposal of waste by the Company (or any of its predecessors-in-interest) at any of the facilities owned or leased thereby, except for such violations which would not have a material adverse effect on the condition, financial or otherwise, or the earnings, affairs or business prospects of the Company; there has been no material spill, discharge, leak, emission, ejection, escape, dumping or release of any kind onto the properties owned or leased by the Company, or into the environment surrounding those properties, of any toxic or hazardous substances, as defined under any federal, state or local regulations, laws or statutes, except for those releases permissible under such regulations, laws or statutes or otherwise allowable under applicable permits and except for such releases which would not have a material adverse effect on the condition, financial or otherwise, or the earnings, affairs or business prospects of the Company. (cc) No material labor dispute with the employees of the Company exists or is imminent. (dd) Each employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) ("Employee Benefit Plan"), and each bonus, retirement, pension, profit sharing, stock bonus, thrift, stock option, stock purchase, incentive, severance, deferred or other compensation or welfare benefit plan, program, agreement or arrangement of, or applicable to employees or former employees of, the Company or with respect to which the Company could have any liability ("Benefit Plans"), was or has been established, maintained and operated in all material respects in compliance with all applicable federal, state, and local statutes, orders, governmental rules and regulations, including, but not limited to, ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). No Benefit -10- 11 Plan is or was subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code. The Company does not, either directly or indirectly as a member of a controlled group within the meaning of Sections 414(b), (c), (rn) and (o) of the Code ("Controlled Group"), have any material liability that remains unsatisfied or arising under Section 502 of ERISA, Subchapter D of Chapter 1 of Subtitle A of the Code or under Chapter 43 of Subtitle D of the Code. No action, suit, grievance, arbitration or other matter of litigation or claim with respect to any Benefit Plan (other than routine claims for benefits made in the ordinary course of plan administration for which plan administrative procedures have not been exhausted) is pending or, to the Company's knowledge, threatened or imminent against or with respect to any Benefit Plan, any member of a Controlled Group that includes the Company, or any fiduciary within the meaning of Section 3(21) of ERISA with respect to a Benefit Plan which, if determined adversely to the Company, would have a material adverse effect on the condition, financial or otherwise, or the earnings, affairs or business prospects of the Company. Neither the Company nor any member of a Controlled Group that includes the Company, has any knowledge of any facts that could give rise to any action, suit, grievance, arbitration or any other manner of litigation or claim with respect to any Benefit Plan. (ee) The Company implemented a comprehensive, detailed program to analyze and address the risk that its computer hardware and software might be unable to recognize and properly execute date-sensitive functions involving any dates after December 31, 1999 (the "Year 2000 Problem") and determined that its computer hardware and software is, and will continue to be, able to process all date information without any errors, aborts, delays or other interruptions in operations associated with the Year 2000 Problem; and the Company believes, after due inquiry, that each supplier, vendor, customer or financial service organization used or serviced by the Company remedied the Year 2000 Problem, except to the extent that a failure to remedy by any such supplier, vendor, customer or financial service organization would not have a material adverse effect on the condition, financial or otherwise, or the earnings, affairs or business prospects of the Company. (ff) Neither the Company nor any of its or their properties or assets has any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) under the laws of the State of Delaware. 4. Agreements of the Company. The Company covenants and agrees with the several Underwriters as follows: (a) The Company will not, either prior to the Effective Date or thereafter during such period as the Prospectus is required by law to be delivered in connection with sales of the Shares by an Underwriter or dealer, file any amendment or supplement to the Registration Statement or the Prospectus, unless a copy thereof shall first have been submitted to the Representative within a reasonable period of time prior to the filing thereof and the Representative shall not have objected thereto in good faith. -11- 12 (b) The Company will use its best efforts to cause the Registration Statement to become effective, and will notify the Representative promptly, and will confirm such advice in writing, (i) when the Registration Statement has become effective and when any post-effective amendment thereto becomes effective, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose or the threat thereof; (iv) of the happening of any event during the period that the Prospectus is required by law to be delivered in connection with the offering or sale of the Shares that in the judgment of the Company makes any statement made in the Registration Statement or the Prospectus untrue or that requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, in the light of the circumstances in which they are made, not misleading and (v) of receipt by the Company or any representative or attorney of the Company of any other communication from the Commission relating to the Company, the Registration Statement, any preliminary prospectus or the Prospectus. If at any time the Commission shall issue any order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal of such order at the earliest possible moment. If the Company has omitted any information from the Registration Statement pursuant to Rule 430A of the Rules and Regulations, the Company will comply with the provisions of and make all requisite filings with the Commission pursuant to said Rule 430A and notify the Representative promptly of all such filings. (c) The Company will furnish to each Representative, without charge, one signed copy of each of the Registration Statement and of any post-effective amendment thereto, including financial statements and schedules, and all exhibits thereto and will furnish to the Representative, without charge, for transmittal to each of the other Underwriters, a copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules but without exhibits. (d) The Company will comply with all the provisions of any undertakings contained in the Registration Statement. (e) On the Effective Date, and thereafter from time to time, the Company will deliver to each of the Underwriters, without charge, as many copies of any preliminary prospectus and the Prospectus or any amendment or supplement thereto as the Representative may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by the several Underwriters and by all dealers to whom the Shares may be sold, both in connection with the offering or sale of the Shares and for any period of time thereafter during which the Prospectus is required by law to be delivered in connection therewith. During the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, the Company will comply with all requirements imposed upon it by the Act and the Rules and Regulations, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Shares as contemplated by the provisions hereof or the Prospectus. If during such period of time any event shall occur which in the judgment of the Company or counsel to the Underwriters should be set forth in the Prospectus in order to make any statement therein, in the light of the -12- 13 circumstances under which it was made, not misleading, or if it is necessary to supplement or amend the Prospectus to comply with law, the Company will forthwith prepare and duly file with the Commission an appropriate supplement or amendment thereto, and will deliver to each of the Underwriters, without charge, such number of copies of such supplement or amendment to the Prospectus as the Representative may reasonably request. The Company will not file any document under the Exchange Act or the Exchange Act Rules and Regulations before the termination of the offering of the Shares by the Underwriters, if such document would be deemed to be incorporated by reference into the Prospectus, that is not approved by the Representative after reasonable notice thereof. In case any Underwriter is required to deliver a prospectus in connection with sales of any Shares at any time nine months or more after the effective date of the Registration Statement, upon the request of the Representative but at the expense of such Underwriter, the Company will prepare and deliver to such Underwriter as many copies as the Representative may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act. (f) Prior to any public offering of the Shares, the Company will cooperate with the Representative and counsel to the Underwriters in connection with the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representative may request; provided, that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to general service of process in any jurisdiction where it is not now so subject. (g) The Company will, so long as required under the Rules and Regulations, furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flow of the Company and its consolidated Subsidiaries, if any, certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Company and its Subsidiaries, if any, for such quarter in reasonable detail. (h) During the period of five years commencing on the Effective Date, the Company will furnish to the Representative and each other Underwriter who may so request copies of such financial statements and other periodic and special reports as the Company may from time to time distribute generally to the holders of any class of its capital stock, and will furnish to the Representative and each other Underwriter who may so request a copy of each annual or other report it shall be required to file with the NASD or any securities exchange pursuant to the requirements of the NASD or with the Commission pursuant to the Act or the Exchange Act. (i) The Company will make generally available to holders of its securities as soon as may be practicable but in no event later than the last day of the fifteenth full calendar month following the calendar quarter in which the Effective Date falls, an earnings statement (which need not be audited but shall be in reasonable detail) for a period of 12 months ended commencing after -13- 14 the Effective Date, and satisfying the provisions of Section 11(a) of the Act (including Rule 158 of the Rules and Regulations). (j) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company will pay or reimburse if paid by the Representative, in such proportions as they may agree upon themselves, all costs and expenses incident to the performance of the obligations of the Company under this Agreement and in connection with the transactions contemplated hereby, including but not limited to costs and expenses of or relating to (i) the preparation, printing and filing of the Registration Statement and exhibits to it, each preliminary prospectus, Prospectus and any amendment or supplement to the Registration Statement or Prospectus, (ii) the preparation and delivery of certificates representing the Shares, (iii) the printing of this Agreement, the Agreement Among Underwriters, any Selected Dealer Agreements, any Underwriters' Questionnaires, any Underwriters' Powers of Attorney and any invitation letters to prospective Underwriters, (iv) furnishing (including costs of shipping and mailing) such copies of the Registration Statement, the Prospectus and any preliminary prospectus, and all amendments and supplements thereto, as may be requested for use in connection with the offering and sale of the Shares by the Underwriters or by dealers to whom Shares may be sold, (v) the listing of the Shares on the NNM, (vi) any filings required to be made by the Underwriters with the NASD, and the fees, disbursements and other charges of counsel for the Underwriters in connection therewith, (vii) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions designated pursuant to Section 5(f), including the fees, disbursements and other charges of counsel to the Underwriters in connection therewith, and the preparation and printing of preliminary, supplemental and final Blue Sky memoranda, (viii) fees, disbursements and other charges of counsel to the Company (but not those of counsel for the Underwriters, except as otherwise provided herein), (ix) accounting fees of the Company and (x) the transfer agent for the Shares. In addition, the Company will pay all travel and lodging expenses incurred by management of the Company in connection with any informational "road show" meetings held in connection with the offering and will also pay for the preparation of all materials used in connection with such meetings. The Company shall not, however, be required to pay for any of the Underwriters' expenses (other than those related to qualification of the Shares under state securities or Blue Sky laws and those incident to securing any required review by the NASD of the terms of the sale of the Shares) except that, if this Agreement shall not be consummated because the conditions in Section 5 hereof are not satisfied, or because this Agreement is terminated by the Representative pursuant to Section 8 hereof; or by reason of any failure, refusal or inability on the part of the Company to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on its part to be performed, unless such failure to satisfy said condition or to comply with said terms shall be due to the default or omission of any Underwriter, then the Company shall promptly upon request by the Representative reimburse the several Underwriters for all out-of-pocket accountable expenses, including fees and disbursements of counsel, incurred in connection with investigating, marketing and proposing to market the Shares or in contemplation of performing their obligations hereunder up to a maximum of $100,000; but the Company shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits from the sale by them of the Shares. -14- 15 (k) If prior to closing on the initial public offering that is the subject of this Agreement, the Company agrees to be acquired, merges, sells all or substantially all of its assets or otherwise effects a corporate reorganization or consolidation with any other entity, or enters into a financing agreement and, as a result, the offering as contemplated hereby is abandoned by the Company, Roth Capital Partners, Incorporated shall be entitled to receive from the Company a cash fee of one percent (1.0%) of the total consideration or commitment received by the Company and its stockholders for such merger, sale, reorganization, consolidation, or financing, to be payable at closing of such a transaction and receipt of consideration. In the event that the Company engages the Roth Capital Partners, Incorporated in a formal advisory assignment, this advisory fee will apply against fees that would be incurred as part of that formal advisory assignment. The expenses and fees reimbursed to the Underwriters under section (j) above shall be deducted from the fee otherwise payable to Roth Capital Partners, Incorporated in this section. (l) The Company will not at any time, directly or indirectly, take any action designed or which might reasonably be expected to cause or result in, or which will constitute, stabilization of the price of the shares of Common Stock to facilitate the sale or resale of any of the Shares. (m) The Company will apply the net proceeds from the offering and sale of the Shares to be sold by the Company substantially in the manner set forth in the Prospectus under "Use of Proceeds" and shall file such reports with the Commission with respect to the sale of the Shares and the application of the proceeds therefrom as may be required in accordance with Rule 463 under the Act. (n) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus, without the prior written consent of Roth Capital Partners, Incorporated, the Company will not offer, sell, contract to sell, grant options to purchase or otherwise dispose of any of the Company's equity securities of the Company or any other securities convertible into or exchangeable with its Common Stock or other equity security (other than pursuant to employee stock option plans or the conversion of convertible securities or the exercise of warrants outstanding on the date of this Agreement). (o) During the period of 180 days after the date of the Prospectus, the Company will not, without the prior written consent of Roth Capital Partners, Incorporated, grant options to purchase shares of Common Stock that will vest in such period at a price less than the initial public offering price. During the period of 180 days after the date of the Prospectus, the Company will not file with the Commission or cause to become effective any registration statement (including a registration statement on Form S-8) relating to any securities of the Company without the prior written consent of Roth Capital Partners, Incorporated. (p) The Company will cause each of its officers, directors and certain stockholders designated by the Representative to enter into lock-up agreements with the Representative in substantially the form of Schedule III hereto to the effect that they will not for a period of 180 days after the date of the Prospectus, without the prior written consent of Roth Capital Partners, -15- 16 Incorporated, sell, contract to sell or otherwise dispose of any shares of Common Stock or rights to acquire such shares. 5. Conditions of the Obligations of the Underwriters. The obligations of each Underwriter hereunder are subject to the following conditions: (a) Notification that the Registration Statement has become effective shall be received by the Representative not later than 5:00 p.m., California time, on the date of this Agreement or at such later date and time as shall be consented to in writing by the Representative and all filings required by Rule 424 and Rule 430A of the Rules and Regulations shall have been made. (b) (i) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall be pending or threatened by the Commission, (ii) no order suspending the effectiveness of the Registration Statement or the qualification or registration of the Shares under the securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending before or threatened or contemplated by the Commission or the authorities of any such jurisdiction, (iii) any request for additional information on the part of the staff of the Commission or any such authorities shall have been complied with to the satisfaction of the staff of the Commission or such authorities and (iv) after the date hereof no amendment or supplement to the Registration Statement or the Prospectus shall have been filed unless a copy thereof was first submitted to the Representative and the Representative do not object thereto in good faith, and the Representative shall have received certificates, dated the Closing Date and, if later, the Option Closing Date and signed by the Chief Executive Officer and the Chief Financial Officer of the Company (who may, as to proceedings threatened, rely upon the best of their information and belief), to the effect of clauses (i), (ii) and (iii) of this paragraph. (c) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) there shall not have been a material adverse change in the general affairs, business, business prospects, properties, management, condition (financial or otherwise) or results of operations of the Company, whether or not arising from transactions in the ordinary course of business, in each case other than as described in or contemplated by the Registration Statement and the Prospectus, and (ii) the Company shall not have sustained any material loss or interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree, which is not described in the Registration Statement and the Prospectus, if in the judgment of the Representative any such development makes it impracticable or inadvisable to consummate the sale and delivery of the Shares by the Underwriters at the initial public offering price. (d) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall have been no litigation or other proceeding instituted against the Company or any of its officers or directors in their capacities as such, before or by any Federal, state or local court, commission, regulatory body, administrative agency or other -16- 17 governmental body, domestic or foreign, in which litigation or proceeding an unfavorable ruling, decision or finding would, in the judgment of the Representative, materially and adversely affect the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company. (e) Each of the representations and warranties of the Company contained herein shall be true and correct in all material respects at the Closing Date and, with respect to the Option Shares, at the Option Closing Date, and all covenants and agreements contained herein to be performed on the part of the Company and all conditions contained herein to be fulfilled or complied with by the Company at or prior to the Closing Date and, with respect to the Option Shares, at or prior to the Option Closing Date, shall have been duly performed, fulfilled or complied with. (f) The Representative shall have received an opinion, dated the Closing Date and, with respect to the Option Shares, the Option Closing Date, satisfactory in form and substance to the Representative and counsel for the Underwriters from Dorsey & Whitney LLP, counsel to the Company, with respect to the following matters: (i) The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; has full corporate power and authority to conduct all the activities conducted by it, to own or lease all the assets owed or leased by it and to conduct its business as described in the Registration Statement and Prospectus; and is duly licensed or qualified to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such license or qualification necessary and where the failure to be licensed or qualified would have a material and adverse effect on the business or financial condition of the Company. (ii) All of the outstanding shares of capital stock of the Company have been duly authorized, validly issued and are fully paid and nonassessable, to such counsel's knowledge, were issued pursuant to exemptions from the registration and qualification requirements of federal and applicable state securities laws, and were not issued in violation of or subject to any preemptive or, to such counsel's knowledge, similar rights; (iii) The specimen certificate evidencing the Common Stock filed as an exhibit to the Registration Statement is in due and proper form under Delaware law, the Shares to be sold by the Company hereunder have been duly authorized and, when issued and paid for as contemplated by this Agreement, will be validly issued, fully paid and nonassessable; and no preemptive or similar rights exist with respect to any of the Shares or the issue and sale thereof. (iv) To such counsel's knowledge, the Company does not own or control, directly or indirectly, any shares of stock or any other equity or long-term debt securities of -17- 18 any corporation or have any equity interest in any corporation, firm, partnership, joint venture, association or other entity. (v) The number of shares of authorized and outstanding capital stock of the Company is as set forth in the Registration Statement and the Prospectus in the column entitled "Actual" under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement or pursuant to reservations, agreements, employee benefit plans or the exercise of convertible securities, options or warrants referred to in the Prospectus). To such counsel's knowledge, except as disclosed in or specifically contemplated by the Prospectus, there are no outstanding options, warrants of other rights calling for the issuance of; and no commitments, plans or arrangements to issue, any shares of capital stock of the Company or any security convertible into or exchangeable or exercisable for capital stock of the Company. The description of the capital stock of the Company in the Registration Statement and the Prospectus conforms in all material respects to the terms thereof. (vi) To such counsel's knowledge, there are no legal or governmental proceedings pending or threatened to which the Company is a party or to which any of its properties is subject that are required to be described in the Registration Statement or the Prospectus but are not so described. (vii) No consent, approval, authorization or order of; or any filing or declaration with, any court or governmental agency or body is required for the consummation by the Company of the transactions on its part contemplated under this Agreement, except such as have been obtained or made under the Act or the Rules and Regulations and such as may be required under state securities or Blue Sky laws or the by-laws and rules of the NASD in connection with the purchase and distribution by the Underwriters of the Shares. (viii) The Company has full corporate power and authority to enter into this Agreement. This Agreement has been duly authorized, executed and delivered by the Company. (ix) The execution and delivery of this Agreement, the compliance by the Company with all of the terms hereof and the consummation of the transactions contemplated hereby does not contravene any provision of applicable law or the Articles of Incorporation or By-Laws of the Company, and will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company pursuant to the terms and provisions of; result in a breach or violation of any of the terms or provisions of; or constitute a default under, or give any party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument known to such counsel to which the Company is a party or by which the Company or any of its properties is bound or affected, or violate or conflict with (i) any judgment, ruling, decree or order -18- 19 known to such counsel or (ii) any statute, rule or regulation of any court or other governmental agency or body, applicable to the business or properties of the Company except for such liens, charges, encumbrances, breaches, violations or terminations as would not reasonably be expected to have a material and adverse effect on business, properties or results of operations of the Company. (x) To such counsel's knowledge, there is no document or contract of a character required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement which is not described or filed or incorporated by reference as required, and each description of such contracts and documents that is contained in the Registration Statement and Prospectus fairly presents in all material respects the information required under the Act and the Rules and Regulations. (xi) The statements under the captions "Risk Factors - Substantial sales of our common stock, or the perception that substantial sales may occur, could cause our stock price to fall and make it difficult for us to sell additional securities," "Management - Employment Agreements," "Management - Stock Option Plans," "Management - Indemnification of Directors and Executive Officers and Limitation of Liability," "Certain Transactions," "Description of Capital Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as the statements constitute a summary of documents referred to therein or matters of law, are accurate summaries and fairly and correctly present, in all material respects, the information called for with respect to such documents and matters (provided, however, that such counsel may rely on representations of the Company with respect to the factual matters contained in such statements, and provided further that such counsel shall state that nothing has come to the attention of such counsel which leads them to believe that such representations are not true and correct in all material respects). (xii) The Company is not an "investment company or an affiliated person" of, or "promoter" or "principal underwriter" for, and immediately upon completion of the sale of Shares contemplated hereby will not be, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. (xiii) The Shares have been duly authorized for listing on the NNM, subject to notice of issuance. (xiv) To such counsel's knowledge, no holder of securities of the Company has rights, which have not been waived, to require the Company to register with the Commission shares of Common Stock or other securities, as part of the offering contemplated hereby. (xv) The Registration Statement has become effective under the Act, and to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or is pending, threatened or contemplated. -19- 20 (xvi) The Registration Statement and the Prospectus comply as to form in all material respects with the requirement of the Act and the Rules and Regulations (other than the financial statements, schedules and other financial and statistical data contained in the Registration Statement or the Prospectus, as to which such counsel need express no opinion). (xvii) Such counsel has participated in the preparation of the Registration Statement and Prospectus and has no reason to believe that, as of the Effective Date, the Registration Statement, or any amendment or supplement thereto, (other than the financial statements, schedules and other financial and statistical data contained therein, as to which such counsel need express no opinion) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or that the Prospectus, or any amendment or supplement thereto, as of its date and the Closing Date and, if later, the Option Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (other than the financial statements, schedules and other financial and statistical data contained therein, as to which such counsel need express no opinion). Such counsel may express the statements set forth in this clause (xvii) in a letter separate from its opinion. (xviii) To the knowledge of such counsel, the Company holds and is operating in compliance with all licenses, approvals, certificates and permits from governmental and regulatory authorities, foreign and domestic, which are necessary to the conduct of its business as currently being conducted and as described in the Prospectus. To the knowledge of such counsel, the Company has not received notice of or has knowledge of any basis for any proceeding or action relating specifically to the Company for the revocation or suspension of any such consent, authorization, approval, order, license, certificate, permit or any other action or proposed action by any regulatory authority having jurisdiction over the Company that would have a material adverse effect on the Company. (xix) To the knowledge of such counsel, the Company owns or licenses all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and other similar rights necessary for the conduct of its business as currently being conducted and as described in the Prospectus. To the knowledge of such counsel, no aspect of the business of the Company involves or gives rise to any infringement of or license or similar fees for any patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets or other similar rights of others, and the Company has not received any notice or claim of conflict with the asserted rights of others with respect to any of the foregoing. -20- 21 In rendering the opinions as to matters of fact, such counsel may rely upon certificates of officers of the Company and governmental officials and the representations and warranties of the Company contained in this Agreement, provided that the opinion of counsel to the Company shall state that they are doing so, that they have no reason to believe that they and the Underwriters are not entitled to rely on such opinions or certificates and that copies of such certificates are attached to the opinion. In rendering such opinion, such counsel may rely upon as to matters of local law on opinions of counsel satisfactory in form and substance to the Representative and counsel for the Underwriters, provided that the opinion of counsel to the Company shall state that they are doing so, that they have no reason to believe that they and the Underwriters are not entitled to rely on such opinions and that copies of such opinions are attached to the opinion. (g) The Representative shall have received an opinion, dated the Closing Date and the Option Closing Date, from Messerli & Kramer P.A., counsel to the Underwriters, with respect to the Registration Statement, the Prospectus and this Agreement, which opinion shall be satisfactory in all respects to the Representative. (h) Concurrently with the execution and delivery of this Agreement, the Accountants shall have furnished to the Representative a letter, dated the date of its delivery, addressed to the Representative and in form and substance satisfactory to the Representative, confirming that they are independent accountants with respect to the Company as required by the Act and the Rules and Regulations and with respect to certain financial and statistical information contained in the Registration Statement. At the Closing Date and, as to the Option Shares, the Option Closing Date, the Accountants shall have furnished to the Representative a letter, dated the date of its delivery, which shall confirm, on the basis of a review in accordance with the procedures set forth in the letter from the Accountants, that nothing has come to their attention during the period from the date of the letter referred to in the prior sentence to a date (specified in the letter) not more than five days prior to the Closing Date and the Option Closing Date, as the case may be, which would require any change in their letter dated the date hereof if it were required to be dated and delivered at the Closing Date and the Option Closing Date. (i) Concurrently with the execution and delivery of this Agreement and at the Closing Date and, as to the Option Shares, the Option Closing Date, there shall be furnished to the Representative a certificate, dated the date of its delivery, signed by each of the Chief Executive Officer and the Chief Financial Officer of the Company, in form and substance satisfactory to the Representative, to the effect that: (i) Each signer of such certificate has carefully examined the Registration Statement and the Prospectus and (A) as of the date of such certificate, such documents are true and correct in all material respects and do not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not untrue or misleading, (B) in the case of the certificate delivered at the Closing Date and the Option Closing Date, since the Effective -21- 22 Date no event has occurred as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not untrue or misleading, (C) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, not in the ordinary course of business, or declared or paid any dividends or made any distribution of any kind with respect to its capital stock, and except as disclosed in the Prospectus, there has not been any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding options or warrants), or any material change in the short-term or long-term debt, or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock, of the Company, or any material adverse change or any development involving a prospective material adverse change (whether or not arising in the ordinary course of business), in the general affairs, condition (financial or otherwise), business, key personnel, property, prospects, net worth or results of operations of the Company, and (D) except as stated in the Registration Statement and the Prospectus, there is not pending, or, to the knowledge of the Company, threatened or contemplated, any action, suit or proceeding to which the Company is a party before or by any court or governmental agency, authority or body, or any arbitrator, which might result in any material adverse change in the condition (financial or otherwise), business, prospects or results of operations of the Company. (ii) Each of the representations and warranties of the Company contained in this Agreement were, when originally made, and are, at the time such certificate is delivered, true and correct. (iii) Each of the covenants required to be performed by the Company herein on or prior to the date of such certificate has been duly, timely and fully performed and each condition herein required to be satisfied or fulfilled on or prior to the date of such certificate has been duly, timely and fully satisfied or fulfilled. (j) The Shares shall be qualified for sale in such jurisdictions as the Representative may reasonably request and each such qualification shall be in effect and not subject to any stop order or other proceeding on the Closing Date or the Option Closing Date. (k) Prior to the Closing Date, the Shares shall have been duly authorized for listing on the NNM upon official notice of issuance. (l) The Company shall have furnished to the Representative such certificates, in addition to those specifically mentioned herein, as the Representative may have reasonably requested as to the accuracy and completeness at the Closing Date and the Option Closing Date of any statement in the Registration Statement or the Prospectus, as to the accuracy at the Closing Date and the Option Closing Date of the representations and warranties of the Company herein, as -22- 23 to the performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations hereunder of the Representative. If any of the conditions hereinabove provided for in this Section 5 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Underwriters hereunder may be terminated by the Representative by notifying the Company of such termination in writing or by telegram at or prior to the Closing Date or the Option Closing Date, as the case may be. In such event, the Company and the Underwriters shall not be under any obligation to each other (except to the extent provided in Section 6 hereof). 6. Indemnification. (a) The Company will indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person, if any, who controls each Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of; any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment or supplement to the Registration Statement or the Prospectus, or the omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading in the light of the circumstances in which they were made, or (ii) any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Common Stock or the offering contemplated hereby, and which is included as part of or referred to in any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arising out of or based upon matters covered by clause (i) above, and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such action or claim as such expenses are incurred; or arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Company contained herein or any failure of the Company to perform its obligations hereunder or under law in connection with the transactions contemplated hereby; provided, however, that (i) the Company will not be liable to the extent that such loss, claim, liability, expense or damage arises from the sale of the Shares in the public offering to any person by an Underwriter and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to any Underwriter furnished in writing to the Company by the Representative, on behalf of any Underwriter, expressly for inclusion in the Registration Statement, the preliminary prospectus or the Prospectus; and (ii) the Company will not be liable to any Underwriter, the directors, officers, employees or agents of such Underwriter or any person controlling such Underwriter with respect to any loss, claim, liability, expense, or damage arising out of or based on any untrue statement or omission or alleged untrue statement or omission or -23- 24 alleged omission to state a material fact in the preliminary prospectus which is corrected in the Prospectus if the person asserting any such loss, claim, liability, charge or damage purchased Shares from such Underwriter but was not sent or given a copy of the Prospectus at or prior to the written confirmation of the sale of such Shares to such person. This indemnity agreement will be in addition to any liability that the Company might otherwise have. (b) Each Underwriter will indemnify and hold harmless the Company, each director of the Company, each officer of the Company who signs the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, but only insofar as losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to any Underwriter furnished in writing to the Company by the Representative, on behalf of such Underwriter, expressly for use in the Registration Statement, the preliminary prospectus or the Prospectus. The Company acknowledges that the only information relating to any Underwriter furnished in writing to the Company by the Representative on behalf of the Underwriters expressly for inclusion in the Registration Statement, the preliminary prospectus or the Prospectus is as set forth in Section 10 below. This indemnity will be in addition to any liability that each Underwriter might otherwise have. (c) Any party that proposes to assert the right to be indemnified under this Section 6 shall, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 6, notify each such indemnifying party in writing of the commencement of such action, enclosing with such notice a copy of all papers served, but the omission so to notify such indemnifying party will not relieve it from any liability that it may have to any indemnified party under the foregoing provisions of this Section 6 unless, and only to the extent that, such omission results in the loss of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the -24- 25 indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (iv) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. Any indemnifying party will not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld). (d) If the indemnification provided for in this Section 6 is applicable in accordance with its terms but for any reason is held to be unavailable to or insufficient to hold harmless an indemnified party under paragraphs (a), (b) and (c) of this Section 6 in respect of any losses, claims, liabilities, expenses and damages referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of; any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the Underwriters, such as persons who control the Company within the meaning of the Act, officers of the Company who signed the Registration Statement and directors of the Company, who also may be liable for contribution) by such indemnified party as a result of such losses, claims, liabilities, expenses and damages in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the Underwriters, on the other hand, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof; as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Representative on behalf of the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable -25- 26 considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof referred to above in this Section 6(d) shall be deemed to include, for purposes of this Section 6(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no Underwriter shall be required to contribute any amount in excess of the underwriting discounts received by it and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute as provided in this Section 6(d) are several in proportion to their respective underwriting obligations and not joint. For purposes of this Section 6(d), any person who controls a party to this Agreement within the meaning of the Act will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement will have the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against any such party in respect of which a claim for contribution may be made under this Section 6(d), will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 7(d). No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld). (e) The indemnity and contribution agreements contained in this Section 6 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of the Underwriters, (ii) acceptance of any of the Shares and payment therefor or (iii) any termination of this Agreement. 7. Reimbursement of Certain Expenses. In addition to its other obligations under Section 6(a) of this Agreement, the Company hereby agrees to reimburse on a quarterly basis the Underwriters for all reasonable legal and other expenses incurred in connection with investigating or defending any claim, action, investigation, inquiry or other proceeding arising out of or based upon, in whole or in part, any statement or omission or alleged statement or omission, or any inaccuracy in the representations and warranties of the Company contained herein or failure of the Company to perform its or his respective obligations hereunder or under law, all as described in Section 6(a), notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligations under this Section 7 and the possibility that such payment might later be held to be improper; provided, however, that, to the extent any such payment is ultimately held to be improper, the persons receiving such payments shall promptly refund them. 8. Termination. The obligations of the several Underwriters under this Agreement may be terminated at any time on or prior to the Closing Date (or, with respect to the Option Shares, on or prior to the Option Closing Date), by notice to the Company from the Representative, without liability on the part of any Underwriter to the Company if; prior to delivery and payment for the Firm Shares or Option Shares, as the case may be, in the sole -26- 27 judgment of the Representative, (i) trading in any of the equity securities of the Company shall have been suspended by the Commission or by The Nasdaq Stock Market, (ii) trading in securities generally on the New York Stock Exchange and/or The Nasdaq Stock Market shall have been suspended or limited or minimum or maximum prices shall have been generally established on such exchange or market, or additional material governmental restrictions, not in force on the date of this Agreement, shall have been imposed upon trading in securities generally by such exchange, by order of the Commission or any court or other governmental authority, or by the New York Stock Exchange, (iii) a general banking moratorium shall have been declared by either Federal or Delaware state authorities or (iv) any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or material escalation of hostilities or other calamity or crisis shall have occurred, the effect of which is such as to make it, in the sole judgment of the Representative, impracticable or inadvisable to proceed with completion of the public offering or the delivery of and payment for the Shares. If this Agreement is terminated pursuant to Section 8 hereof, the Company shall not be under any liability to any Underwriter except as provided in Sections 4(j) and (k), 6 and 7 hereof. 9. Substitution of Underwriters. If any one or more of the Underwriters shall fail or refuse to purchase any of the Firm Shares which it or they have agreed to purchase hereunder, and the aggregate number of Firm Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of Firm Shares, the other Underwriters shall be obligated, severally, to purchase the Firm Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase, in the proportions which the number of Firm Shares which they have respectively agreed to purchase pursuant to Section 1 bears to the aggregate number of Firm Shares which all such non-defaulting Underwriters have so agreed to purchase, or in such other proportions as the Representative may specify; provided that in no event shall the maximum number of Firm Shares which any Underwriter has become obligated to purchase pursuant to Section 1 be increased pursuant to this Section 9 by more than one-ninth of such number of Firm Shares without the prior written consent of such Underwriter. If any Underwriter or Underwriters shall fail or refuse to purchase any Firm Shares and the aggregate number of Firm Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase exceeds one-tenth of the aggregate number of the Firm Shares and arrangements satisfactory to the Representative and the Company for the purchase of such Firm Shares are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company for the purchase or sale of any Shares under this Agreement. In any such case either the Representative or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. The term "Underwriter" includes any person substituted for a defaulting Underwriter. Any action taken pursuant to this Section 9 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. -27- 28 10. Written Information. For all purposes under this Agreement, the Company understands and agrees with each of the Underwriters that the following constitutes the only written information furnished to the Company by or through the Representative specifically for use in preparation of the Registration Statement, any preliminary prospectus, the Prospectus, or any amendment or supplement thereto: (i) the per share "Public offering price" and per share "Underwriting discount" set forth on the cover page of the Prospectus and (ii) the information set forth under the caption "Underwriting" in the preliminary prospectus and the Prospectus. 11. Miscellaneous. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed or delivered (a) if to the Company, at the office of the Company, 2600 Crosspark Road, Coralville, Iowa 52241, Attention: William E. Staib, Chief Executive Officer, with a copy to Dorsey & Whitney LLP, Pillsbury Center South, 220 South Sixth Street, Minneapolis, Minnesota 55402, Attention: Thomas Martin, Esq., or (b) if to the Underwriters, to the Representative at the offices of Roth Capital Partners, Incorporated, 24 Corporate Plaza, Suite 200, Newport Beach, California 92660, Attention: Corporate Finance Department, with a copy to Messerli & Kramer P.A., 150 South Fifth Street, Suite 1800, Minneapolis, Minnesota 55402, Attention: Jeffrey C. Robbins, Esq. Any such notice shall be effective only upon receipt. Any notice under such Section 8 or 9 may be made by telex or telephone, but if so made shall be subsequently confirmed in writing. This Agreement has been and is made solely for the benefit of the several Underwriters, the Company, and the controlling persons, directors and officers referred to in Section 6, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" as used in this Agreement shall not include a purchaser, as such purchaser, of Shares from any of the several Underwriters. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota applicable to contracts made and to be performed entirely within such State. This Agreement may be signed in two or more counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The Company and the Underwriters each hereby waive any right they may have to a trial by jury in respect of any claim based upon or arising out of this Agreement or the transactions contemplated hereby. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) -28- 29 The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof; or by or on behalf of the Company or its directors and officers and (c) delivery of and payment for the Shares under this Agreement. Please confirm that the foregoing correctly sets forth the agreement among the Company and the several Underwriters. Very truly yours, STOCKPOINT, INC. By:_________________________________________ William E. Staib, Chief Executive Officer Confirmed as of the date first above mentioned: ROTH CAPITAL PARTNERS, INCORPORATED Acting on behalf of itself and as the Representative of the other several Underwriters named in Schedule I hereto. By: ROTH CAPITAL PARTNERS, INCORPORATED By:________________________________________ Title: Managing Director -29- 30 SCHEDULE I UNDERWRITERS
Number of Firm Shares Underwriters to be Purchased - ------------ ---------------- Roth Capital Partners, Incorporated.................................................... _________ TOTAL................................................ =========
-30- 31 SCHEDULE II WARRANT THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED, EXCEPT UPON SUCH REGISTRATION OR UPON DELIVERY TO MAKER OF AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR TRANSFER. STOCKPOINT, INC. WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK NO. [ ] [_______] SHARES FOR VALUE RECEIVED, STOCKPOINT, INC., a Delaware corporation (the "Company"), hereby certifies that ______________________ _______________ or its permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing on [ , 2001] and prior to 5:00 P.M., California time, on [ , 2005], ___________________ (_________) fully paid and non-assessable shares of the common stock, $.01 par value per share, of the Company for an aggregate purchase price of $[ ] (computed on the basis of $___ per share). Hereinafter, (i) said common stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "Common Stock," (ii) the shares of the Common Stock purchasable hereunder or under any other Warrant (as hereinafter defined) are referred to individually as a "Warrant Share" and collectively as the "Warrant Shares," (iii) the aggregate purchase price payable for the Warrant Shares hereunder is referred to as the "Aggregate Warrant Price," (iv) the price payable for each of the Warrant Shares hereunder is referred to as the "Per Share Warrant Price," (v) this Warrant, all similar Warrants issued on the date hereof and all Warrants hereafter issued in exchange or substitution for this Warrant or such similar Warrants are referred to as the "Warrants" and (vi) the holder of this Warrant is referred to as the "Holder" and the holder of this Warrant and all other Warrants or Warrant Shares issued upon the exercise of any Warrant are referred to as the "Holders." The Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter provided, and in the event of any such adjustment, the number of Warrant Shares shall be adjusted to equal the number determined by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment. 1. Exercise of Warrant. (a) This Warrant may be exercised in whole at any time or in part from time to time, during the period commencing on [ , 2001] and ending prior to 5:00 P.M., California time, on [ - 31 - 32 , 2005] (such period, the "Exercise Period"), by the Holder by the surrender of this Warrant (with the subscription form at the end of this Warrant duly executed) at the address set forth in Section 10(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. Payment for Warrant Shares shall be made by certified or official bank check payable to the order of the Company. If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock, and the Holder is entitled to receive a new Warrant covering the Warrant Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon such exercise and surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine) and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. (b) In lieu of exercising this Warrant in the manner set forth in Section 1(a) above, this Warrant may be exercised in whole at any time or in part from time to time during the Exercise Period, by the Holder by surrendering the Warrant at the address set forth in Section 10(a) hereof, without payment of any other consideration, commission or remuneration, together with the subscription form at the end of this Warrant, duly executed. The number of shares of the Common Stock to be issued by the Company shall be calculated using the following formula: X= (Y (A - B)) /A Where X= the number of shares of the Common Stock to be issued to the Holder Y= the number of shares of the Common Stock purchasable under this Warrant or, if this Warrant is being exercised in part, under the portion of the Warrant being exercised (at the date of the surrender of this Warrant and the subscription form) A= the Market Price (at the date of the surrender of this Warrant and the subscription form) -32- 33 B= the Per Share Warrant Price (as adjusted to the date of the surrender of this Warrant and the subscription form) If this Warrant is exercised in part pursuant to this Section 1(b), this Warrant must be exercised for a number of whole shares of the Common Stock, and the Holder is entitled to receive a new Warrant covering the Warrant Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon such exercise and surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay cash equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine) and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. (c) The market price of a share of the Common Stock (the "Market Price") on any date of determination shall be (i) the last reported sale price per share of the Common Stock on the business day immediately preceding the date of determination as reported on the Nasdaq National Market (the "Nasdaq National Market"), or (ii) if there is no such reported sale on the date in question, the average of the closing bid and asked quotations as so reported on the Nasdaq National Market, or (iii) if the Common Stock is not then listed on the Nasdaq National Market, the last reported sale price per share of the Common Stock on such national securities exchange upon which the Common Stock is then listed or (iv) if the Common Stock is not then listed on any national securities exchange, the average of the closing bid and asked quotations in the over-the-counter market as reported by Nasdaq, or if not so reported, as reported by the National Quotations Bureau or a similar organization. In the absence of such quotations, the Board of Directors of the Company shall determine in good faith the fair market value per share of the Common Stock, which shall for these purposes be deemed to be the Market Price, which determination shall be set forth in a certificate executed by an officer of the Company showing the facts upon which the Market Price is based. 2. Reservation of Warrant Shares; Listing. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times (a) have authorized and in reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions on sale or transfer and free and clear of all preemptive rights and rights of first refusal and (b) if the Company has listed or hereafter lists the Common Stock on the Nasdaq Stock Market or any national securities exchange, use its best efforts to keep the shares of the Common -33- 34 Stock receivable upon the exercise of this Warrant authorized for listing on such market or exchange upon notice of issuance. 3. Protection Against Dilution. (a) If, at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to the holders of shares of the Common Stock (i) securities, other than shares of the Common Stock, or (ii) property, other than cash, without payment therefor, with respect to the Common Stock, then, and in each such case, the Holder, upon the exercise of this Warrant, shall be entitled to receive the securities and property which the Holder would hold on the date of such exercise if, on the date of this Warrant, the Holder had been the holder of record of the number of shares of the Common Stock subscribed for upon such exercise and, during the period from the date of this Warrant to and including the date of such exercise, had retained such shares and the securities and properties receivable by the Holder during such period. Notice of each such distribution shall be forthwith mailed to the Holder. (b) If, at any time or from time to time after the date of this Warrant, the Company shall (i) pay a dividend or make a distribution on its capital stock in shares of the Common Stock, (ii) subdivide its outstanding shares of the Common Stock into a greater number of shares, (iii) combine its outstanding shares of the Common Stock into a smaller number of shares or (iv) issue by reclassification of the Common Stock any shares of capital stock of the Company, the Per Share Warrant Price shall be adjusted so that the Holder upon the exercise hereof shall be entitled to receive the number of shares of the Common Stock or other capital stock of the Company which the Holder would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Section 3(b) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c) In case of any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another entity (including any exchange effected in connection with a merger of another corporation with the Company), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such consolidation, merger, statutory exchange, sale or conveyance had this Warrant been exercised immediately prior to the effective date of such consolidation, merger, statutory exchange, sale or conveyance and, in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Section 3(c) shall -34- 35 similarly apply to successive consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (d) No adjustment in the Per Share Warrant Price shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of the Common Stock; provided, however, that any adjustments which by reason of this Section 3(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; and provided further, however, that adjustments shall be required and made in accordance with the provisions of this Section 3 (other than this Section 3(d)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holder of this Warrant or the Common Stock issuable upon exercise hereof. All calculations under this Section 3 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 3 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Per Share Warrant Price, in addition to those required by this Section 3, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (e) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder of Warrants in accordance with this Section 3, the Company shall promptly prepare a notice (the "Adjustment Notice"), which shall be certified by the Company's Chief Executive Officer to be true and correct. The Adjustment Notice shall set forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or the effect of such modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same, and copies of such notice shall be mailed to the Holders of the Warrants not later than thirty (30) days following the occurrence of the event giving rise to the adjustment. (f) If the Board of Directors of the Company shall (i) declare any dividend or other distribution with respect to the Common Stock, other than a cash dividend payable otherwise than out of earnings or earned surplus, (ii) offer to the holders of shares of the Common Stock any additional shares of the Common Stock, any securities convertible into or exercisable for shares of the Common Stock or any rights to subscribe thereto or (iii) propose a dissolution, liquidation or winding up of the Company, the Company shall mail notice thereof to the Holders of the Warrants not less than 15 days prior to the record date fixed for determining stockholders entitled to participate in such dividend, distribution, offer or subscription right or to vote on such dissolution, liquidation or winding up. -35- 36 (g) If, as a result of an adjustment made pursuant to this Section 3, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of the Common Stock and other capital stock of the Company, the Board of Directors of the Company (whose determination shall be conclusive and shall be described in a written notice to the Holder of any Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares or such classes of capital stock or shares of the Common Stock and other capital stock and any subsequent adjustments made pursuant to this Section 3 shall apply equally to each such resulting class of capital stock. 4. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common Stock represented by each and every certificate for Warrant Shares delivered on the exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights, rights of first refusal or other contractual rights to purchase securities of the Company, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or certificate therefor. 5. Registration Rights. (a) The Company agrees that if, at any time during the period commencing on [_________, 2000] and ending on [_________, 2005], (i) the Holder and/or the Holders of any other Warrants and/or Warrant Shares who or which shall hold, collectively, not less than 50% of the Warrants and/or Warrant Shares outstanding at such time and not previously sold pursuant to this Section 5 shall request that the Company file a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering not less than 50% of the Warrant Shares issued or issuable upon the exercise of the Warrants, and not so previously sold, the Company will (i) promptly notify each Holder of the Warrants and each holder of Warrant Shares not so previously sold that such registration statement will be filed and that the Warrant Shares which are then held, and/or may be acquired upon exercise of the Warrants by the Holder and such Holders, will be included in such registration statement at the Holder's and such Holders' request, (ii) cause such registration statement to cover all Warrant Shares which it has been so requested to include, (iii) use its best efforts to cause such registration statement to become effective as soon as practicable and (iv) take all other action necessary under any federal or state law or regulation of any governmental authority to permit all Warrant Shares which it has been so requested to include in such registration statement to be sold or otherwise disposed of, and will maintain such compliance with each such federal and state law and regulation of any governmental authority for the period necessary for such Holders to effect the proposed sale or other disposition. The Company shall be required to effect a registration or qualification pursuant to this Section 5(a) on one occasion only and shall be required to effect such registration only at such time as the -36- 37 Company is eligible to use Form S-3 (or any successor form) for the resale of shares by persons other than the Company. The Company agrees to exercise its best efforts to obtain eligibility to use Form S-3 at the earliest possible time, and to maintain such eligibility through the term of this Warrant. (b) The Company agrees that if, at any time and from time to time during the period commencing [__________, 2000] and ending on [___________, 2007], the Board of Directors of the Company shall authorize the filing of a registration statement (any such registration statement being hereinafter called a "Subsequent Registration Statement") under the Securities Act (otherwise than pursuant to Section 5(a) hereof, and other than a registration statement on Form S-8, Form S-4 or other form which does not permit secondary sales or include substantially the same information as would be required in a form for the general registration of securities) in connection with the proposed offer of any of its securities by it or any of its stockholders, the Company will (i) promptly notify the Holder and each of the Holders, if any, of other Warrants and/or Warrant Shares not previously sold pursuant to this Section 5 that such Subsequent Registration Statement will be filed and that the Warrant Shares which are then held, and/or which may be acquired upon the exercise of the Warrants, by the Holder and such Holders, will, at the Holder's and such Holders' request, be included in such Subsequent Registration Statement, (ii) upon the written request of a Holder made within 20 days after the giving of such notice by the Company, include in the securities covered by such Subsequent Registration Statement all Warrant Shares which it has been so requested to include, (iii) use its best efforts to cause such Subsequent Registration Statement to become effective as soon as practicable and (iv) take all other action necessary under any federal or state law or regulation of any governmental authority to permit all Warrant Shares which it has been so requested to include in such Subsequent Registration Statement to be sold or otherwise disposed of, and will maintain such compliance with each such federal and state law and regulation of any governmental authority for the period necessary for the Holder and such Holders to effect the proposed sale or other disposition. (c) Whenever the Company is required pursuant to the provisions of this Section 5 to include Warrant Shares in a registration statement or a post-effective amendment to a registration statement, the Company shall (i) furnish each Holder of any such Warrant Shares and each underwriter of such Warrant Shares with such copies of the prospectus, including the preliminary prospectus, conforming to the Securities Act (and such other documents as each such Holder or each such underwriter may reasonably request) in order to facilitate the sale or distribution of the Warrant Shares, (ii) use its best effort to register or qualify such Warrant Shares under the blue sky laws (to the extent applicable) of such jurisdiction or laws (to the extent applicable) of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares and each underwriter of Warrant Shares being sold by such Holders shall reasonably request and (iii) take such other actions as may be reasonably necessary or advisable to enable such Holders and such underwriters to consummate the sale or distribution in such jurisdiction or jurisdictions in which such Holders shall have reasonably requested that the Warrant Shares be sold, provided that the Company shall not be required to execute a general consent to service of process or qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified. -37- 38 (d) The Company shall have the right to defer the filing of any registration statement pursuant to Section 5(a) hereof and to suspend the ability of Holders to sell Warrant Shares pursuant to any registration statement declared effective under Section 5(a) or 5(b) hereof, in either case for up to 60 days, if (i) in the opinion of counsel for the Company, the Company would thereby be required to disclose nonpublic information relating to pending corporate developments or business transactions involving the Company or its subsidiaries not otherwise then required by law to be publicly disclosed and (ii) in the good faith judgment of the Company's Board of Directors, such disclosure at such time would adversely affect the Company or such corporate development or business transaction contemplated by the Company or its subsidiaries. Such period shall be referred to herein as the "Black-Out Period," and the Company shall not be entitled to implement more than two such Black-Out Periods during any 12-month period. In the event that notice of a Black-Out Period is given, each Holder shall keep the fact and subject matter of such notice confidential and refrain from any further sales or other transfers of Warrant Shares pursuant to the registration statement until the Holder receives either copies of a supplemented or amended prospectus or a notice from the Company advising the Holder that the use of the existing prospectus may be resumed. (e) Notwithstanding any provision in this Section 5 to the contrary, the Company shall not be required to include in any registration requested pursuant to this Section 5 any Warrant Shares issued or issuable upon exercise of a Warrant and then held by any Holder who is able at such time to sell all such Warrant Shares in one three-month period pursuant to Rule 144 under the Securities Act. (f) The Company shall pay all expenses incurred in connection with any registration or other action pursuant to the provisions of this Section, other than underwriting discounts and applicable transfer taxes relating to the Warrant Shares and fees and disbursements of counsel and accountants for the Holders. 6. Indemnification. (a) The Company agrees to indemnify and hold harmless each selling holder (including, for purposes of this Section 6, any Holder) of Warrant Shares and each person who controls any such selling holder within the meaning of Section 15 of the Securities Act, and each and all of them, from and against any and all losses, claims, damages, liabilities or actions, joint or several, to which any selling holder of Warrant Shares or they or any of them may become subject under the Securities Act or otherwise and to reimburse the persons indemnified above for any legal or other expenses (including the cost of any investigation and preparation) reasonably incurred by them in connection with any litigation or threatened litigation, whether or not resulting in any liability, but only insofar as such losses, claims, damages, liabilities or actions arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any registration statement pursuant to which Warrant Shares were registered under the Securities Act (hereinafter called a "Registration Statement"), any preliminary prospectus, the final prospectus or any amendment or supplement thereto (or in any application or document filed in connection therewith) or the omission or alleged omission to state therein a material fact required to be stated -38- 39 therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that (i) the indemnity agreement contained in this Section 6(a) shall not extend to any selling holder of Warrant Shares in respect of any such losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was based upon and made in conformity with information furnished in writing to the Company by a selling holder of Warrant Shares specifically for use in connection with the preparation of such Registration Statement, any final prospectus, any preliminary prospectus or any such amendment or supplement thereto. The Company agrees to pay any legal and other expenses for which it is liable under this Section 6(a) from time to time (but not more frequently than monthly) within 30 days after its receipt of a bill therefor. (b) Each selling holder of Warrant Shares, severally and not jointly, will indemnify and hold harmless the Company, its directors, its officers who shall have signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act to the same extent as the foregoing indemnity from the Company, but in each case to the extent, and only to the extent, that any statement in or omission from or alleged omission from such Registration Statement, any final prospects, any preliminary prospectus or any amendment or supplement thereto was made in reliance upon information furnished in writing to the Company by such selling holder specifically for use in connection with the preparation of the Registration Statement, any final prospectus or the preliminary prospectus or any such amendment or supplement thereto; provided, however, that the obligation of any holder of Warrant Shares to indemnify the Company under the provisions of this Section 6(b) shall be limited to the Market Price of the Warrant Shares being sold by the selling holder minus the Aggregate Warrant Price for such Warrant Shares. Each selling holder of Warrant Shares agrees to pay any legal and other expenses for which its liable under this Section 6(b) from time to time (but not more frequently than monthly) within 30 days after receipt of a bill therefor. (c) If any action is brought against a person entitled to indemnification pursuant to the foregoing Section 6(a) or Section 6(b) (an "indemnified party") in respect of which indemnity may by sought against a person granting indemnification (an "indemnifying party") pursuant to such section, such indemnified party shall promptly notify such indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party of any such action shall not release the indemnifying party from any liability it may have to such indemnified party otherwise than on account of the indemnity agreement contained in Section 6(a) or Section 6(b) hereof to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against an indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party against which a claim is to be made will be entitled to participate therein at its own expense and, to the extent that it may wish, to assume at its own expense the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if the indemnified party shall have reasonably concluded based upon advice of counsel that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party shall have the right to select separate counsel to assume such legal defenses and otherwise to -39- 40 participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel), (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. An indemnifying party shall not be liable for any settlement of any action or proceeding effected without its written consent (which consent shall not be unreasonably withheld). (d) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 6(a) or (b) hereof is unavailable in accordance with its terms, the Company and the selling holder of Warrant Shares shall contribute to the aggregate losses, claims, damages and liabilities, of the nature contemplated by said indemnity agreement, incurred by the Company and the selling holder of Warrant Shares, in such proportions as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the selling holder of Warrant Shares, on the other hand, from any offering of the Warrant Shares; provided, however, that if such allocation is not permitted by applicable law or if the indemnified party failed to give the notice required under Section 6(c), then the relative fault of the Company and the selling holder of Warrant Shares in connection with the statements or omissions which result in such losses, claims, damages and liabilities and other relevant equitable considerations will be considered together with such relative benefits. (e) The respective indemnity and contribution agreements by the Company and the selling holder of Warrant Shares in Sections 6(a), (b), (c) and (d) hereof shall remain operative and in full force and effect regardless of (i) any investigation made by any selling holder of Warrant Shares or by or on behalf of any person who controls such selling holder or by the Company or any controlling person of the Company or any director or any officer of the Company, (ii) the exercise of this Warrant or (iii) payment for any of the Warrant Shares, and shall survive the delivery of the Warrant Shares, and any successor of the Company, or of any selling holder of Warrant Shares, or of any person who controls the Company, or of any selling holder of Warrant Shares, as the case may be, shall be entitled to the benefit of such respective indemnity and contribution agreements. The respective indemnity and contribution agreements by the Company and the selling holders of Warrant Shares contained in Sections 6(a), (b), (c) and (d) hereof shall be in addition to any liability which the Company and the selling holders of Warrant Shares may otherwise have. -40- 41 7. Limited Transferability. This Warrant may not be sold, transferred, assigned or hypothecated by the Holder (a) except in compliance with the provisions of the Securities Act and any applicable state securities laws and (b) until the first anniversary of the date hereof except (i) to Roth Capital Partners, Incorporated or any successor firm or corporation of Roth Capital Partners, Incorporated, (ii) to any of the officers of Roth Capital Partners, Incorporated, or of any such successor firm or corporation or (iii) in the case of an individual, pursuant to such individual's last will and testament or the laws of descent and distribution, and is so transferable only upon the books of the Company which it shall cause to be maintained for the purpose. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit any Holder of a Warrant or his or its duly authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. All Warrants issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant, and all rights of the Holder thereof shall be identical to those of the Holder of this Warrant. 8. Loss or Destruction of Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 9. Warrant Holder Not Stockholder. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a stockholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a stockholder, prior to the exercise hereof. 10. Communication. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 2600 Crosspark Road, Coralville, Iowa 52241, or such other address as the Company has designated in writing to the Holder, or (b) the Holder at Roth Capital Partners, Incorporated, 24 Corporate Plaza, Suite 200, Newport Beach, California 92660, Attention: Corporate Finance Department, or such other address as the Holder has designated in writing to the Company. -41- 42 11. Headings. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 12. Applicable Law. This Warrant shall be governed by and construed in accordance with the law of the State of Minnesota without giving effect to the principles of conflicts of law thereof. IN WITNESS WHEREOF, Stockpoint, Inc. has caused this Warrant to be signed by its [ ] and attested by its Secretary this ____ day of ____________, 2000. STOCKPOINT, INC. By:_____________________________________ Its:_________________________________ ATTEST: Name: Title: -42- 43 ASSIGNMENT FOR VALUE RECEIVED __________________________ hereby sells, assigns and transfers unto _______________________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________________, attorney, to transfer said Warrant on the books of Stockpoint, Inc. Dated: ________________ Signature: ____________________________________ Address: ___________________________ ___________________________ ___________________________ -43- 44 PARTIAL ASSIGNMENT FOR VALUE RECEIVED __________________________ hereby sells, assigns and transfers unto __________________________ the right to purchase _____________ shares of the Common Stock of Stockpoint, Inc. covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint __________________________, attorney, to transfer that part of said Warrant on the books of Stockpoint, Inc. Dated: ________________ Signature: ____________________________________ Address: ___________________________ ___________________________ ___________________________ -44- 45 SUBSCRIPTION FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the attached Warrant for, and to purchase thereunder, _____________ shares of the Common Stock of Stockpoint, Inc., as provided for in Section 1 thereof. The undersigned herewith makes payment for such shares in full at the price per share provided by such Warrant in the following manner (please check the type or types of payment and indicate the portion of the aggregate payment to be paid by each type of payment): ____ exercise for cash as provided in Section 1(a) of such Warrant. ____ exercise by surrender of such Warrant (or a portion thereof) in accordance with Section 1(b) of such Warrant. Please issue a certificate or certificates for such shares in the name of, and pay any cash for any fractional share to: Name ___________________________________________________ (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) Address ________________________________________________ ________________________________________________ ________________________________________________ Social Security No. or Taxpayer Identification No.___________________________ Signature__________________________________________ NOTE: The above signature should correspond exactly with the name on the first page of such Warrant or with the name of the assignee appearing in the assignment form attached to the Warrant. And if such number of shares shall not be all the shares purchasable under the attached Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder and delivered to the address set forth above. -45- 46 SCHEDULE III FORM OF LOCK-UP AGREEMENTS Roth Capital Partners Incorporated Individual Lock-Up 24 Corporate Plaza, Suite 200 Newport Beach, California 92660 Ladies and Gentlemen: In connection with a proposed initial public offering (the "Offering") by Stockpoint, Inc. (the "Company") of shares of the Company's common stock (the "Common Stock"), the Company has filed a registration statement on Form S-1 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). To induce you to enter into an underwriting agreement for the Offering (the "Underwriting Agreement"), I agree that for the 180 day period following the day on which the Registration Statement becomes effective under the Securities Act (the "Lock Up Period"), I will not, without the prior written consent of Roth Capital Partners Incorporated, directly or indirectly: o issue, o offer, o sell (including any short sale), o grant any option for the sale of, o acquire any option to dispose of, o assign, o transfer, o pledge or o otherwise encumber or dispose of any shares of Common Stock, or securities convertible into, exercisable or exchangeable for or evidencing any right to purchase or subscribe for any shares of Common Stock or any beneficial interest therein (collectively, "Convertible Securities"), that, as of the date the Registration Statement was filed with the U.S. Securities and Exchange Commission or becomes effective, I own of record or beneficially. I also agree that if I offer or sell any shares of Common Stock or Convertible Securities (including securities I acquire after the Offering commences) during the Lock Up Period (with the prior written consent of Roth Capital Partners Incorporated) or during the 180 days following the end of Lock Up Period, I will offer and sell these securities through Roth Capital Partners Incorporated. -46- 47 I understand that, notwithstanding the above, I may transfer my Common Stock or Convertible Securities to: o my spouse, o my parents, o my siblings, o my children or other lineal descendants, o any trust for the benefit of the above persons, o any of my distributees, legatees or devisees who acquire my Common Stock or Convertible Securities by will or operation of law upon my death, or o any other recipient of a bona fide gift or a charitable contribution of Common Stock or Convertible Securities by me, but only if my transferees agree in writing to be bound by the terms of this letter to the same extent as me. Notwithstanding the above, if the Underwriting Agreement is not executed on or before July 1, 2000, this agreement shall terminate and be of no effect. Very truly yours, ________________________________________________ Dated: __________________, 2000 Accepted as of the date set forth immediately above: ROTH CAPITAL PARTNERS INCORPORATED By______________________________ Name:___________________________ Title:__________________________ -47- 48 Roth Capital Partners Incorporated Entity Lock-Up 24 Corporate Plaza, Suite 200 Newport Beach, California 92660 Ladies and Gentlemen: In connection with a proposed initial public offering (the "Offering") by Stockpoint, Inc. (the "Company") of shares of the Company's common stock (the "Common Stock"), the Company has filed a registration statement on Form S-1 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). To induce you to enter into an underwriting agreement for the Offering (the "Underwriting Agreement"), the undersigned agrees that for the 180 day period following the day on which the Registration Statement becomes effective under the Securities Act (the "Lock Up Period"), the undersigned will not, without the prior written consent of Roth Capital Partners Incorporated, directly or indirectly: o issue, o offer, o sell (including any short sale), o grant any option for the sale of, o acquire any option to dispose of, o assign, o transfer, o pledge or o otherwise encumber or dispose of any shares of Common Stock, or securities convertible into, exercisable or exchangeable for or evidencing any right to purchase or subscribe for any shares of Common Stock or any beneficial interest therein (collectively, "Convertible Securities"), that, as of the date the Registration Statement was filed with the U.S. Securities and Exchange Commission or becomes effective, the undersigned owns of record or beneficially. [continued on next page] -48- 49 The undersigned also agrees that if the undersigned offers or sells any shares of Common Stock or Convertible Securities (including securities the undersigned acquires after the Offering commences) during the Lock Up Period (with the prior written consent of Roth Capital Partners Incorporated) or during the 180 days following the end of Lock Up Period, the undersigned will offer and sell these securities through Roth Capital Partners Incorporated. Very truly yours, By______________________________________________ Name:___________________________________________ Title:__________________________________________ Dated: _______________, 2000 Accepted as of the date set forth above: ROTH CAPITAL PARTNERS INCORPORATED By_____________________________________ Name:__________________________________ Title:_________________________________ -49- EX-2.1 3 ASSET PURCHASE AGREEMENT DATED 4/2/1999 1 EXHIBIT 2.1 ASSET PURCHASE AGREEMENT BETWEEN SYSTEMS ALTERNATIVES, INC. AND NEURAL APPLICATIONS CORPORATION AND THE DAVID J. JOSEPH COMPANY DATED TO BE EFFECTIVE APRIL 2, 1999 2 TABLE OF CONTENTS
Page ---- 1. The Acquisition..........................................................................................1 1.1 Purchase and Sale...........................................................................1 1.2 The Assets..................................................................................1 1.3 Excluded Assets.............................................................................3 1.4 Assets to be Transferred by Robert B. Staib.................................................4 1.5 Purchase Price..............................................................................4 1.6 Royalties and Payment of Royalties..........................................................4 1.7 Assumed Liabilities and Latent Claims.......................................................7 1.8 Royalties, Discounts and Other Obligations..................................................8 2. Execution of Other Agreements............................................................................9 3. The Closing..............................................................................................9 3.1 Place and Time..............................................................................9 3.2 Deliveries by Seller.......................................................................10 3.3 Deliveries by Buyer........................................................................10 3.4 Proration..................................................................................11 4. Representations and Warranties of Seller................................................................11 4.1 Organization of Seller; Authorization......................................................11 4.2 No Conflict as to Seller...................................................................11 4.3 Consents and Approvals of Governmental Bodies..............................................12 4.4 Other Consents.............................................................................12 4.5 Financial Information......................................................................12 4.6 Title to Properties; Encumbrances..........................................................12 4.7 Inventory..................................................................................13 4.8 Buildings, Plants and Equipment............................................................13 4.9 No Condemnation or Expropriation...........................................................14 4.10 Litigation.................................................................................14 4.11 Books and Records..........................................................................14 4.12 Absence of Certain Changes.................................................................15 4.13 No Material Adverse Change.................................................................16 4.14 Intellectual Property and Y2K Compliance...................................................16 4.15 Contracts and Commitments..................................................................19 4.16 Status of Agreements.......................................................................20 4.17 Customers and Suppliers....................................................................20 4.18 Labor Relations............................................................................20 4.19 Employee Benefit Plans.....................................................................21 4.20 Compliance with Law; Taxes.................................................................21 4.21 Environmental Protection...................................................................22 4.22 No Brokers or Finders......................................................................23 4.23 Absence of Certain Commercial Practices....................................................23 4.24 Solvency...................................................................................23 4.25 No Other Agreement to Sell the Assets or Capital Stock of Seller...........................23
-i- 3 4.26 Key Employees..............................................................................24 4.27 Warranty Claims............................................................................24 4.28 Representations Respecting The Northern Trust Company......................................24 4.29 Disclosure.................................................................................24 5. Representations and Warranties of Buyer.................................................................24 5.1 Organization of Buyer; Authorization.......................................................24 5.2 No Conflict as to Buyer....................................................................25 5.3 No Brokers or Finders......................................................................25 6. Conduct of Business by Seller...........................................................................25 7. Additional Agreements...................................................................................26 7.1 Publicity..................................................................................26 7.2 Access to Information......................................................................27 7.3 Cooperation................................................................................27 7.4 Obtaining Consents.........................................................................27 7.5 Employees of Sellers; Employee Benefits....................................................27 7.6 Accounts Payable...........................................................................28 7.7 Supplemental Information...................................................................29 7.8 Encumbrances...............................................................................29 7.9 Noncompetition, Etc........................................................................29 8. Conditions Precedent....................................................................................32 8.1 Conditions to Each Party's Obligation......................................................32 8.2 Conditions to the Obligations of Buyer.....................................................32 8.3 Conditions to the Obligations of Seller....................................................33 9. Termination and Waiver..................................................................................34 9.1 Termination................................................................................34 9.2 Effect of Termination......................................................................34 9.3 Waiver.....................................................................................34 10. Survival of Representations and Warranties; Indemnification.............................................35 10.1 Survival...................................................................................35 10.2 Indemnification by Seller..................................................................35 10.3 Limitation on Seller's Obligations.........................................................36 10.4 Indemnification by Buyer...................................................................36 10.5 Procedure for Indemnification..............................................................36 10.6 Insurance..................................................................................37 10.7 Exclusion..................................................................................37 11. Definitions.............................................................................................37 12. Notices.................................................................................................40 13. Miscellaneous...........................................................................................41 13.1 Expenses...................................................................................41 13.2 Specific Performance.......................................................................41
-ii- 4 13.3 Captions...................................................................................41 13.4 Attorney's Fees............................................................................42 13.5 No Waiver..................................................................................42 13.6 Exclusive Agreement; Amendment.............................................................42 13.7 Counterparts...............................................................................42 13.8 Governing Law..............................................................................42 13.9 Further Assurances.........................................................................42 13.10 Assignment.................................................................................43 13.11 Records....................................................................................43 13.12 Agreements Affecting DJJ...................................................................43 13.13 No Third Party Rights......................................................................44
-iii- 5 EXHIBITS
Page ---- Exhibit 1.2(a) - Inventory 1 Exhibit 1.2(b) - Tangible Personal Property 1 Exhibit 1.2(c) - Software 1 Exhibit 1.2(e) - Warranties 2 Exhibit 1.2(f) - Intellectual Property 2 Exhibit 2(a)(i) - License Agreement 7 Exhibit 2(a)(ii) - Maintenance Agreement 7 Exhibit 2(a)(iii) - Source Code Escrow Agreement 7 Exhibit 2(b) - Lease 7 Exhibit 2(c) - Noncompetition Agreement 7 Exhibit 3.2(a) - Bill of Sale and General Assignment 7 Exhibit 3.2(c) - Opinion of William E. McNally 8 Exhibit 3.3(b) - Assumption of Assumed Liabilities 8 Exhibit 3.3(c) - Opinion of Vorys, Sater, Seymour and Pease LLP 8 Exhibit 4.2 - No Conflict 9 Exhibit 4.3 - Consents and Approvals of Governmental Bodies 10 Exhibit 4.4 - Other Consents 10 Exhibit 4.6(a) - Title to Properties; Encumbrances 10 Exhibit 4.6(b) - Good and Marketable Title 10 Exhibit 4.6(c) - Title to Assets 10 Exhibit 4.7 - Inventory 11 Exhibit 4.8 - Buildings, Plants and Equipment 11 Exhibit 4.10 - Litigation 12
-iv- 6 Exhibit 4.12 - Absence of Certain Changes 12 Exhibit 4.13 - No Material Adverse Change 14 Exhibit 4.14 - Intellectual Property and Y2K Compliance 14 Exhibit 4.15 - Contracts and Commitments 17 Exhibit 4.16 - Status of Agreements 18 Exhibit 4.17 - Customers and Suppliers 18 Exhibit 4.18 - Labor Relations 19 Exhibit 4.19 - Employee Benefit Plans 19 Exhibit 4.20 - Compliance with Law; Taxes 19 Exhibit 4.21 - Environmental Protection 20 Exhibit 4.27 - Key Employees 22 Exhibit 4.28 - Warranty Claims 22
-V- 7 ASSET PURCHASE AGREEMENT This Agreement, dated to be effective as of April 2, 1999 between SYSTEMS ALTERNATIVES, INC., an Ohio corporation or a limited liability company established by Buyer ("Buyer"), and NEURAL APPLICATIONS CORPORATION, a Delaware corporation ("Seller"). Buyer desires to purchase, and Seller desires to sell, certain of Seller's operating assets relating to the business (the "Business") of its Metals Industry Products Group (the "Group") on the terms and conditions of this Agreement. The parties agree as follows: 1. The Acquisition 1.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell the Assets to Buyer, free and clear of all Encumbrances, and Buyer shall purchase the Assets from Seller. 1.2 The Assets. As used herein, the "Assets" shall consist of and include all of the following except as set forth in Section 1.3: (a) All of Seller's inventories relating to the Group (the "Inventory") including without limitation the items listed on Exhibit 1.2(a); (b) All of Seller's tangible personal property consisting of fixed assets relating to the Group, including without limitation the furniture, fixtures and equipment listed on Exhibit 1.2(b) hereto and all spare parts and supplies; (c) All software relating to the Group which is resident on computer equipment and is used to build or maintain products, including without limitation the software listed on Exhibit 1.2(c), but excluding the Aegis software to be licensed to Buyer pursuant to Section 1.2(g) hereof; (d) All rights of Seller in and to the products of the Group (software and hardware system designs and research and development projects including source code and software tool sets), including but not limited to, Intelligent Arc Furnace Controller (IAF) all models, ControlTech 2000, LoadMaster, OptiMaster, CheMaster, StockMaster, LadleTech (all models), ControlTech II Arc Furnace Controller, LabTech, Laboratory Management Systems, VD Tech (Vacuum Degassing System), all products in development including but not limited to IFOS and 8 ICC, and Milltech Scrap Management System (aka MeltTech)(the "Products"); (e) All warranties, if any, with respect to the Assets, and all licenses, permits, claims and other intangible assets listed on Exhibit 1.2(e) hereto (the "Assigned Permits"), if and to the extent assignable, all of which shall be transferred and assigned to Buyer; (f) All rights of Seller in and to its name, trade names, trademarks, logos, copyrights, patents (including patents 5204872 and 5406581), other intellectual property, and similar assets relating to the Business, including, but not limited to any of those items, if any, owned by Robert B. Staib, Jr.("Staib") listed on Exhibit 1.2(f) hereto (the "Intellectual Property"); (g) A non-exclusive license from Seller to Buyer to permit Buyer to use the Mathematics and Neural Network Libraries of the Aegis Technology software in object code (and source code, upon the occurrence of certain conditions set forth in the Software License Agreement, dated as of the Closing Date, by and between Seller and Buyer) and other tool sets necessary to market, manufacture, develop and modify the Assets for use in the Business and the metals industry; (h) All of Staib's rights in and to the Assets, if any, including but not limited to patent, copyright or other intellectual property rights; (i) Such of Seller's business records relating to the Business as Buyer may require for the operation of the Business after the Closing, other than records which Seller is required by law to retain in its possession, copies of which will be delivered to Buyer and subject to the agreement that the corporate minute books and stock books of Seller shall remain Seller's property; (j) All of Seller's rights under employment and confidentiality agreements between Seller and its employees offered employment by Buyer pursuant to Section 7.5 hereof; and (k) All of Seller's goodwill relating to the Business. (l) Seller shall assign to Buyer all of its right, title and interest in proposal number 606003 by and between Seller and The David J. Joseph Company ("DJJ") dated September 18, 1996, the Software License Agreement by and between Seller and DJJ dated September 18, 1996 and the Software -2- 9 Maintenance and Services Agreement by and between Seller and DJJ dated September 18, 1996 (collectively, the "DJJ/Seller Agreements"). (m) Seller shall prepare, at its own cost, individual country assignments for all patents, trademarks and copyrights to be transferred pursuant to (f) above and related powers of attorney and notarization/legalization/consularization in the U.S. and will deliver such documents and instruments to Buyer in form required to place record title in the name of Buyer. (n) Seller agrees to pay all invoices and legal bills for legal or legally related work ordered or authorized by Seller or performed by Seller prior to Closing. 1.3 Excluded Assets. A. Notwithstanding Section 1.2 hereof, the Assets shall not include the Excluded Assets. For purposes hereof, the term "Excluded Assets" means: (1) All cash, cash equivalents and accounts receivable (including deposits); (2) All of Seller's assets not listed or described in Section 1.2 hereof. (3) EXCEPT AS EXPRESSLY SET FORTH IN SECTION 1.7 HEREOF, BUYER SHALL NOT ASSUME, AND SHALL NOT FOR ANY PURPOSES BE DEEMED TO HAVE ASSUMED, ANY CONTRACTS, LIABILITIES OR OBLIGATIONS OF ANY NATURE WHATSOEVER OF, OR CLAIMS AGAINST, SELLER OR ITS AFFILIATES OR ANY LIABILITIES OR OBLIGATIONS OF ANY NATURE WHATSOEVER ARISING OR BASED ON EVENTS OCCURRING PRIOR TO THE CLOSING DATE WITH RESPECT TO THE ASSETS OR THE BUSINESS, INCLUDING WITHOUT LIMITATION ANY LIABILITY FOR TAXES, EMPLOYEE BENEFITS OR WORKERS COMPENSATION CLAIMS, WARRANTY CLAIMS, IMPLIED OR EXPRESSED, YEAR 2000 CLAIMS, OR CLAIMS ARISING PRIOR TO OR ON OR AFTER THE CLOSING DATE WITH RESPECT TO ANY EXCLUDED ASSETS (COLLECTIVELY, THE "RETAINED LIABILITIES"). SELLER AGREES TO TIMELY PERFORM, PAY OR DISCHARGE ANY AND ALL OF THE RETAINED LIABILITIES AS THEY BECOME DUE. B. Seller shall be responsible for resolving any claims relating to the Excluded Assets. Seller shall also not sell any of the Excluded Assets related to the Business to any third party, nor shall Seller use the Excluded Assets in any way, except to resolve any claims of third parties for violations of contracts or other agreements related to the Excluded Assets. -3- 10 C. Seller acknowledges and agrees that Buyer is purchasing all of the Assets related to the Business, except the Excluded Assets, and Seller has no right to continue the Business after the Closing, except to resolve any claims of third parties involving the Excluded Assets or claims against the Assets which Seller has an obligation to resolve pursuant to this Agreement. 1.4 Assets to be Transferred by Robert B. Staib. Subject to the terms and conditions of this Agreement, at the Closing, Seller shall cause Staib to sell, transfer and deliver to Buyer, free and clear of all Encumbrances, in return for the consideration paid to Seller as provided herein, all of his rights, in and to the Assets, if any, including but not limited to any patent, copyright or other intellectual property rights in the Assets. Immediately prior to the closing, and as a condition of Buyer to close, Buyer shall confirm that no order for relief has been issued in Bankruptcy Case No. 98-5541-DH, Bankruptcy Court, Southern District of Iowa, or if an order for relief has been issued, that the Bankruptcy Court approves the transfers, assignments and other agreements of Robert B. Staib described in this Agreement. 1.5 Purchase Price. (a) As payment in full for the Assets, Buyer shall pay the purchase price therefor (the "Price"), plus the royalties (the "Royalties") described in Section 1.6, by wire transfer to an account of Seller designated by Seller. The purchase price for the Assets shall be Seven Hundred Fifty Thousand Dollars ($750,000.00) plus the Royalties described in Section 1.6 hereof. Five Hundred Thousand Dollars ($500,000.00) shall be paid at the Closing. Two Hundred Fifty Thousand Dollars ($250,000.00) shall be paid thirty (30) days after the Closing. (b) The Price shall be allocated among the Assets as set forth in a schedule signed by Buyer and Seller at the Closing. Neither of the parties shall take any tax position inconsistent with such allocation and each of the parties shall reflect such allocation where relevant in all tax filings made by it. 1.6 Royalties and Payment of Royalties . The Royalties shall be paid on sales or licenses of the software portion only of the following products of Seller (the "Seller Products"): (1) ControlTech 2000 (2) LadleTech (all Models) (3) Intelligent Arc Furnace Controller (all Models) -4- 11 (4) LoadMaster (5) OptiMaster (6) CheMaster (as currently developed) (7) StockMaster (8) IFOS (9) ICC The specific royalties to be paid on the software portion only of these Seller Products follow: (a) On ControlTech 2000, LadleTech and Intelligent Arc Furnace Controller, a Royalty of 10% of the software portion only of these Seller Products at the sale price to be established by Buyer. (b) On LoadMaster and OptiMaster, a Royalty of 10% of the sales price of the software portion only of LoadMaster and OptiMaster; provided, however, one-half of the Royalties (5% of the sales price of LoadMaster and OptiMaster) will be paid directly by Buyer to DJJ and Seller will be paid the remaining 5% of the sales price of LoadMaster and OptiMaster until such time as DJJ has received an amount equal to $360,000 from the Royalties described in subparagraphs (b), (c) and (d) of Section 1.6. (c) On CheMaster, Seller shall be entitled to a Royalty of 7% of the sales price of the software portion only of CheMaster; provided, however, 5% of the sales price of the software portion only of CheMaster will be paid directly by Buyer to DJJ and Seller will be paid the remaining 2% of the sales price of the software portion of CheMaster until such time as DJJ has received an amount equal to $360,000 from the Royalties described in subparagraphs (b), (c) and (d) of Section 1.6. (d) On StockMaster, this product has limited utility and is part of a larger product. Consequently, the sales price for this product shall be established by Seller and Buyer and Seller shall receive a Royalty of 10% of the established sales price; provided, however, one-half of the Royalties (5% of the established sales price of StockMaster) will be paid by Buyer directly to DJJ and Seller will be paid the remaining 5% of the established sales price of StockMaster until such time as DJJ has received an amount equal to $360,000 from the Royalties described in subparagraphs (b), (c) and (d) of Section 1.6. Seller acknowledges that Buyer has a current product similar to StockMaster and will sell or license this product and Seller is not entitled to Royalties on this Buyer product. (e) On IFOS, a Royalty of 6% of the sales price of the software portion only. -5- 12 (f) On ICC, the Seller and Buyer acknowledge and agree that this product is not complete and commercially viable. If it is ever completed and becomes commercially viable, the parties agree to negotiate and establish the Royalty on the following basis. The number of man hours performed by Seller prior to the Closing on the ICC product shall be determined. The man hours spent by Buyer or its assigns after the Closing shall be determined. These two numbers shall be added together and the Royalty for Seller shall be established by multiplying 10% times a fraction, the numerator of which is the man hours performed by Seller prior to the Closing, and the denominator shall be the total man hours spent by Seller and Buyer with respect to the ICC product before and after the Closing. All Royalties paid to DJJ under subsections (b) through (d) above and the approximately $45,000 paid to DJJ as described below shall be paid by Buyer to DJJ until the total is $360,000 collectively. As stated above, the Royalties shall be paid only on the software portion of the Products. When sales are made of software, and the software price is not listed as an item on the sales invoice, such as is the case with IAF, the software portion only of the product will be defined as the total sales price for the product, less the cost of hardware, assembly, engineering, transportation and installation. The cost of hardware shall be the price paid by Buyer for the hardware and the cost of the engineering, assembly and installation shall be determined by multiplying the normal billable rate of Buyer for the person providing these services times the hours spent to accomplish the various tasks. Buyer is willing to discuss a Royalty payment other than a Royalty based on the sale price of the Product, including a price per ton arrangement where Buyer licenses the Seller Products to a customer on a per-ton basis. If Seller and Buyer are able to agree on an alternative royalty arrangement, and neither party is under a compulsion to do so, the alternative royalty arrangement shall be paid in lieu of the Royalties described in this Section 1.6. If this alternative arrangement relates to a royalty on any product described in subsections (b) through (d) above, DJJ shall receive fifty percent (50%) of this alternative royalty until it has received, including Royalties paid on the sales price, an amount equal to $360,000 and Seller shall receive the remaining fifty percent (50%) of the Royalty. No Royalties will be paid on non-Seller Products, including, but not limited to: (i) service and maintenance revenues; (ii) research and development services; (iii) hardware; (iv) new products developed by SAI; or (v) anything other than -6- 13 the software portion of the Seller Products described in Section 1.6(a) through (d) above. The Royalties shall be paid for ten (10) years or until Three Million Dollars ($3,000,000.00) shall have been paid to Seller, excluding the $360,000 paid to DJJ. Thereafter, the Royalty payments shall cease. An advance against future Royalties of Two Hundred Fifty Thousand Dollars ($250,000.00) shall be paid on the six month anniversary of the Closing less the approximately Forty Five Thousand Dollars ($45,000.00) due DJJ and less any Royalties paid to Seller between the Closing and the six month anniversary of the Closing by Buyer. 1.7 Assumed Liabilities and Latent Claims. (a) Prior to the Closing, the parties shall mutually agree upon and set forth in a writing to be executed by the parties those Seller works in progress, prepaid commitments, maintenance and service contracts, and other contractual obligations and liabilities relating to the Business that the parties deem necessary to the integration of the Business into Buyer (the "Assumed Liabilities"). After the Closing, Buyer agrees to assume the Assumed Liabilities and Seller agrees to pay for all of the costs and expenses associated with the Assumed Liabilities by permitting Buyer to deduct the costs of these services as provided in Section 1.7(d) hereof from future Royalties due Seller as provided in Section 1.6 hereof. Seller acknowledges and agrees that it has not been able to provide to Buyer a complete list of all works in progress, prepaid commitments, maintenance and service contracts, and other contractual obligations and liabilities of Seller relating to the Business. Consequently, Buyer may discover after the Closing additional items in these categories which it wishes to assume and add to the Assumed Liabilities. If any such items are discovered by Buyer or disclosed to Buyer by Seller after the Closing, Buyer shall be able to add these items to the Assumed Liabilities and deduct the costs and expenses associated with these additional Assumed Liabilities by permitting Buyer to deduct the costs of these services as provided in Section 1.7(d) hereof from future Royalties due Seller as provided in Section 1.6 hereof. (b) Notwithstanding anything to the contrary in this Section 1.7, Buyer shall not be responsible for any warranty claims, "year 2000" claims, claims for defective products or any other claims, which arise out of, or are based upon, any products produced by Seller or services provided by Seller prior to the Closing Date (each a "Latent Claim"); provided, however, that if Buyer determines in good faith and on any reasonable basis that it is in its best interests to satisfy a Latent Claim, it -7- 14 reserves the right to satisfy such Latent Claim, at Seller's sole cost and expense, in accordance with the procedures set forth in this Section 1.7(b). Upon determining in good faith and on a reasonable basis that it is in its best interest to satisfy a Latent Claim, Buyer shall satisfy the Latent Claim and give written notice of its determination to Seller. Upon receipt of such notice, Seller shall have thirty (30) days to notify Buyer that it challenges Buyer's determination. If Seller does not challenge Buyer's determination in such 30 day period, there shall be no further opportunity to challenge Buyer's right to deduct the cost from the Royalties. If Seller so contests Buyer's determination, the parties agree to attempt in good faith to resolve the dispute within thirty (30) days of Seller's determination to reject Buyer's election to satisfy the Latent Claim. In the event the parties cannot resolve the dispute within such thirty (30) day period, either party shall have the right to pursue all available legal remedies. (c) Except for the Assumed Liabilities and any Latent Claims Buyer elects to satisfy, Buyer will not assume, or be liable for, any of the liabilities or obligations of Seller, whether existing on the date hereof or arising hereafter. (d) The costs of assuming the Assumed Liabilities and Latent Claims described in subsections 1.7(a) and (b) above shall be charged and deducted from the Royalties on the following basis. The hours required to provide these services shall be multiplied times the normal hourly charge for such services as provided on Buyer's annual rate sheet and the product plus any out-of-pocket expenses for materials shall be the costs of these services and deducted from the Royalties. The parties acknowledge and agree that Buyer will publish a new rate sheet each year. 1.8 Royalties, Discounts and Other Obligations. Without limiting the other provisions of this Agreement (including the provisions in Section 1.7), Seller hereby expressly acknowledges the existence of certain contractual obligations, agreements and liabilities of Seller relating to the Business, including, without limitation, royalties, discounts and other liabilities and obligations (including those of which Buyer does not have actual knowledge because there are no written agreements or Seller has not been able to provide to Buyer a complete list or copies of all license agreements, proposals, purchase orders, confirmations, and other contracts and agreements between Seller and its customers) (collectively, the "Seller Obligations"). Examples of the Seller Obligations are the royalties that accrue to or for the benefit of, and discounts granted to (i) DJJ pursuant to (a) Proposal 606003, (b) the Software License Agreement and (c) the Software Maintenance and -8- 15 Services Agreement, all dated as of September 18, 1996, (ii) North Star Steel Company pursuant to (a) Proposal 606004C dated June 26, 1996 (b) Proposal 708004 dated November 14, 1997, as such proposal was amended to, among other things, modify the provisions of Section 7.7, and (iii) Keystone Steel & Wire Company pursuant to Proposal 607002-C dated May 14, 1997, all as may have been amended from time to time (whether orally or in writing). Because of this lack of information and the unknown liabilities, Buyer shall be able to deduct any Seller Obligations paid or incurred by Buyer and/or which result in an offset or credit to the applicable customer from future Royalties due Seller as provided in Section 1.6 hereof. With respect to any Royalties payable to the applicable customer or which can be used to offset payments due from the applicable customer pursuant to the applicable customer's agreement, and with respect to any other sums payable to the applicable customer or which can be used to offset amounts due from the applicable customer, Buyer shall be able to deduct on a dollar for dollar basis the amount of the Seller Obligations. With respect to discounts, Buyer shall be able to deduct such Seller Obligations from future Royalties due Seller as provided in Section 1.6 hereof by deducting the amount of the discount as measured against the list price stated in the applicable contract or, if none is stated, then the list price of the applicable product as was in effect. 2. Execution of Other Agreements. Simultaneously with the Closing: (a) If Buyer so elects, Seller and Buyer will enter into a License Agreement, a Maintenance Agreement and a Source Code Escrow Agreement in the forms of Exhibits 2(a)(i), 2(a)(ii) and 2(a)(iii) hereto, respectively. (b) Buyer and Seller will enter into a Lease in the form of Exhibit 2(b) hereto. (c) Buyer and Seller and Seller's Principal Shareholders, significant officers and employees will enter into a Noncompetition Agreement in the form of Exhibit 2(c) hereto. 3. The Closing. 3.1 Place and Time. The closing of the sale and purchase of the Assets (the "Closing") shall take place at 10:00 a.m. at the offices of Vorys, Sater, Seymour and Pease LLP on or before May 28, 1999 (the "Closing Date") unless another date or place is agreed to in writing by the parties hereto. -9- 16 3.2 Deliveries by Seller. At the Closing, Seller, and with respect to 3.2(b) below, Staib, if necessary, shall deliver the following to Buyer: (a) A bill of sale and general assignment with respect to the Assets in the form of Exhibit 3.2(a) hereto. (b) Such other documents of assignment and transfer (including lease assignments, assignments of trademarks, copyrights and patents included in the Assets) as, and in such form as, Buyer has reasonably requested with respect to the Assets. (c) The opinion of William E. McNally, counsel for Seller, dated the Closing Date and in substantially the form of Exhibit 3.2(c) hereto. (d) Certified copies of the Certificate of Incorporation and By-laws of Seller and of the resolutions of its board of directors and shareholders approving this Agreement and the transactions contemplated hereby. (e) A certificate signed by the chief executive officer of Seller to the effect that, to his knowledge and except as may be set forth in such certificate, all representations and warranties of Seller set forth in this Agreement were true and complete when made and are true and complete in all material respects at the Closing Date as if then made and Seller has performed in all material respects all obligations to be performed by it pursuant to this Agreement at or before the Closing. (f) Executed releases of all Encumbrances, except Permitted Exceptions, on the Assets in form recordable with appropriate Governmental Bodies. (g) The original or copies of all of the books of account and other records of Seller relating to the Business. (h) All other documents, instruments and writings required by this Agreement or as Buyer may reasonably request to be delivered by Seller at the Closing in order to more fully carry out and effectuate the intent of this Agreement. 3.3 Deliveries by Buyer. At the Closing, Buyer shall deliver the following to Seller: (a) A wire transfer in the amount of Five Hundred Thousand Dollars ($500,000.00). -10- 17 (b) An assumption of the Assumed Liabilities in the form of Exhibit 3.3(b) hereto. (c) The opinion of Vorys, Sater, Seymour and Pease LLP dated the Closing Date and in substantially the form of Exhibit 3.3(c) hereto. (d) Certified copies of the Articles of Incorporation and By-laws of Buyer and of the resolutions of its board of directors approving this Agreement and the transactions contemplated hereby. (e) A certificate of the chief executive officer of Buyer to the effect that (except as may be set forth in such certificate) all representations and warranties of Buyer set forth in this Agreement were true and complete when made and are true and complete in all material respects at the Closing Date as if then made and Buyer has performed in all material respects all obligations to be performed by it pursuant to this Agreement at or before the Closing. 3.4 Proration. At the Closing, accrued personal property Taxes, utility bills, patent payments and deposits with respect to the Assets or the Business shall be prorated to the Closing Date and Buyer shall pay to Seller, or vice versa as the case may be, an appropriate net amount in respect thereof. 4. Representations and Warranties of Seller. Seller represents and warrants to, and agrees with, Buyer as follows: 4.1 Organization of Seller; Authorization. Seller is a corporation duly organized, validly existing and in good standing under the laws of Delaware, with full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Ancillary Agreements have been duly authorized by Seller's Board of Directors and shareholders and each of this Agreement and the Ancillary Agreements constitutes a valid and binding obligation of Seller, enforceable against it in accordance with its terms. 4.2 No Conflict as to Seller. Except as set forth in Exhibit 4.2 hereto, neither the execution and delivery of this Agreement and the Ancillary Agreements nor the consummation of any or all of the Contemplated Transactions will (a) violate any provision of the Certificate of Incorporation or By-Laws (or other governing instrument) of Seller or (b) violate, be in -11- 18 conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under any agreement or commitment to which Seller is party or (c) violate any statute or law or any judgment, decree, order, regulation or rule of any court or other Governmental Body applicable to Seller. 4.3 Consents and Approvals of Governmental Bodies. Except for the consents set forth in Exhibit 4.3 hereto, no consent, approval or authorization of, or declaration, filing or registration with, any Governmental Body is required to be obtained or made by Seller in connection with the execution, delivery and performance of this Agreement and the Ancillary Agreements or the consummation of the Contemplated Transactions. 4.4 Other Consents. Except for the consents set forth on Exhibit 4.4 hereto, no consent of any Person is required to be obtained by Seller for the execution, delivery and performance of this Agreement and the Ancillary Agreements or the consummation of the Contemplated Transactions. 4.5 Financial Information. Seller has delivered to Buyer true and complete copies of its balance sheets as of December 31, 1996, 1997 and 1998 and March 31, 1999 and the related statements of income and cash flows for the twelve (12) month periods then ended and the three (3) month period then ended, respectively. The foregoing financial statements have been based upon the information contained in Seller's books and records (which are accurate and complete in all material respects) and fairly present the financial condition and results of operations of Seller as of the times and for the periods referred to therein, and such financial statements contain proper accruals and adequate reserves and have been prepared in accordance with generally accepted accounting principles ("GAAP"), consistently applied by Seller throughout the periods indicated, except as otherwise noted therein. 4.6 Title to Properties; Encumbrances. (a) Exhibit 4.6(a) hereto describes all real property or interests therein owned or leased by Seller and used in the Business. Seller has delivered to Buyer copies of all deeds, leases, title insurance policies, title reports and other instruments (as recorded) related to Seller's acquisition of such real property and interests. (b) Except as set forth in Exhibit 4.6(b) hereto, Seller has good, valid and marketable title to all of the Assets, subject to any Permitted Exceptions, any landlord rights with respect to any fixtures located on leased property which cannot -12- 19 be removed pursuant to terms of a lease and to the mortgages and security agreements listed on Exhibit 4.6(b) hereto, which Seller will discharge at Closing. The instruments of transfer described in Section 3.2 are sufficient to vest in Buyer all of Seller's right, title and interest in and to the Assets. The assignment of Seller's rights in any lease will be subject to receipt of the consents relating thereto set forth in Exhibits 4.3 and 4.4. (c) Except as set forth in Exhibit 4.6(c) hereto, all of the Assets are held by Seller and will be acquired by Buyer free and clear of all Encumbrances (and are not, except for Permitted Exceptions, in the case of real property, subject to any rights of way, building use restrictions, exceptions, variances, reservations or limitations of any nature whatsoever) except, with respect to all such properties and assets, liens for current taxes not yet due and payable. Except as set forth in Exhibit 4.6(c) hereto, no financing statement under the Uniform Commercial Code which has not expired or been terminated and which names Seller as the debtor is on file in any jurisdiction with respect to any of the Assets, and Seller has not signed any such financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement with respect to any of the Assets. (d) The Assets include all rights, properties and other assets necessary to permit Buyer to conduct the Business after the Closing in all material respects in the same manner as it is conducted on, and has been conducted prior to, the date of this Agreement by Seller. 4.7 Inventory. Except as set forth in Exhibit 4.7 hereto, at the Closing all of the Inventory will consist of a quality and quantity usable or salable in the ordinary course of the Business. 4.8 Buildings, Plants and Equipment. The parties agree that Seller is not making any representation or warranty as to the condition of the property, plant and equipment, express or implied, except as set forth herein. Except as set forth in the following sentence and Exhibit 4.8 hereto, and subject to equipment which is out of service from time to time for maintenance or repairs, Seller maintains in good operating order, ordinary wear and tear excepted, all of its equipment which is material to the conduct of the business. Except as set forth in Exhibit 4.8 hereto, Seller has not received written notification that it is in violation of any applicable building, zoning, health, safety or other law, ordinance or regulation in respect of such buildings, plants or structures or their operations, and, to Seller's knowledge, no such material violation exists. Seller leases the real and personal property listed on Exhibit 4.8 -13- 20 hereto and the leases with respect thereto are included in the Assumed Liabilities. All of such leases are valid, binding and enforceable in accordance with their terms and are in full force and effect; there are no existing defaults (or events which, with notice or lapse of time or both, would constitute an event of default) by Seller or, to the best knowledge of Seller, any other party thereunder; and, except as set forth in Exhibit 4.8, all lessors under such leases have consented (where such consent is necessary) to the consummation of the Contemplated Transactions. 4.9 No Condemnation or Expropriation. Neither the whole nor any portion of the property or leaseholds owned or held by Seller and included in the Assets is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any Governmental Body or other Person with or without payment of compensation therefor, nor, to the best knowledge of Seller, has any such condemnation, expropriation or taking been proposed. 4.10 Litigation. Except as set forth in Exhibit 4.10 hereto, there is no action, suit, inquiry, proceeding or investigation (including any investigation required by the filing of a charge or complaint by, or on behalf of, any employee, former employee or job applicant), by or before any court or Governmental Body pending or, to the best knowledge of Seller, threatened (a) against or involving Seller and relating to or affecting the Assets or the Business or (b) which questions or challenges the validity of this Agreement or any action taken or to be taken by Seller pursuant to this Agreement or in connection with the Contemplated Transactions, nor is there any valid basis for any such action, proceeding or investigation. Except as set forth in such Exhibit 4.10, Seller is not in default under or in violation of any agreement, commitment or restriction to which Seller is a party or by which it is bound which relates to or affects the Assets or the Business. Except as set forth in such Exhibit 4.10, Seller is not subject to any judgment, order or decree that may have an adverse effect on its business practices or on its ability to acquire any property or conduct any business in any part of the world and that relates to or affects the Assets or the Business. 4.11 Books and Records. All of the books of account and other records of Seller relating to the Business, all of which have been or will be made available to Buyer and are included in the Assets, are complete and correct in all material respects and have been maintained in accordance with generally accepted business practices. -14- 21 4.12 Absence of Certain Changes. Except as set forth in Exhibit 4.12 hereto, since December 31, 1998, Seller has not, with respect to any of the Assets or the Business: (a) permitted the waste of any properties or assets, suffered the damage or destruction of any material properties or assets (unless covered by insurance and repaired or replaced prior to the date hereof or the Closing Date, as the case may be) or made any disposition of any properties or assets other than the sale of inventory in the ordinary course of business; (b) disposed of any records except in the ordinary course of business; (c) permitted or allowed any of its property or assets (real, personal or mixed, tangible or intangible) to be subjected to any Encumbrance; (d) granted any general increase in the compensation of employees; (e) purchased or entered into any contract or commitment to purchase any raw materials or supplies, or sold or entered into any contract or commitment to sell any property or assets, except (i) contracts or commitments for the purchase of, and purchases of, raw materials or supplies, made in the ordinary course of business and consistent with past practice, (ii) contracts or commitments for the sale of, and sales of, inventory in the ordinary course of business and consistent with past practice, and (iii) other contracts, commitments, purchases or sales in the ordinary course of business and consistent with past practice; (f) done any act or omitted to do any act, or permitted any act or omission to act, which has caused or will cause a breach of any contract or commitment or which could cause the breach of any representation or warranty contained in this Agreement; (g) sold, transferred, leased, assigned or conveyed any property or asset to, or purchased, leased or acquired any property or assets from, any Related Party, or otherwise not in the ordinary course of business and consistent with past practice; (h) written down or been required to write down any inventory (other than monthly adjustments to market value in the ordinary course of business); -15- 22 (i) entered into any collective bargaining or union contract or agreement, including the settlement of any grievance; or (j) agreed or otherwise committed, whether in writing or otherwise, to do any of the foregoing. 4.13 No Material Adverse Change. Since December 31, 1998, except as set forth on Exhibit 4.13 hereto, there has not been any material adverse change in the business, operations, properties, assets, prospects or condition of Seller relating to or affecting the Assets or the Business or any event, condition or contingency that could result in such a material adverse change. 4.14 Intellectual Property and Y2K Compliance. (a) Attached as Exhibit 4.14 hereto is (i) a description of all intellectual property owned by, licensed to or used in the Business by, the Group, excluding commercially available software including, but not limited to, United States and foreign patents, trademarks (whether registered or unregistered), trade names (whether registered or unregistered), registered copyrights, and applications for any of the foregoing, and all trade secrets, know-how, and similar rights owned by, licensed to or used by Seller in the Business (collectively, the "Intellectual Property") together with a designation of ownership, and (ii) a list of all licenses, agreements or other arrangements which affect the ownership or use of any item of Intellectual Property. (b) Except as set forth in Exhibit 4.14: (i) Seller is the owner of all rights, title and interest in and to each item of Intellectual Property, free and clear of all liens, security interests, charges, encumbrances, equities or other adverse claims; (ii) Seller has the right to use, free and clear of any claims or rights of others, all Intellectual Property required for or incident to the development, production, marketing, licensing or sale of all products presently produced, developed, licensed, marketed or sold or being developed by Seller in the conduct of the Business, and Buyer will have all such rights exclusively after the Closing; (iii) Seller has not licensed any third party to use any of the Intellectual Property; (iv) No proceedings have been instituted or are pending or, to the knowledge of Seller, threatened which -16- 23 challenge the rights of Seller in any respect in or to any of the Intellectual Property or any license thereof; (v) Neither the use by Seller of any of the Intellectual Property nor any software product produced, licensed or sold by Seller infringes, or to the best knowledge of Seller, is infringed by, any patent, trademark, trade name, trade secret, know-how or copyright owned or used by another, nor is it subject to any outstanding order, decree, judgment or stipulation; (vi) Seller has no claim, demand or proceeding charging any party with violation of any of Seller's rights with respect to the Intellectual Property or any license thereof; (vii) There is no unexpired valid patent or copyright on software or other products that Seller uses or has used in developing its software products that Seller is not entitled to use, or to license to others for use; (viii) No shareholder, officer, director or employee of Seller or, to the knowledge of Seller, any other Person, has an interest in or is authorized to use any of the Intellectual Property; (ix) All trademark, copyright and trade name registrations listed on Exhibit 4.14 are valid and in full force and effect, and title is in the name of Seller in the respective trademark, patent and copyright offices; (x) There is no governmental restriction or limitation, domestic or foreign, on the manner in which any of the Intellectual Property may be used and there are no agreements with any third party restricting how Seller may use any of the Intellectual Property except as described on Exhibit 4.14; (xi) Seller has taken all steps necessary to maintain the Intellectual Property which it owns ("Owned Intellectual Property") as a trade secret or as trademarked, copyrighted or patented material. No Person has had access to the source code, object code, flowcharts, programmers' notes and annotations thereto (the "Development Materials") relating to any of the Owned Intellectual Property except as described on Exhibit 4.14. (xii) Current and complete documentation and source code exists with respect to all software included in the Owned Intellectual Property. -17- 24 (xiii) None of the software included in the Owned Intellectual Property has manifested any significant operating problem, other than any such problems that have been corrected or are correctable in the ordinary course of business. (c) Seller has provided to Buyer complete and correct copies of all licenses or other agreements pursuant to which Seller licenses any of the Intellectual Property to any person or has the right to utilize Intellectual Property not owned by it. All such licenses or other agreements are valid and binding, are enforceable in accordance with their respective terms, and are in full force and effect. Seller has performed all material obligations required to be performed by it under each such license or other agreement, and there are not any existing defaults or circumstances which, with the passage of time, might constitute a default under such licenses or other agreements. (d) Except as set forth in Exhibit 4.14, Seller has taken all steps necessary to prevent any Year 2000 caused failures that could have a material adverse effect on the business, operations, property or financial condition of the Group. Without limitation of the foregoing, except as described in Exhibit 4.14, all software and hardware used in the Business is "Year 2000 Compliant", which means that such software and hardware (i) processes all dates in and after the Year 2000 in a correct and consistent manner in all applicable operations, including, but not limited to, input, output, comparisons (branching) and arithmetic operations (such as the difference between two dates), (ii) uses fields providing at least four decimal digits for the year portion of all stored dates without (a) reliance on use of program logic to determine which century most likely applies to a 2-digit year field or (b) use of other symbolic representations for the Year 2000 and thereafter (such as 101 for the Year 2001), (iii) calculates and handles leap year dates correctly, (iv) will otherwise generally manipulate data and generate output and reports in a fault-free manner during and after the Year 2000. Seller further represents and warrants that Seller has taken adequate steps to verify that all hardware and software of Seller's suppliers, customers and any other Persons whose internal Year 2000 failures might reasonably be expected to have a material adverse effect upon the business, operations, property or financial condition of the Group, is Year 2000 Compliant, or if not, that the timely conversion, replacement or retirement of noncompliant software and hardware will be managed by such suppliers and other Persons in a manner sufficient to prevent Year 2000 failures that could have a material adverse effect on the business, operations, property or financial condition of the Group. Seller has no claim, demand or pending proceeding against any Person alleging that such Person licensed -18- 25 or sold to Seller any software or hardware that is not Year 2000 Compliant. (e) Seller has evaluated and has adequately tested all software and hardware of Seller licensed or sold to any licensee or customer of Seller. Except as noted on Exhibit 4.14, all such software is Year 2000 Compliant (as defined above). Seller has delivered to Buyer true and correct copies of all correspondence, website material, warranties, disclaimers, certifications or other documentation relating to the Year 2000 compliance of any software licensed or sold by the Group. No claims, demands or proceedings have been made or instituted or, to the knowledge of Seller, threatened, which allege that the software licensed or sold by the Group is not Year 2000 Compliant. 4.15 Contracts and Commitments. Exhibit 4.15 hereto lists each of the following which relate to the Assets or the Business: (a) agreements, commitments or restrictions which are material to the Business or the Assets or which require the making of any charitable contribution; (b) purchase agreements or commitments of Seller which continue for a period of more than 30 days or are in excess of the normal, ordinary and usual requirements of the Business or at any excessive price; (c) outstanding sales agreements, licenses, maintenance agreements, commitments or proposals that continue for a period of more than 30 days; (d) agreements or commitments with officers, employees, agents, consultants, advisors, salesmen, sales representatives, distributors or dealers that are not cancelable by Seller on notice of not longer than 30 days and without liability, penalty or premium, or any agreement or arrangement providing for the payment of any bonus or commission based on sales or earnings; (e) employment agreement or commitment, or any other agreement or commitment that contains any severance or termination pay liabilities or obligations; (f) employee of Seller to whom it is paying compensation at the annual rate of more than $30,000; (g) agreement or commitment restricting Seller (or its successor) from carrying on any business anywhere in the world; -19- 26 (h) liability or obligation with respect to the return of goods rejected by customers; (i) security agreement, mortgage or other agreement or commitment that creates or may create any Encumbrance on any of the Assets; (j) agreement or commitment to make any capital expenditures or to acquire any property or assets other than raw materials and supplies; (k) distribution, sales agency or similar agreement; or (l) agreement or commitment having a remaining term in excess of one year. Seller has delivered to Buyer complete copies of all agreements listed on Exhibit 4.15 as currently in effect. 4.16 Status of Agreements. Except as set forth in Exhibit 4.16, all contracts, agreements, commitments, plans, leases, policies and licenses included in the Assumed Liabilities are valid and in full force and effect; there are no existing defaults (or events which, with notice or lapse of time or both, would constitute a default) by Seller, or to the best knowledge of Seller, any other party, thereunder; and copies thereof have been delivered to Buyer. 4.17 Customers and Suppliers. Exhibit 4.17 hereto sets forth a list of (a) the 10 largest (by dollar value) customers of Seller in the conduct of the Business in terms of sales during the twelve-month period ended March 31, 1999 and (b) the 10 largest (by dollar value) suppliers of Seller in the conduct of the Business in terms of purchases during the twelve-month period ended March 31, 1999. Except as set forth in such Exhibit 4.17, to Seller's knowledge, there has not been any material adverse change in the business relationships of Seller with any such customer, other than that which has occurred or may occur as a result of the intense local competition. Except as set forth in such Exhibit 4.17, no Related Party has been a supplier to or a customer of Seller in its conduct of the Business since April 1, 1998. 4.18 Labor Relations. Except as set forth in Exhibit 4.18 hereto, (i) Seller has no obligations under any collective bargaining agreement; (ii) Seller, in the conduct of the Business, is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, wages and hours and equal pay; (iii) Seller is not -20- 27 and has not been engaged in any unfair labor practice; (iv) there is no unfair labor practice complaint against Seller pending before the National Labor Relations Board; (v) there is no labor strike, dispute, slowdown or stoppage actually pending or threatened against or affecting Seller; (vi) no representation question exists and, to the best of Seller's knowledge, since March 31, 1998, no union organizational activity has occurred respecting Seller's employees; (vii) Seller has not experienced in the conduct of the Business any strike, work stoppage or other labor difficulty since March 31, 1998; and (viii) no collective bargaining agreement relating to employees of Seller is currently being negotiated and no labor organization has been recognized as agent or representative for any group of employees in a unit appropriate for collective bargaining purposes. 4.19 Employee Benefit Plans. Except as set forth in Exhibit 4.19 hereto, Seller does not have, and none of its employees are covered by, any bonus, deferred compensation, pension, profit-sharing, retirement, insurance, stock purchase, stock option or other fringe benefit plan, arrangement or practice, or any other employee benefit plan (as defined in section 3(3) of ERISA), whether formal or informal. Any employee benefit plan of Seller or to which it contributes which is subject to the provisions of the Employee Retirement Income Security Act is in compliance in all material respects with the provisions thereof and there is no unfunded liability with respect thereto. 4.20 Compliance with Law; Taxes. (a) Except as set forth in Exhibit 4.20 hereto, (i) in its conduct of the Business, Seller has operated in accordance with all applicable laws, regulations and other requirements of all Governmental Bodies having jurisdiction over it, including, without limitation, all such laws, regulations, directives, requirements, executive orders, interpretive bulletins and health and safety standards relating to antitrust, consumer protection, currency exchange, equal employment opportunity, nondiscrimination in employment, health, occupational health and safety, pension, immigration and securities matters; (ii) Seller has not since March 31, 1998 received any notification of any asserted present or past failure by Seller in its conduct of the Business to comply with any such law, rule, regulation or directive; (iii) Seller has all licenses, permits, orders or approvals from Governmental Bodies required for the conduct of the Business and is not in violation of any such license, permit, order or approval; and (iv) all such licenses, permits, orders and approvals are current, valid and in full force and effect, and no suspension or cancellation thereof has been threatened. Exhibit 4.20 hereto lists all such licenses, permits, orders and approvals which are material to the conduct of the Business. -21- 28 (b) Seller has filed on a timely basis all Tax Returns required pursuant to all applicable laws or regulations of each Governmental Body. Seller has paid all Taxes due pursuant to those Tax Returns, or pursuant to any assessment received by it. To the best of Seller's knowledge, (i) there exists no existing or proposed tax assessment or tax audit against or affecting Seller; (ii) all Taxes that Seller has been required by law to withhold, deposit, or collect have been duly withheld, deposited, or collected and paid or will be paid to the proper Governmental Body; and (iii) all Tax Returns filed by Seller are true, correct and complete in all material respects. Seller has not extended, or waived the application of, any statute of limitations of any jurisdiction regarding the assessment or collection of any taxes. There are not tax liens (other than any lien for current taxes not yet due and payable) on any of the Assets. 4.21 Environmental Protection. Exhibit 4.21 hereto lists all permits, licenses and other authorizations which Seller has obtained to conduct the Business under all applicable laws, regulations and other requirements of Governmental Bodies relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic materials or wastes into ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic material or wastes (collectively, "Environmental Laws"). Except as set forth on such Exhibit 4.21, Seller is in compliance in all material respects with all terms and conditions of such required permits, licenses and authorizations, and in the conduct of the Business Seller is also, in compliance in all material respects with all other requirements, limitations, restrictions, conditions, standards, prohibitions, obligations, schedules and timetables of or contained in Environmental Laws or contained in any regulations, code, plan, order, decree, judgment, notice or demand letter issued, entered, promulgated or approved thereunder. Except as set forth on such Exhibit 4.21, Seller has not received written notice from any Governmental Body of any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent continued compliance, or which may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, suit, proceedings, hearing or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, -22- 29 contaminant, or hazardous or toxic material or waste at or from the Real Property. 4.22 No Brokers or Finders. Neither Seller, nor any of its officers, directors or employees, has employed any broker or finder or incurred any liability for any brokerage or finder's fees or commissions or similar payments in connection with any of the Contemplated Transactions. 4.23 Absence of Certain Commercial Practices. Seller in its conduct of the Business has not, and no director, officer, agent, employee or other Person acting on its behalf in its conduct of the Business has, (a) given or agreed to give any gift or similar benefit of more than nominal value to any customer, supplier or governmental employee or official or any other Person who is or may be in a position to help or hinder Seller or assist Seller in connection with any proposed transaction, which gift or similar benefit, if not given in the past, might have materially and adversely affected the business or prospects of Seller, or which, if not continued in the future, might materially and adversely affect the business or prospects of Seller, or (b) used any corporate or other funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to government officials or others or established or maintained any unlawful or unrecorded funds. Neither Seller nor any director, officer, agent, employee or other Person acting on its behalf in the conduct of the Business has accepted or received any unlawful contributions, payments, gifts or expenditures. 4.24 Solvency. (a) Seller has not (i) made a general assignment for the benefit of its creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition in bankruptcy by its creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets or properties or (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets. (b) Seller is Solvent. 4.25 No Other Agreement to Sell the Assets or Capital Stock of Seller. Other than as set forth in this Agreement, Seller has no legal obligation, absolute or contingent, to any Person to (a) sell any capital stock of Seller or, outside of the ordinary course of business, assets, or effect any merger, consolidation or other reorganization of Seller or (b) enter into any agreement with respect to any of the foregoing. -23- 30 4.26 Key Employees. Exhibit 4.27 hereto lists each employee of Seller whose services are necessary to conduct the Business in all material respects as previously conducted. The performance by each of such employees of their duties will not violate any provision of any agreement to which any of such persons or Seller is a party or give use to any obligation or liability of Seller to any third party or limit in any way Seller's ability to conduct the Business. None of such key employees is engaged, directly or indirectly, or has any interest in any entity which competes with Seller. 4.27 Warranty Claims. Exhibit 4.28 hereto lists all open Warranty Claims of which Seller has received notice and the terms of any warranties and limitations thereon given by Seller with respect to the Products prior to the date hereof. 4.28 Representations Respecting The Northern Trust Company. In addition to the representations made elsewhere in this Agreement, including, without limitation, in Section 4 hereof, (i) all of the Assets will be acquired by Buyer free and clear of all Encumbrances of The Northern Trust Company ("Northern Trust"), (ii) Northern Trust has not demanded any security pursuant to any Application and Agreement for Irrevocable Letter of Credit and has not otherwise made any claim, orally or in writing, in any way respecting the Assets, or any portion thereof, (iii) Seller has not granted and will not grant at any time to Northern Trust any security interest or assignment in and to the Assets, or any portion thereof, and no financing statement under the Uniform Commercial Code which names Seller as the debtor and Northern Trust as secured party is or at any time will be on file in any jurisdiction with respect to any of the Assets, or any portion thereof, and (iv) Northern Trust does not and will not at any time have any security interests, liens, assignments in and to, and/or rights or claims in, the Assets, or any portion thereof. 4.29 Disclosure. Neither this Agreement nor in any Exhibit attached to this Agreement contains or will contain any untrue statement of a material fact omits to state any material fact necessary in order to make the statements made in the light of the circumstances under which they were made, when taken as a whole, not misleading. 5. Representations and Warranties of Buyer. Buyer represents and warrants to, and agrees with, Seller as follows: 5.1 Organization of Buyer; Authorization. Buyer is a corporation duly organized, validly existing and in good standing -24- 31 under the laws of Ohio, with full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Ancillary Agreements have been duly authorized by all necessary corporate action (including, but not limited to, approval by the Board of Directors) of Buyer and this Agreement constitutes a valid and binding obligation of Buyer, enforceable against it in accordance with its terms. 5.2 No Conflict as to Buyer. Neither the execution and delivery of this Agreement and the Ancillary Agreements nor the performance of Buyer's obligations hereunder or thereunder will (a) violate any provision of the articles of incorporation or Code of Regulations of Buyer, (b) violate, be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under any agreement or commitment to which Buyer is party or (c) violate any statute or law or any judgment, decree, order, regulation or rule of any court or other Governmental Body applicable to Buyer. 5.3 No Brokers or Finders. Neither Buyer nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage or finder's fees or commissions or similar payments in connection with any of the Contemplated Transactions. 6. Conduct of Business by Seller. Prior to the Closing or termination of this Agreement, unless Buyer shall otherwise agree in writing or as otherwise contemplated by this Agreement, in the conduct of the Business and with respect to the Assets: (a) Seller shall conduct its business only in the ordinary and usual course consistent with past practices; (b) Seller shall not (i) acquire any assets, other than inventory and supplies in the ordinary course of business, (ii) dispose of any assets other than sales of inventory in the ordinary course of business, (iii) enter into any other transaction other than in the ordinary course of business, or (iv) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing; (c) Seller shall endeavor in good faith to preserve intact the business organization of Seller, to keep available the services of its present employees, and to preserve the good will of those having business relationships with it; (d) Seller shall not, directly or indirectly, encourage, initiate or engage in discussions or negotiations -25- 32 with, or provide any information to, any Person or other entity or group, other than to Buyer or pursuant to Section 7.4 hereof, concerning any merger, sale or lease of substantial assets, equity investment in Seller or similar transaction involving Seller; and Seller shall promptly notify Buyer of any proposal or offer to enter into any such transaction, or any inquiry or contact with any person with respect thereto and shall promptly furnish to Buyer any written material received by Seller relating to any of the foregoing; (e) Seller shall not enter into any employment agreement with any director, officer or employee of Seller or, otherwise than pursuant to policies of Seller in effect on the date hereof, grant any severance or termination pay to, or increase the compensation (including deferred compensation) of, any such person; (f) Seller shall not, other than in the ordinary course of business and consistent with past practices, adopt or amend to increase compensation or benefits payable under any collective bargaining, employment, bonus, incentive, compensation, profit-sharing, pension, retirement, severance, stock purchase, stock option, deferred compensation, hospitalization, group insurance, death benefit, disability, other fringe benefit or other plan, agreement, trust, fund or arrangement for the benefit of employees; (g) Seller shall not amend or terminate any employment or noncompetition agreement; (h) Seller shall not enter into any sales or maintenance contract or license (or group of contracts for the same customer), with a sales price in excess of $10,000 without Buyer's written consent, which shall not be unreasonably withheld or delayed; and (i) Seller shall not, with the intent to breach Sections 8 or 4 of this Agreement, or reckless disregard for the provisions thereof, take any action or agree, in writing or otherwise, to take any of the foregoing actions or any action which would cause any conditions precedent set forth in Section 8 hereof not to be met or make any representation or warranty set forth in Section 4 hereof untrue or incomplete in any material respect. 7. Additional Agreements. 7.1 Publicity. Prior to any public filing or announcement concerning any of the Contemplated Transactions, -26- 33 Seller and Buyer shall discuss and coordinate with respect thereto. 7.2 Access to Information. Between the date of this Agreement and the Closing, Seller shall give Buyer and its respective authorized representatives reasonable access to all personnel, plants, offices, warehouses and other facilities and to all books and records of Seller and will permit Buyer to make such inspections as it may reasonably request and will cause its officers to furnish Seller with such financial and operating data and other information with respect to the business and properties of Buyer as Buyer may from time to time reasonably request. 7.3 Cooperation. Upon the terms and subject to the conditions hereof, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the Contemplated Transactions and shall use all reasonable efforts to obtain all waivers, permits, consents and approvals and to effect all registrations, filings and notices with or to third parties or governmental or public bodies or authorities which are in the opinion of Buyer or Seller necessary or desirable in connection with the Contemplated Transactions. Nothing in this Section 7.3 or Section 7.4 shall be deemed to require Buyer or Seller to make any payment to any third party (other than its accountants, counsel or other professional advisors) to obtain any consent from or action of any third party, except for payments required by contracts as in effect on the date hereof or incidental payments (such as the third party's legal and filing fees) to facilitate such consent or action. If at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers or directors of each of the parties hereto shall take such action. 7.4 Obtaining Consents. Subject to Section 7.3 hereof, Seller shall use its best efforts to obtain the consents and approvals set forth in Exhibits 4.3 and 4.4 hereto on terms acceptable to Buyer. Until any consent listed in such Exhibits is obtained, at Buyer's request and direction, Seller shall act as Buyer's agent in order to obtain for Buyer the benefits under the contract, agreement, license or other obligation or instrument relating thereto as if such consent had been obtained. 7.5 Employees of Sellers; Employee Benefits. (a) Buyer is under no legal obligation to employ any personnel presently employed by Seller. Prior to the Closing Date, Buyer may offer employment to such persons currently employed by Seller as Buyer in it sole discretion shall -27- 34 determine. Buyer shall have the absolute right to establish all terms and conditions of employment, including wages, benefits and benefit plans, for any employees of Seller to whom it chooses to make an offer of employment to be employed by Buyer. All such offers of employment shall be on the terms and conditions established by Buyer and shall be contingent upon employment commencing with Buyer only following the Closing Date. Seller agrees not to discourage any individuals who are offered employment by Buyer from accepting employment with Buyer. (b) After the Closing Date, Seller shall pay directly to each of its employees that is offered employment by Buyer and accepts such employment with Buyer, that portion of all benefits which has been accrued on behalf of that employee (or is attributable to expenses properly incurred by that employee) as of the Closing Date, and Buyer shall assume no liability therefor. No portion of the assets of any plan, fund, program or arrangement, written or unwritten, heretofore sponsored or maintained by Seller (and no amount attributable to any such plan, fund, program or arrangement) shall be transferred to Buyer, and Buyer shall not be required to continue any such plan, fund, program or arrangement after the Closing Date. The amounts payable on account of all benefit arrangements shall be determined with reference to the date of the event by reason of which such amounts become payable, without regard to conditions subsequent, and Buyer shall not be liable for any claim for insurance, reimbursement or other benefits payable by reason of any event which occurs prior to the Closing Date. All amounts payable directly to employees of Seller, or to any fund, shall be paid by Seller within thirty (30) days after the Closing Date to the extent that such payment is not inconsistent with the terms of such fund, program, arrangement or plan. All employees of Seller who are employed by Buyer on or after the Closing Date shall be new employees of Buyer and any prior employment by Seller of such employees shall not affect entitlement to, or the amount of, salary or other compensation or benefits, current or deferred, which Buyer may make available to its employees. (c) Three employees which Buyer may employ must remain in the employ of Seller until they receive their visas. If Buyer decides to hire these employees, it will reimburse Seller for their costs to Seller while they are employed by Seller. If Buyer decides to hire them, it will employ them as soon as permitted by the immigration laws. 7.6 Accounts Payable. Seller shall promptly pay when due in accordance with their terms any accounts payable incurred by it prior to the Closing relating to the Business, unless it disputes in good faith any such payment. -28- 35 7.7 Supplemental Information. From time to time prior to the Closing, each party hereto shall promptly disclose in writing to the other party any matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be disclosed to such other party. 7.8 Encumbrances. Seller shall obtain executed releases of all Encumbrances on the Assets, except Permitted Exceptions, in form to be recorded with all appropriate Governmental Bodies. 7.9 Noncompetition, Etc. Subject to the provisions of 7.9(f) below, Seller shall, and shall cause Robert B. Staib, William E. Staib, Robert ___. Squires and Harry O. Hefter (collectively the "Covenanting Person") to agree not to, directly or indirectly, for the benefit of Seller or any other person, either as principal, agent, manager, consultant, partner, owner, employee, distributor, dealer, representative, joint venturer, creditor or otherwise, do any of the following: (a) For a period of three (3) years from the Closing, Seller and the Covenanting Person shall not, directly or indirectly, for the benefit of Seller, the Covenanting Person or others, either as principal, agent, manager, consultant, partner, owner, employee, distributor, dealer, representative, joint venturer, creditor or otherwise, (i) engage in any work involving the acquisition, development, marketing, distribution, sale, licensing, maintenance or support of software products, services and related hardware that are competitive with the Assets sold under this Agreement within the continuous process material handling, melting, forming and processing industries, including but not limited to the ferrous, non-ferrous and glass production industries (the "Business"), in any geographic area where Buyer or its successor in interest conducts Business now or in the future; or (ii) the promotion, solicitation, attempt to solicit, license or sale in any geographic area where Buyer or its successor in interest conducts Business of any product or service in competition with the products or services of Buyer related to the Business. (b) Solicitation of Customers. For a period of three (3) years from the Closing, Covenanting Person shall not solicit, attempt to solicit, manage, maintain, sell or license software products, services and related hardware that are competitive with the software sold under this Agreement related to the Business to any Customer. For the purposes of this Agreement, "Customer" shall mean any person who is a Customer of Buyer or the Group as of the date of this Agreement, any person who has been a Customer of the Group or Buyer within two (2) years of the execution of this Agreement or becomes a Customer of -29- 36 Buyer during the three (3) year period from the date of this Agreement. (c) Non-Solicitation of Employees, etc. For a period of three (3) years from the date of this Agreement, the Covenanting Person shall not, either directly or indirectly, solicit to hire or hire any current or past employees of the Group or Buyer, or any person who is or was in any way affiliated with the Group or Buyer. (d) Restrictions, etc. The Covenanting Person acknowledges that the Business of the Group and Buyer is international in scope, and the international scope is the reason for the geographic scope and/or duration of the restrictions on competition and solicitation provided in this Section. Satisfaction of the three (3) year period described in this Section shall be suspended during the time of any activity of the Covenanting Person prohibited by this Section. In the event a court grants injunctive relief to Buyer for a failure of the Covenanting Person to comply with the provisions contained in this Section, the non-competition period shall commence anew with the date such relief is granted. The restrictions provided in this Section may be enforced by Buyer, by an action at law, or in equity, including but not limited to, an action for injunction and/or an action for damages. It being expressly agreed that, in view of the general impracticability and impossibility of determining by compilation or legal proof, the exact amount of damages resulting to Buyer from a violation by the Covenanting Person of the provisions of this Section, liquidated damages are hereby fixed at Ten Thousand Dollars ($10,000.00) for violation of this Section, unless actual damages in excess of Ten Thousand Dollars ($10,000.00) are proved, in which case, the amount actually proved shall be assessed as damages. The provisions of this Section constitute an essential element of this Agreement, without which this Agreement would not have been effected by Buyer. The provisions of this Section shall survive the termination of any other obligation of the Covenanting Person under this Agreement for a period necessary to enforce its provisions. If the scope of any restriction contained in this Section is too broad to permit enforcement of such restriction to its fullest extent permitted by law, the Covenanting Person hereby consents and agrees that such scope may be judicially modified in any proceeding brought to enforce such restriction. (e) Proprietary Rights and Protection of Buyer's Confidential Information. As used throughout this Agreement, the -30- 37 term "Proprietary Information" means any information acquired by the Covenanting Person during or as a result of past, present or future affiliation with or employment by Seller, which is not in the public domain and which relates to software products, services and related hardware that are competitive with the Assets sold under this Agreement for use in the Business, whether such information is patentable or unpatentable, copyrightable or uncopyrightable. Proprietary Information shall include but is not limited to: inventions, information of a technical nature such as trade secrets, "know-how", innovations, discoveries, formulae, research projects, software, source codes, object codes, software architecture, flow charts, software documentation, decision tables, test data, conversion programs, technical writings and confidential information of other parties which it provides to the Group or Buyer by any agreement by which the Group or Buyer has obligations to protect the confidentiality of same, matters of a business nature such as customer lists, customer and supplier marketing representatives requirements and preferences, costs, prices or license fees or maintenance fees or other financial information such as sale, profit, expenses, financial projections, financial goals, local, state and federal tax returns, litigation and compensation, personnel data, business plans and market research. All information disclosed to the Covenanting Person or to which the Covenanting Person obtains access during affiliation with or employment with the Group or Buyer shall be presumed to be Proprietary Information. The Covenanting Person acknowledges that he or it has had or will have access to and become familiar with this Proprietary Information and it is very valuable to Buyer. The Covenanting Person agrees not to disclose any of the Proprietary Information directly or indirectly to any person nor use it in any way, at any time, except as required in the course of his employment or affiliation with the Group or Buyer. All the Proprietary Information shall remain the exclusive property of Buyer and any Proprietary Information in the possession of the Covenanting Person at the end of his employment or affiliation with the Group or Buyer shall be returned to Buyer. Provided, however, information shall not be deemed to be Proprietary Information if it: (i) is or becomes known through no fault of the Covenanting Person to a third party; (ii) is learned by the Covenanting Person following his termination of employment or affiliation with the Group or Buyer; or (iii) is in the public domain. The restrictions of this Section 7.9(e) shall be a perpetual obligation of the Covenanting Person to keep the Proprietary Information confidential and the ownership of Proprietary Information inures solely to Buyer. (f) The Covenant Not to Compete described in Section 7.9(a) hereof shall not prevent the Harry O. Hefter Group -31- 38 from manufacturing, selling or leasing its product known as CLERQ 2000. 8. Conditions Precedent. 8.1 Conditions to Each Party's Obligation. The respective obligations of each party to this Agreement to consummate the Contemplated Transactions shall be subject to the following conditions: (a) There is no suit, action or proceeding pending or, to the knowledge of Buyer or Seller, threatened against either Buyer or Seller that seeks to prevent the consummation of any of Contemplated Transactions or to obtain substantial monetary payment as a result thereof nor shall any order, statute, rule, regulation, executive order, stay, decree, judgment or injunction have been enacted, entered, issued, promulgated or enforced by any court or governmental authority of competent jurisdiction which prohibits or restricts the consummation of the Contemplated Transactions. (b) All material consents, approvals or authorizations of, or declarations, filings or registrations with, any Governmental Body, including without limitation those referred to in Section 4.3 hereof, required in connection with the execution, delivery and performance of this Agreement or the consummation of the Contemplated Transactions shall have been obtained. (c) The Contemplated Transactions shall have been approved by the holders of a majority of the outstanding shares of common stock, Convertible Series A Preferred Stock, Convertible Series B Preferred Stock and Convertible Series C Preferred Stock voting together as a single class on an as converted basis (excluding the stock held by the Staib family), and the holders of a majority in principal amount of Seller's 8.75% Senior Secured Debentures. (d) All other material consents of any Person, including without limitation those referred to in Section 4.4 hereof, necessary to the execution, delivery and performance of this Agreement or the consummation of the Contemplated Transactions, including but not limited to, consents from parties to the Assumed Liabilities shall have been obtained. 8.2 Conditions to the Obligations of Buyer. The obligations of Buyer to effect the Contemplated Transactions shall be further subject to the fulfillment at or prior to the Closing of the following conditions, any one or more of which may be waived by Buyer: -32- 39 (a) Seller shall have performed and complied in all material respects with the agreements and obligations contained in this Agreement required to be performed and complied with by it at or prior to the Closing. (b) The representations and warranties of the Seller contained in this Agreement were true and complete when made and are true and complete in all material respects at the Closing Date as if then made and Seller has performed in all material respects all obligations to be performed by it pursuant to this Agreement at or before the Closing. (c) From the date hereof to Closing, Seller shall have maintained its fixed assets consistent with its past practices and there shall have been no known material adverse change in the condition of such fixed assets, and Buyer shall have received a certificate from an officer of Seller to such effect. (d) Seller shall have obtained executed releases of all Encumbrances on the Assets in form suitable for recording with all of the appropriate Government Bodies. (e) Seller has delivered all of the documents described in Section 3.2 hereof, duly executed by duly authorized officers or persons. (f) Buyer has consummated a transaction with DJJ for an investment in Buyer or an entity controlled by Buyer and which has provided Buyer or such entity with enough money to make the Five Hundred Thousand Dollar ($500,000.00) payment at the Closing, the Two Hundred Fifty Thousand Dollar payment ($250,000.00) thirty (30) days after the Closing, and to fulfill Buyer's other obligations pursuant to this Agreement. (g) Buyer has been able to employ all of the employees of Seller it wishes to employ and to allow Buyer to operate the Business after the Closing. (h) Buyer shall have completed its due diligence of Seller and decided, in its sole discretion, to proceed with the Transaction. 8.3 Conditions to the Obligations of Seller. The obligations of the Seller to effect the Contemplated Transactions shall be further subject to the fulfillment at or prior to the Closing of the following conditions, any one or more of which may be waived by the Seller: (a) Buyer shall have performed and complied in all material respects with the agreements and obligations -33- 40 contained in this Agreement required to be performed and complied with by it at or prior to the Closing. (b) The representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects as of the date hereof and shall be true and correct in all material respects as of the Closing, with the same force and effect as though made on and as of the Closing, except for changes permitted or contemplated by this Agreement. 9. Termination and Waiver. 9.1 Termination. This Agreement may be terminated at any time prior to the Closing, whether before or after approval by the stockholders of Seller: (a) by mutual consent of the Boards of Directors of Seller and Buyer; (b) by either Seller or Buyer if the Contemplated Transactions shall not have been consummated by May 28, 1999 (the "Mandatory Termination Date") and such terminating party is not then in material breach of any provision of this Agreement; or (c) by Buyer if it cannot consummate the transaction with DJJ described in Section 8.2(f) hereof. 9.2 Effect of Termination. In the event of termination of this Agreement by either Seller or Buyer, as provided above, this Agreement (other than Section 13.1 hereof, which shall remain in effect) shall forthwith become void and there shall be no further liability on the part of any of Seller, Buyer or their respective directors or officers, unless and to the extent such party is in breach of any provision of this Agreement at the time of such termination. The Confidentiality Agreement among the parties dated of even date herewith shall survive any such termination. 9.3 Waiver. At any time prior to the Mandatory Termination Date, Seller or Buyer, by action taken by their respective Boards of Directors, may (i) extend the time for the performance of any of the obligations or other acts of the other party hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid if set forth in an instrument in writing signed on behalf of such party. -34- 41 10. Survival of Representations and Warranties; Indemnification. 10.1 Survival. All representations and warranties contained in this Agreement or in the certificate delivered pursuant to Section 3.2(f) hereof, except for any representations and warranties which Seller has identified to Buyer in writing prior to Closing as being untrue as of the Closing Date and Buyer has waived the existence thereof pursuant to Section 9.3 hereof, shall survive the Closing notwithstanding any investigation conducted, or knowledge acquired, with respect thereto, for a period of five years from the Closing Date, except that the representations and warranties set forth in Section 4.20(b) (pertaining to taxes) shall survive the Closing Date for a period which terminates upon the lapse of the last statute of limitations that is applicable to the matters covered by such representations and warranties. All agreements contained in this Agreement shall survive the Closing without limitation. 10.2 Indemnification by Seller. Seller shall indemnify and hold harmless Buyer, and shall reimburse Buyer for, any loss, liability, claim, cost, damage, expense (including, but not limited to, costs of investigation and defense and reasonable attorneys' fees) or diminution of value (collectively, "Damages") arising from or in connection with (a) any inaccuracy in any of the representations and warranties of Seller in this Agreement or in any certificate delivered by Seller pursuant to this Agreement as referenced in Section 10.1 hereof, or any actions, omissions or state of facts inconsistent with any such representation or warranty, if notice thereof is given by Buyer to Seller prior to the second anniversary of the Closing Date, (b) any failure by Seller to perform or comply with any agreement in this Agreement, (c) any Environmental Remediation, (d) Buyer's assumption of any liability pursuant to Section 1.7 hereof, (e) any other liability incurred by Seller prior to the Closing and not specifically assumed by Buyer hereunder, (f) any cost or expenses or liability incurred by Buyer to defend against claims of third persons related to the Assets, the Assumed Liabilities or its operation of the Business resulting from or arising out of the acts or omissions of Seller prior to or after the Closing, (g) any costs and expenses incurred by Buyer resulting from or arising out of the Seller Obligations pursuant to Section 1.8 hereof, including, without limitation, any costs and expenses arising from contracts or agreements of Seller that are not being assumed by Buyer pursuant to the provisions hereof, and (h) any claim by any person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with Seller (or any Person acting on its behalf) in connection with any of the Contemplated Transactions. Buyer shall have the right to deduct any Damages -35- 42 due to Seller from the Royalties due Seller pursuant to Section 1.6 hereof. 10.3 Limitation on Seller's Obligations. Seller shall be required to indemnify Buyer if and only to the extent Damages from the breach of the representations and warranties contained in Article 4 exceed Twenty Five Thousand Dollars ($25,000.00); provided, however, breaches of the representations and warranties contained in Section 4.28 are not subject to this limitation. 10.4 Indemnification by Buyer. Buyer shall indemnify and hold harmless Seller, and shall reimburse Seller for, any Damages arising from or in connection with (a) any inaccuracy in any of the representations and warranties of Buyer in this Agreement or in any certificate delivered by Buyer pursuant to this Agreement, or any actions, omissions or state of facts inconsistent with any such representation or warranty, if notice thereof is given by Seller to Buyer prior to the second anniversary of the Closing Date, (b) any failure by Buyer to perform or comply with any agreement in this Agreement, (c) any liability arising from Buyer's conduct of the Business after the Closing, (d) any claim arising from Seller's actions as Buyer's agent pursuant to Section 7.4 hereof, or (e) any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by such Person with Buyer (or any Person acting on its behalf) in connection with any of the Contemplated Transactions. 10.5 Procedure for Indemnification. Promptly after receipt by an indemnified party under Section 10.2 or 10.4 of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under such Section, give notice to the indemnifying party of the commencement thereof, but the failure so to notify the indemnifying party shall not relieve it of any liability that it may have to any indemnified party except to the extent the indemnifying party demonstrates that the defense of such action is prejudiced thereby. In case any such action shall be brought against an indemnified party and it shall give notice to the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof with counsel satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such Section for any fees of other counsel or any other expenses, in each case subsequently incurred by such indemnified party in -36- 43 connection with the defense thereof, other than reasonable costs of investigation. If an indemnifying party assumes the defense of such an action, (a) no compromise or settlement thereof may be effected by the indemnifying party without the indemnified party's consent (which shall not be unreasonably withheld) unless (i) there is no finding or admission of any violation of law or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party and (ii) the sole relief provided is monetary damages that are paid in full by the indemnifying party and (b) the indemnified party shall have no liability with respect to any compromise or settlement thereof effected without its consent (which shall not be unreasonably withheld). If notice is given to an indemnifying party of the commencement of any action and it does not, within ten days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense thereof, the indemnifying party shall be bound by any determination made in such action or any compromise or settlement thereof effected by the indemnified party. Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that an action may adversely affect it or its affiliates other than as a result of monetary damages, such indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise or settle such action, but the indemnifying party shall not be bound by any determination of an action so defended or any compromise or settlement thereof effected without its consent (which shall not be unreasonably withheld). 10.6 Insurance. Neither Buyer nor Seller shall be deemed to have incurred Damages under this Article 10 if and to the extent that it receives any insurance proceeds with respect thereto. 10.7 Exclusion. Nothing contained herein shall limit any Person's liability for fraud or for willful or intentional breach of a representation, warranty or covenant. 11. Definitions. As used in this agreement, the following terms have the meanings specified or referred to in this Section 11. 11.1 "Ancillary Agreements" -- The agreements described in Section 2. 11.2 "Assets" -- See Section 1.2. 11.3 "Assumed Liabilities" -- See Section 1.7. -37- 44 11.4 "Business" -- See the second paragraph of this Agreement. 11.5 "Business Day" -- Any day that is not a Saturday or Sunday or a day on which banks located in the Cities of Toledo, Ohio or Cedar Rapids, Iowa are authorized or required to be closed. 11.6 "Buyer" -- See the first paragraph of this Agreement. 11.7 "Closing" -- See Section 3.1. 11.8 "Closing Date" -- The date and time of the Closing. 11.9 "Contemplated Transactions" -- The sale of the Assets by Seller to Buyer, the purchase of the Assets by Buyer from Seller, the assignment to, and the assumption of the Assumed Liabilities by, Buyer, performance of and compliance with all agreements contained in this Agreement and the Ancillary Agreements, and Buyer's exercise of control over the Assets. 11.10 "Damages" -- See Section 10.2. 11.11 "Encumbrance" -- Any security interest, mortgage, lien, charge, adverse claim or restriction of any kind, including, but not limited to, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership which is not a Permitted Exception. 11.12 "Excluded Assets" -- See Section 1.3. 11.13 "Governmental Body" -- Any domestic or foreign national, state or municipal or other local government or multi-national body (including, but not limited to, the European Economic Community), any subdivision, agency, commission or authority thereof, or any quasi-governmental or private body exercising any regulatory or taxing authority thereunder. 11.14 "Inventory" -- See Section 1.2(b). 11.15 "Mandatory Termination Date" -- See Section 9.1(b). 11.16 "Permitted Exception" -- All of the following: (i) liens for current taxes not yet due and payable or which in good faith are being contested or litigated and which are not material to the particular Asset they encumber or to the Business; (ii) mechanics', carriers', workers', or other like liens which arose in the ordinary course of business securing -38- 45 obligations which are not material to the particular Asset such lien encumbers or to the Business (provided that Seller shall remain responsible for promptly discharging any obligations pertaining to any such liens and shall defend, indemnify and hold harmless Buyer from and against any Damages incurred by Buyer as a result thereof), (iii) matters that would be disclosed by an accurate survey on the ground of any tract of property relevant to the Assets; (iv) as of the Closing, restrictions or limitations on the use of any Asset imposed by any state, federal or local Governmental Body, restrictive covenants, rights-of-way and easements, other minor title defects, objections, and irregularities in title, none of which items individually or in the aggregate, have more than an immaterial effect on the value of such Asset or its present use by Seller. 11.17 "Person" -- Any individual, corporation, limited liability company, partnership, joint venture, trust, association, unincorporated organization, other entity, or Governmental Body. 11.18 "Price" -- See Section 1.5(a). 11.19 "Related Party" -- (a) any individual who is a director or officer of Seller or who is an employee of Seller with aggregate compensation from it at an annual rate in excess of $50,000, (b) any Person that owns 10 percent or more of the outstanding equity securities of any class of Seller, (c) any member of the family (as defined in section 267(c)(4) of the Internal Revenue Code) of, or any individual who has the same home as, any individual (or the spouse of any such individual) described in clause (a) or (b) of this section, (d) any trust, estate or partnership of which an individual described in clause (a), (b) or (c) of this Section is a grantor, fiduciary, beneficiary or partner or (e) any Person (and any subsidiary of such a Person) of which one or more Persons described in clause (a), (b), (c) or (d) of this Section have either (i) aggregate record or beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of at least 10 percent of the outstanding equity securities or at least 10 percent of the outstanding voting securities or (ii) the power to direct or to cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. 11.20 "Seller" -- See the first paragraph of this Agreement. 11.21 "Solvent" -- (a) the assets and the property of Seller exceeds its liabilities (including contingent and unliquidated liabilities), (b) after giving effect to the -39- 46 Contemplated Transactions, Seller will not be left with unreasonably small capital and (c) after giving effect to the Contemplated Transactions, Seller is able both to service and to pay its liabilities as they mature. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that is likely to become an actual or matured liability. 11.22 "Taxes" -- All taxes, charges, fees, levies, interest, penalties, additions to tax or other assessments, including, but not limited to, income, excise, property, sales, use, value added and franchise taxes and customs duties, imposed by any Governmental Body and any payments with respect thereto required under any tax-sharing agreement. 11.23 "Tax Returns" -- Any return, report, information return or other document (including any related or supporting information) filed or required to be filed with any Governmental Body in connection with the determination, assessment or collection of any Taxes or the administration of any laws, regulations or administrative requirements relating to any Taxes. 12. Notices. All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by telex or telecopier (with receipt confirmed), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by Express Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate addresses, telex numbers and telecopier numbers set forth below (or to such other addresses, telex numbers and telecopier numbers as a party may designate as to itself by notice to the other parties). (a) If to Buyer: Systems Alternatives, Inc. 1705 Indian Wood Circle, Suite #100 Maumee, Ohio 43537 Telecopier No.: (419) 891-1045 Attention: John W. Underwood -40- 47 with a copy to: Vorys, Sater, Seymour and Pease LLP 52 East Gay Street P.O. Box 1008 Columbus, Ohio 43216-1008 Telecopier No.: (614) 464-6350 Attention: George L. Jenkins, Esq. (b) If to Seller: Oakdale Research Park 2600 Crosspark Road Coralsville, Iowa 52241 Telecopier No.: (319) 626-5001 Attention: Robert Squires with a copy to: Oakdale Research Park 2600 Crosspark Road Coralsville, Iowa 52241 Telecopier No.: (319) 626-5001 Attention: William E. McNally 13. Miscellaneous. 13.1 Expenses. Each party shall bear its own expenses incident to the preparation, negotiation, execution and delivery of this Agreement and the performance of its obligations hereunder. 13.2 Specific Performance. The parties acknowledge that the subject matter of this Agreement (i.e., the Business and the Assets) is unique and that no adequate remedy at law would be available for breach of this Agreement. Accordingly, each party agrees that the other party will be entitled to an appropriate decree of specific performance or other equitable remedies to enforce this Agreement (without any bond or other security being required) and each party waives the defense in any action or proceeding brought to enforce this Agreement that there exists an adequate remedy at law; provided that specific performance will not be available against a party which is entitled to terminate this Agreement pursuant to Section 9.1 hereof. 13.3 Captions. The captions in this Agreement are for convenience of reference only and shall not be given any effect in the interpretation of this agreement. -41- 48 13.4 Attorney's Fees. In any action or proceeding brought by a party to enforce any provision of this agreement, the prevailing party shall be entitled to recover the reasonable costs and expenses incurred by it in connection with that action or proceeding (including, but not limited to, attorneys' fees). 13.5 No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. 13.6 Exclusive Agreement; Amendment. This Agreement, plus the Confidentiality Agreement and the Agreement Regarding Assumed Liabilities, supersedes all prior agreements among the parties, with respect to their subject matter, is intended (with the documents referred to herein) to be a complete and exclusive statement of the terms of the agreement among the parties with respect thereto and cannot be changed or terminated except by a written instrument executed by Seller and Buyer. 13.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be considered an original, but all of which together shall constitute the same instrument. 13.8 Governing Law. This Agreement and (unless otherwise provided) all amendments hereof and waivers and consents hereunder shall be governed by the internal law of the State of Ohio, without regard to the conflicts of law principles thereof. 13.9 Further Assurances. (a) From and after the Closing, each of the parties shall, without further consideration, execute and deliver to the other such other instruments of transfer and assumption, and take such other action, as the other may request, to carry out the Contemplated Transactions. (b) Without limiting any provision hereof, Seller hereby effective as at the Closing constitutes and appoints Buyer, its successors and assigns, the true and lawful attorney for Seller, with full power of substitution, in the name of Buyer or in the name of Seller, but for the benefit of Buyer, (i) to institute and prosecute all proceedings which Buyer may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the Assets, properties and Business to be sold and transferred or intended to be sold and transferred to Buyer as provided in this Agreement, to defend or -42- 49 compromise any and all actions, suits or proceedings in respect of any of the assets, properties and business to be so sold and transferred or intended so to be, and to do all such acts and things in relation thereto as Buyer shall deem advisable and (ii) to take all actions which reasonably may deem proper in order to provide for Buyer the benefits under any claims, contracts, licenses, leases, commitments, sales orders or purchase orders where any required consent of another party to the assignment thereof to Buyer pursuant to this Agreement shall not have been obtained. Seller acknowledges that the foregoing powers are coupled with an interest and shall be irrevocable by it or by its subsequent dissolution or in any manner or for any reason. Buyer shall be entitled to retain for its own account any amounts collected pursuant to foregoing powers, including any amounts payable as interest in respect thereof. 13.10 Assignment. Buyer may assign its rights, but not its obligations, under this Agreement to an affiliate. Buyer's obligations hereunder shall not be terminated or limited by its sale after the Closing Date of any or all of the Assets or Business or any merger, recapitalization or other reorganization of Buyer. 13.11 Records. After the Closing, Seller and Buyer shall make available to the other on reasonable request and provide the other with reasonable access to personnel previously employed by Seller and to such books, records and computer data for that party as may be appropriate for use in connection with their respective tax returns, investigating and/or defending third-party claims and any claim relating to pre-existing Environmental Conditions and for all other reasonable uses. Subject to the provisions of this Section 13.11, such other party may make copies thereof. Such books and records relating to the Business or the Assets shall be retained in accordance with the holder's records retention policy, provided, however, thereafter any portion of such books and records may be destroyed in whole or in part, by the party in possession thereof upon thirty (30) days' notice to the other party, unless the party to whom such notice is given shall object, in which event the objecting party shall be given such records in lieu of destruction thereof. To the extent that any such books and records contain confidential information of either party, the other party shall maintain the confidentiality thereof as provided in the Confidentiality Agreement referred to in Section 13.6. 13.12 Agreements Affecting DJJ. DJJ agrees to be bound and is hereby bound by, and entitled to the benefits of, the agreements concerning the payment of Royalties contained in Section 1.6 hereof. In the event of conflict between the provisions of the DJJ/Seller Agreements and the Royalty -43- 50 provisions set forth in Section 1.6 hereof, the Royalty provisions set forth in Section 1.6 shall control. 13.13 No Third Party Rights. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon, create or give to any person or entity other than the parties any rights or remedies hereunder or by reason hereof; the parties expressly agree that there are no intended or incidental third party beneficiaries to this Agreement; provided, however, that Buyer is expressly and intentionally made a third party beneficiary to all license agreements and other contracts and agreements that Buyer has elected at this time not to assume for purposes of enforcing, at Buyer's discretion (without any obligation of Buyer to do so), any rights of Seller under such contracts and agreements, including, without limitation, rights respecting protection of the Assets being sold to Buyer pursuant to this Agreement. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Agreement to be effective as of the date set forth in the introductory clause. Attest: /s/ William E. McNally NEURAL APPLICATIONS CORPORATION --------------------------- By: William E. McNally By: /s/ Robert A. Squires ------------------------------- ---------------------------------- Its: Secretary Name: Robert A. Squires ------------------------------ -------------------------------- Title: President ------------------------------- Attest: /s/ J. Paul Trestan SYSTEMS ALTERNATIVES, INC. --------------------------- By: J. Paul Trestan By: /s/ John W. Underwood ------------------------------- ---------------------------------- Its: Chief Financial Officer Name: John W. Underwood ------------------------------ -------------------------------- Title: President ------------------------------- Attest: *THE DAVID J. JOSEPH COMPANY --------------------------- By: By: /s/ Benjamin M. Blemker ------------------------------- ---------------------------------- Its: Name: Benjamin M. Blemker ------------------------------ -------------------------------- Title: President - [illegible] ------------------------------- Corp. V.P. ------------------------------- *Solely for purposes of Section 13.12 hereof -44- EX-2.2 4 AMENDMENT TO THE ASSET PURCH. AGREEMENT 1 EXHIBIT 2.2 AMENDMENT TO ASSET PURCHASE AGREEMENT AMENDMENT, dated as of May 25, 1999 (the "Amendment") to the Asset Purchase Agreement (the "Asset Purchase Agreement"), dated to be effective April 2, 1999 among Systems Alternatives, Inc. ("Buyer"), an Ohio corporation, Neural Applications Corporation ("Seller"), a Delaware corporation, and The David J. Joseph Company ("DJJ"), a Delaware corporation. WHEREAS, the parties desire to amend the Asset Purchase Agreement to reflect the Royalties due DJJ as of the Closing; NOW, THEREFORE, of the premises and the mutual covenants and agreement hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 1.6 of the Asset Purchase Agreement is hereby amended by deleting the references to "Forty Five Thousand Dollars ($45,000)" or "$45,000" and replacing them with "Fifty One Thousand Dollars ($51,000)" or "51,000." 2. When the balance of the accounts receivable is received from Keystone Steel and Wire and Northstar Steel Company, Seller shall pay the five percent (5%) Royalty to Buyer and Buyer shall pay it to DJJ and the amount shall be credited against the $360,000 Royalty Payment. 3. Other than as expressly set forth herein, the Asset Purchase Agreement is hereby ratified and confirmed and shall remain unchanged in all other respects. 4. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original copy of the Amendment, and all of which, when taken together, will be deemed to constitute one and the same agreement. 5. This Agreement will be governed by the internal law of the State of Ohio, without regard to the conflicts of law principles thereof. 2 IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first written above. NEURAL APPLICATIONS CORPORATION BY: /s/ Robert A. Squires --------------------------------------- NAME: Robert A. Squires ------------------------------------- TITLE: President/CEO ------------------------------------ SYSTEMS ALTERNATIVES, INC. BY: /s/ John W. Underwood --------------------------------------- NAME: John W. Underwood ------------------------------------- TITLE: President ------------------------------------ THE DAVID J. JOSPEH COMPANY BY: /s/ Benjamin M. Blemker --------------------------------------- NAME: Benjamin M. Blemker ------------------------------------- TITLE: Senior Vice President ------------------------------------ EX-3.1 5 AMENDED & RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 CERTIFICATE OF INCORPOARTION OF NEURAL APPLICATIONS CORPORATION * * * * 1. The name of the corporation is NEURAL APPLICATIONS CORPORATION 2 The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock, which the corporation shall have authority to issue, is One Million (1,000,000) and the par value of each of such shares is one Dollar ($1.00) amounting in the aggregate to One million ($1,000,000). 5. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS ---- --------------- M. C. Kinnamon 1209 Orange Street Wilmington, DE 19801 T. L. Ford 1209 Orange Street Wilmington, DE 19801 R. L. Parsons 1209 Wilmington Street Wilmington, DE 19801
2 6. The corporation is to have perpetual existence. 7. In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter, or repeal the by-laws of the corporation. 8. The corporation reserves the right to amend, alter, change or repeal any provisions contained in this certificate of Incorporation, in the manner now or hereafter prescribed by statue, and all rights conferred upon stockholders herein are granted subject to this reservation. 9. 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 (i) for any breach of the director's duty or loyalty to the corporation or its stockholders, (ii) for acts or omission not in good faith or which involve intentional misconduct or a knowing violation of law, (ii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purposes of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is our act and deed and the facts herein stated are true, and accordingly have hereunto set our hands this 1st day of February 1993. ----------------------------------- M. C. Kinnamon ----------------------------------- T. L. Ford ----------------------------------- R. L. Parsons EX-3.2 6 AMENDMENT OF CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NEURAL APPLICATIONS CORPORATION ARTICLE 1. The name of this corporation is Neural Applications Corporation. ARTICLE 2. The purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. ARTICLE 3. The registered office of this corporation in Delaware is 1209 Orange Street, Wilmington, Delaware 19801, and the name of its registered agent is The Corporation Trust Company. ARTICLE 4. (a) Authorized Capital Stock. The total number of shares of capital stock of all classes which this corporation is authorized to issue is 25,000,000 shares, par value $.01 per share, of which 20,000,000 shares are designated common stock and 5,000,000 shares are designated preferred stock. (b) Preferred Stock. Authority is expressly vested in the board of directors of this corporation to authorize the issuance from time to time of one or more classes or series of preferred stock by resolution or resolutions adopted by a majority of the board of directors, and to establish the number, voting powers (full, partial or no voting powers) and designations and the preferences, qualifications, limitations or restrictions of the shares of each such class or series. ARTICLE 5. -1- 2 In furtherance, and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, amend, alter, change, add to or repeal bylaws of this corporation, without any action on the part of the stockholders. The bylaws made by the directors may be amended, altered, changed, added to or repealed by the stockholders. Any specific provision in the bylaws regarding amendment thereof shall be controlling. ARTICLE 6. A director of this corporation shall not be personally liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that this Article 6 shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to this corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit. This Article 6 shall not eliminate or limit the liability of a director for any act or omission occurring prior to the effective date of this Article 6. If the Delaware General Corporation Law is hereafter amended to authorize any further limitation of the liability of a director, then the liability of a director of this corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as amended. Any repeal or modification of the foregoing provisions of this Article 6 by the stockholders of this corporation shall not adversely affect any right or protection of a director of this corporation existing at or prior to the time of such repeal or modification. ARTICLE 7. The business and affairs of the Corporation shall be managed by or under the direction of a board of directors consisting of not less than three nor more than eleven persons, none of whom need be shareholders. The number of directors may from time to time be increased or decreased by the stockholders or the board of directors; provided, however, that, unless such change shall have been approved by a majority of the entire board of directors, any change in the number of directors (including, without limitation, changes at an annual meeting of the stockholders) shall be approved by the affirmative vote of not less than 75% of the votes entitled to be cast by the holders of all then outstanding shares of common stock. -2- 3 The directors shall be divided into three classes as determined by the board of directors, designated as Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors then constituting the entire board of directors. At the 1996 annual meeting of the stockholders, Class I directors shall be elected for a one-year term, Class II directors shall be elected for a two-year term and Class III directors for a three-year term. At each succeeding annual meeting of stockholders thereafter, successors to the class of directors whose terms expired at that annual meeting shall be elected for a three-year term. If the number of directors has changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class. In no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected and qualified, subject, however, to such director's prior death, resignation, retirement, disqualification or removal from office. Newly created directorships resulting from any increase in the number of directors may be filled by a majority of the board of directors then in office, and any other vacancy on the board of directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office or a sole remaining director, even if less than a quorum of the board of directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the new directorship which was created or in which the vacancy occurred and until such director's successor shall have been elected and qualified. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by this corporation shall have the right, voting separately by class or series, to elect directors at any annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by or pursuant to the applicable terms of the resolution or resolutions of the board of directors establishing the rights, designations and preferences of such preferred stock, and such directors so elected shall not be divided into classes pursuant to this Article 7 unless expressly provided by such resolutions. No person other than a person nominated by or on behalf of the board of directors shall be eligible for election as a director at any annual or special meeting of stockholders unless a written request that his or her name be placed in nomination is received from a stockholder of record by the Secretary of this corporation not less than 60 days prior to the date fixed for the meeting, together with the written consent of such person to serve as a director. -3- 4 Notwithstanding any other provisions of this Certificate of Incorporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law or this Certificate of Incorporation), the affirmative vote of not less than 75% of the votes entitled to be cast by the holders of all then outstanding shares of common stock shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article 7. -4- EX-3.3 7 AMENDED & RESTATED BYLAWS OF THE REGISTRANT 1 EXHIBIT 3.3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF NEURAL APPLICATIONS CORPORATION The undersigned hereby certifies that Neural Applications Corporation was incorporated in the State of Delaware on February 1, 1993 and that the following amendment to its Amended and Restated Articles of Incorporation was duly adopted by a majority of the stockholders by written consent effective July 22, 1999, and written notice has been given to those stockholders who have not consented in writing, in accordance with the provisions of Sections 228 and 242 of the Delaware General Corporation Law, and that such amendment has not been subsequently modified or resecinded: RESOLVED, that Article I of the Amended and Restated Certificate of Incorporation be stricken and in lieu thereof inserted the following: "The name of the corporation is Stockpoint, Inc." IN WITNESS WHEREOF, I have executed this certificate the ____th day of July 1999. ----------------------------------------- William E. Staib, Chief Executive Officer EX-3.4 8 BYLAWS OF MILLTECH/HOH, INC. 1 EXHIBIT 3.4 BY-LAWS OF MILLTECH-HOH, INC. ARTICLE I OFFICES The corporation shall continuously maintain in the State of Illinois a registered office and a registered agent whose business office is identical with such registered office, and may have other offices within or without the state. ARTICLE II SHAREHOLDERS SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders shall be held on the 1st Monday in May of each year or at such time as the board of directors may designate for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called either by the president, by the board of directors or by the holders of not less than one-fifth of all the outstanding shares of the corporation entitled to vote, for the purpose or purposes stated in the call of the meeting. SECTION 3. PLACE OF MEETING. The board of directors may designate any place, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at the offices of the company. SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets not less than 20 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the president, or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail. addressed to the shareholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a 2 determination of shareholders FOR ANY OTHER PROPER PURPOSE, the board of directors of the corporation may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days and for a meeting of shareholders, not less than 10 days, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than 20 days before the date of such meeting. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. A determination of shareholders shall apply to any adjournment of the meeting. SECTION 6. VOTING LISTS. The officer or agent having charge of the transfer book for shares of the corporation shall make, within 20 days after the record date for a meeting of shareholders or 10 days before such meeting, whichever is earlier, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of 10 days prior to such meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder, and to copying at the shareholder's expense, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this State, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders. SECTION 7. QUORUM. The holders of a majority of the outstanding shares of the corporation entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter at any meeting of shareholders, but in no event shall a quorum consist of less than one-third of the outstanding shares entitled so to vote; provided that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting at any time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Business Corporation Act, the articles of incorporation or these by-laws. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. Withdrawal of shareholders from any meeting shall not cause failure of a duly constituted quorum at that meeting. SECTION 8. PROXIES. Each shareholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed, but no such proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class, shall be entitled to one vote in each matter submitted to vote at a meeting of shareholders, and in all elections for directors, every shareholder shall have the right to vote the number of shares owned by such shareholder for 3 as many persons as there are directors multiplied by the number of such shares or to distribute such cumulative votes in any proportion among any number of candidates. Each shareholder may vote either in person or by proxy as provided in SECTION 8 hereof. SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares held by the corporation in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at any given time. Shares registered in the name of another corporation, domestic or foreign, may be voted by any officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation. Shares registered in the name of a deceased person, a minor ward or a person under legal disability, may be voted by his or her administrator, executor or court appointed guardian, either in person or by proxy without a transfer of such shares into the name of such administrator, executor or court appointed guardian. Shares registered in the name of a trustee may be voted by him or her, either in person or by proxy. Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Any number of shareholders may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, for a period not to exceed 10 years, by entering into a written voting trust agreement specifying the terms and conditions of the voting trust, and by transferring their shares to such trustee or trustees for the purpose of the agreement. Any such trust agreement shall not become effective until a counterpart of the agreement is deposited with the corporation at its registered office. The counterpart of the voting trust agreement so deposited with the corporation shall be subject to the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation, and shall be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at any reasonable time for any proper purpose. SECTION 1l. CUMULATIVE VOTING. In all elections for directors, every shareholder shall have the right to vote in person or by proxy, the number of shares owned by him/her, for as many persons as are directors to be elected, or to cumulate such votes, and give one candidate as many votes as the number of directors multiplied by the number of his/her shares shall equal, or to distribute them on the same principle among as many candidates as he/she shall think fit. 4 The articles of incorporation may be amended to limit or eliminate cumulative voting rights in all or specified circumstances, or to limit or deny voting rights or to provide special voting rights as to any class or classes or series of shares of the corporation. SECTION 12. INSPECTORS. At any meeting of shareholders, the presiding officer may, or upon the request of any shareholder, shall appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there be more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The REPORT OF the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken shall be signed (a) if 5 days prior notice of the proposed action is given in writing to all of the shareholders entitled to vote with respect to the subject matter hereof, by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voting or (b) by all of the shareholders entitled to vote with respect to the subject matter thereof. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given in writing to those shareholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate under any section of the Business Corporation Act if such action had been voted on by the shareholders at a meeting thereof, the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of shareholders, that written consent has been given in accordance with the provisions of SECTION 7.10 of the Business Corporation Act and that written notice has been given as provided in such SECTION 7.10. SECTION 14. VOTING BY BALLOT. Voting on any question or in any election may be by voice unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business of the corporation shall be managed by or under the direction of its board of directors. A majority of the 5 board of directors may establish reasonable compensation for their services and the services of other officers, irrespective of any personal interest. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation shall be three (3). Each director shall hold office until the next annual meeting of shareholders; or until his successor shall have been elected and qualified. Directors need not be residents of Illinois or shareholders of the corporation. The number of directors may be increased or decreased from time to time by the amendment of this section. No decrease shall have the effect of shortening the term of any incumbent director. SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place for holding of additional regular meetings without other notice than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors any be called by or at the request of the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors called by them. SECTION 5. NOTICE. Notice of any special meeting shall be given at least 10 days previous thereto by written notice to each director at his business address. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegram company. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM. A majority of the number of directors fixed by these by-laws shall constitute a quorum for transaction of business at any meeting of the board of directors, provided that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting at any time without further notice. SECTION 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute, these by-laws, or the articles of incorporation. SECTION 8. VACANCIES. Any vacancy on the board of directors may be filled by election at the next annual or special meeting of shareholders. A majority of the board of directors may fill any vacancy prior to such annual or special meeting of shareholders. SECTION 9. RESIGNATION AND REMOVAL OF DIRECTORS. A director may resign at any time upon written notice to the board of directors. A director may be 6 removed with or without cause, by a majority of shareholders if the notice of the meeting names the director or directors to be removed at said meeting. SECTION 10. INFORMAL ACTION BY DIRECTORS. The authority of the board of directors may be exercised without a meeting if a consent in writing, setting forth the action taken, is signed by all of the directors entitled to vote. SECTION 11. COMPENSATION. The board of directors, by the affirmative vote of a majority of directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise notwithstanding any director conflict of interest. By resolution of the board of directors, the directors may be paid their expenses, if any, of attendance at each meeting of the board. No such payment previously mentioned in this section shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 12. PRESUMPTION OF ASSENT. A director of the CORPORATION who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 13. COMMITTEES. A majority of the board of directors may create one or more committees of two or more members to exercise appropriate authority of the board of directors. A majority of such committee may transact business without a meeting by unanimous written consent. ARTICLE IV OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be a chairman of the board, a president, one or more vice-presidents, a treasurer, a secretary, and such other officers as may be elected or APPOINTED BY THE BOARD of directors. Any two or more offices may be held by the same person. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Election of an officer shall not of itself create contract rights. SECTION 3. REMOVAL. Any officer elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the 7 best interest of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. CHAIRMAN OF THE BOARD. The chairman of the board shall be the principal executive officer of the corporation. Subject to the direction and control of the board of directors, he/she shall be in charge of the business of the corporation; he shall see that the resolutions and directions of the board of directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the board of directors; and, in general he/she shall discharge all duties incident to the office of chairman of the board and such other duties as may be prescribed by the board of directors from time to time. He shall preside at all meetings of the shareholders and of the board of directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, he may execute for the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirement of the form of the instrument. He may vote all securities which the corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the corporation by the board of directors. SECTION 5. PRESIDENT. The president shall assist the chairman of the board in the discharge of his/her duties as chairman of the board may direct and shall perform such other duties as from time to time may be assigned to him/her by the chairman of the board or by the board of directors. Subject to the direction and control of the chairman of the board and the board of directors, he/she shall be in charge of the business of the corporation, if the chairman of the board is not present; he shall see that the resolutions and directions OF THE BOARD of directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the board of directors; and, in general he/she shall discharge all duties incident to the office of president and such other duties as may be prescribed by the chairman of the board and/or board of directors from time to time. He shall preside at all meetings of the shareholders and of the board of directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, he may execute for the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirement of the form of the instrument. He may vote all securities which the corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the corporation by the board of directors. SECTION 6. THE VICE-PRESIDENTS. The vice-president (or in the event there be more than one vice-president, each of the vice-presidents) shall assist 8 the president in the discharge of his/her duties as the president may direct and shall perform such other duties as from time to time may be assigned to him/her by the president or by the board of directors. In the absence of the president or in the event of his/her inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the board of directors, or by the president if the board of directors has not made such a designation, or in the absence of any designation, then in the order of seniority of tenure as vice president) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, the vice-president (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and he/she may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument. SECTION 7. THE TREASURER. The treasurer shall be the principal accounting and financial officer of the corporation. He shall: (a) have charge of and be responsible for the maintenance of adequate books of account for the corporation; (b) have charge and custody of all funds and securities of the corporation, and be responsible therefor and for the receipt and disbursement thereof; and (c) perform all the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president of by the board of directors. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors may determine. SECTION 8. THE SECRETARY. The secretary shall:(a) record the minutes of the shareholders' and of the board of directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation; (d) keep a register of the post-office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) sign with the president, or a vice-president, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by-laws; (f) have general charge of the stock transfer books of the corporation; (g) have authority to certify the by-laws, resolutions of the shareholders and board of directors and committees thereof, and other documents of the corporation as true and correct copies thereof, and (h) perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him/her by the president or by the board of directors. SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant treasurers and assistant secretaries shall perform such duties as shall 9 be assigned to them by the treasurer or the secretary, respectively, or by the president or the board of directors. The assistant secretaries may sign with the president, or a vice-president, or any other office thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, any and contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by-laws. The assistant treasurers shall respectively, if required by the board of directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the board of directors shall determine. SECTION 10. SALARIES. The salaries of the officers shall be fixed from time to time by the board of directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. CONTRACTS. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness is issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the board of directors may select. ARTICLE VI SHARES AND THEIR TRANSFER SECTION 1. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED SHARES. Shares either shall be represented by certificates or shall be uncertificated shares. Certificates representing shares of the corporation shall be signed by the appropriate officers and may be sealed with the seal or a facsimile of the seal of the corporation. If a certificate is countersigned by a transfer agent or 10 registrar, other than the corporation or its employee, any other signatures may be facsimile. Each certificate representing shares shall be consecutively numbered or otherwise identified, and shall also state the name of the person to whom issued, the number and class of shares (with designation of series, if any), the date of issue, and that the corporation is organized under Illinois law. If the corporation is authorized to issue shares of more than one class or of series within a class, the certificate shall also contain such information or statement as may be required by law. Unless prohibited by the articles of incorporation, the board of directors may provide by resolution that some or all of any class or series of shares shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until the certificate has been surrendered to the corporation. Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send the registered owner thereof a written notice of all information that would appear on a certificate. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares shall be identical to those of the holders of certificates representing shares of the same class and series. The name and address of each shareholder, the number and class of shares held and the date on which the shares were issued shall be entered on the books of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. SECTION 2. LOST CERTIFICATES. If a certificate representing shares has allegedly been lost or destroyed, the board of directors may in its discretion, except as may be required by law, direct that a new certificate be issued upon such indemnification and other reasonable requirements as it may impose. SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the corporation shall be recorded on the books of the corporation. Transfer of shares represented by a certificate, except in the case of a lost or destroyed certificate, shall be made on surrender for cancellation of the certificate for such shares. A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature and other appropriate assurances that the endorsement is effective. Transfer of an uncertificated share shall be made on receipt by the corporation of an instruction from the registered owner or other appropriate person. The instruction shall be in writing or a communication in such form as may be agreed upon in writing by the corporation. ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors. ARTICLE VIII DISTRIBUTIONS 11 The board of directors may authorize, and the corporation may make, distributions to its shareholders, subject to any restrictions in its articles of incorporation or provided by law. ARTICLE IX SEAL The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Illinois." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced, provided that the affixing of the corporate seal to an instrument shall not give the instrument additional force or effect, or change the construction thereof, and the use of the corporate seal is not mandatory. ARTICLE X WAIVER OF NOTICE Whenever any notice is required to be given under the provisions of these by-laws or under the provisions of the articles of incorporation or under the provisions of The Business corporation Act of the State of Illinois, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance at any meeting shall constitute waiver of notice thereof unless the person at the meeting objects to the holding of the meeting because proper notice was not given. ARTICLE XI INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SECTION 1. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the CORPORATION, OR WHO is or was serving at the request of the CORPORATION as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. 12 SECTION 2. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonable incurred by such person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which this court shall deem proper. SECTION 3. To the extent that a director, officer, employee or agent of a corporation has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Sections 1 and 2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith. SECTION 4. Any indemnification under Sections 1 and 2 shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Sections 1 and 2. Such determination shall be made (a) by the board of directors by a majority vote of a quorum consisting of the directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders. SECTION 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, as authorized by the board of directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation as authorized in this Article. SECTION 6. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or 13 agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of these sections. SECTION 8. If the corporation has paid indemnity or had advanced expenses to a director, officer, employee or agent, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting SECTION 9. For purposes of this Article references to "the corporation" shall include, in addition to the surviving corporation, any merging corporation (including any corporation having merged with a merging corporation) absorbed in a merger which, if its separate existence had continued would have had the power and authority to indemnify its directors, officers, and employees or agents, so that any person who was a director, officer, employee or agent of such merging corporation, or was serving at the request of such merging corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the surviving corporation as such person would have with respect to such merging corporation if its separate existence had continued. SECTION 10. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the corporation" as referred to in this Article. ARTICLE XII AMENDMENTS Unless the power to make, alter, amend or repeal the by-laws is reserved to the shareholders by the articles of incorporation, the bylaws of the corporation may be made, altered, amended or repealed by the shareholders or the board of directors, but no by-law adopted by the shareholders may be altered, amended or repealed by the board of directors if the by-laws so provide. The by-laws may contain any provisions for the regulation and management of the affairs of the CORPORATION NOT inconsistent with the law or the articles of incorporation. EX-3.5 9 AMENDED AND RESTATED BYLAWS 1 EXHBIT 3.5 AMENDED AND RESTATED BYLAWS OF NEURAL APPLICATIONS CORPORATION ARTICLE I. OFFICES, CORPORATE SEAL SECTION 1.01. OFFICES. The Corporation shall have a registered office, a principal office and such other offices as the Board of Directors may determine. SECTION 1.02. CORPORATE SEAL. The Corporation shall have no corporate seal. ARTICLE II. MEETINGS OF STOCKHOLDERS SECTION 2.01. PLACE AND TIME OF MEETINGS. Meetings of the stockholders may be held at such place and at such time as may be designated by the Board of Directors. In the absence of a designation of place, this meeting shall be held at the principal office. In the absence of a designation of time, the meeting shall be held at nine o'clock a.m. Central Standard Time or ten o'clock Central Daylight Savings Time, regardless of whether or not such meeting is held in the United States. SECTION 2.02. ANNUAL MEETINGS. The annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of any other proper business, notice of which was given in the notice of the meeting, shall be held in April of each year on such business day as the Secretary of the Corporation shall determine from time to time. However, the necessity of such annual meeting of stockholders may be dispensed with if it is determined by the President to seek the written consent of the stockholders. If a sufficient number of written consents are not obtained prior to the time hereinabove provided, the Board of Directors shall cause an annual meeting to be held as soon thereafter as possible. SECTION 2.03. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes shall be called by the Secretary at the written request of a majority of the total number of directors, by Chairman of the Board, by the President or by the stockholders owning a majority of the shares outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting shall be limited to the purposes stated in the notice. 2 SECTION 2.04. QUORUM, ADJOURNED MEETINGS. The holders of a majority of the shares outstanding and entitled to vote shall constitute a quorum for the transaction of business at any annual or special meeting. If a quorum is not present at the meeting, those present shall adjourn to such day as they shall agree upon by majority vote. Notice of any adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. At adjourned meetings at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. If a quorum is present, the stockholders may continue to transact business until adjournment notwithstanding the withdrawal of enough stockholders to leave less than a quorum. SECTION 2.05. ORGANIZATION. At each meeting of the stockholders, the Chairman of the Board or in his absence the President or in his absence the chairman chosen by a majority in voting interest of the stockholders present in person or by proxy and entitled to vote shall act as chairman; and the Secretary of the Corporation or in his absence an Assistant Secretary or in his absence any person whom the chairman of the meeting shall appoint shall act as Secretary of the meeting. SECTION 2.06. ORDER OF BUSINESS. The order of business at all meetings of the stockholders shall be determined by the Chairman of the meeting, but such order of business may be changed by the vote of a majority in voting interest of those present or represented at such meeting and entitled to vote thereat. SECTION 2.07. VOTING. Each stockholder of the Corporation entitled to vote at a meeting of stockholders or entitled to express consent in writing the corporate action without a meeting shall have one vote in person or by proxy for each share of stock having voting rights held by him and registered in his name on the books of the Corporation. Upon the request of any stockholder, the vote upon any question before a meeting shall be written by written ballot, and all elections of directors shall be by written ballot. All questions at a meting shall be decided by a majority vote of the number of shares entitled to vote except where otherwise required bay statute, the Certificate of Incorporation or these Bylaws. Any action to be taken by written consent without a meeting may be taken by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting in which all shares entitled to vote thereon were present and voted. For the election of directors, the persons receiving the largest number of votes (up to and including the number of directors to be elected) shall be directors. If directors are to be elected by consent in writing of the largest number of shares in the aggregate and constituting not less than a majority of the total outstanding shares entitled to consent in writing thereon (up to and including the number of directors to be elected) shall be directors. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons shall have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation shall have been 3 furnished with a copy of the instrument or order appointing them or creating a relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one shall vote, his act shall bind all. (ii) if more than one shall vote, the act of the majority voting shall bind all. (iii) If more than one shall vote, but the votes shall be evenly split on any particular matter, then, except as otherwise required by statute, each fraction may vote the shares in question proportionately. SECTION 2.08. INSPECTORS OF ELECTION. At each meeting of the Stockholders, the chairman of such meeting may appoint two inspectors of election to act. Each inspector of election so appointed shall first subscribe an oath or affirmation briefly to execute the duties of an inspector of election at such meeting with strict impartiality and according to the best of his ability such inspectors of election, if any, shall take charge of the ballots at such meeting and after the balloting thereat on any question shall count the ballots thereon and shall make a report in writing to the Secretary of such meeting of the results thereof. An inspector of election need not be a stockholder of the Corporation, and any officer or employee of the Corporation may be an inspector of election on any question other than a vote for or against his election to any position with the Corporation or on any other question in which he may be directly interested. SECTION 2.09. NOTICES OF MEETINGS AND CONSENTS. Every stockholder shall furnish the Secretary of the Corporation with an address at which notices of meetings and notices and consent material with respect to proposed corporate action without a meeting and all other corporate communications may be served on or mailed to him. Except as otherwise provided by the Certificate of Incorporation or by statute, a written notice of each annual and special meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of such meeting or the date on which the corporate action without a meeting is proposed to be taken to each stockholder of record of the Corporation entitled to vote at such meeting by delivering such notice of meeting to him personally or depositing the same in the United States mail, postage prepaid, directed to him at the post office address shown upon the records of the Corporation. Service of notice is complete upon mailing. Personal delivery to any officer of a corporation or association or to any member of a partnership is delivery to such corporation, association or partnership. Every notice of a meeting of stockholders shall state the place, date and hour of the meeting and the purpose or purposes for which the meeting is called. SECTION 2.10. PROXIES. Each stockholder entitled to vote at a meeting of stockholders or consent to corporate action without a meeting may authorize another person or persons to act for him by proxy by an instrument executed in writing. If any such instrument designates two or more persons to act as proxies, a majority of such 4 persons present at the meeting, or, if only one shall be present, then that one, shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. No such proxy shall be valid after three years from the date of its execution unless the proxy provides for a longer period. A proxy may be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient to support an irrevocable power. Subject to the above, any proxy may be revoked if an instrument revoking it or proxy bearing a later date is filed with the Secretary. SECTION 2.11 WAIVER OF NOTICE. Notice of any annual or special meeting may be waived either before, at or after such meeting in writing signed by the person or persons entitled to the notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transacting of any business because the meeting is not lawfully called or convened. SECTION 2.12. WRITTEN ACTION. Any action that may be taken at a meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent in writing, setting forth the actions so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be required to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 2.13. STOCKHOLDER LIST. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before each meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. ARTICLE III. BOARD OF DIRECTORS SECTION 3.01. GENERAL POWERS. The business of the Corporation shall be managed by the Board of Directors. 5 SECTION 3.02. NUMBER, QUALIFICATION AND TERM OF OFFICE. The number of directors shall be established by a resolution adopted by a majority of the total number of directors. Directors need not be stockholders. Each director shall hold office until the annual meeting of stockholders next held after his election or until the stockholders have elected directors by consent in writing without a meeting and until his successor is elected and qualified or until his earlier death, resignation or removal. SECTION 3.03. ANNUAL MEETING. As soon as practicable after each election of directors, the Board of Directors shall meet at the registered office of the Corporation, or at such other place previously designated by the Board of Directors, for the purpose of electing the officers of the Corporation and for the transaction of such other business as may come before the meeting. SECTION 3.04. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held from time to time at such time and place as may be fixed by resolution adopted by a majority of the total number of directors. SECTION 3.05. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President, or by any two of the directors and shall be held from time to time at such time and place as may be designated in the notice of such meeting. SECTION 3.06. NOTICE OF MEETINGS. No notice need be given of any annual or regular meeting of the Board of Directors. Notice of each special meeting of the Board of Directors shall be given by the secretary who shall give at least twenty-four hours' notice thereof to each directors by mail, telephone, telegram, or in person. Notice shall be effective upon receipt. SECTION 3.07. WAIVER OF NOTICE. Notice of any meeting of the Board of Directors may be waived either before, at, or after such meeting in writing signed by each director. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purposes of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 3.08. QUORUM. A majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless these Bylaws require a greater number. SECTION 3.09. VACANCIES. Any vacancy among the directors or increase in the authorized number of directors shall be filled for the unexpired term by a majority of the directors then in office though less than a quorum or by the sole remaining director. When one or more directors shall resign from the Board, effective at a future date, a 6 majority of the directors then in office may fill such vacancy or vacancies to take effect when such resignation or resignations shall become effective. SECTION 3.10. REMOVAL. Any director may be removed from office at any special meeting of the stockholders either with or without cause. If the entire Board of Directors or any one or more directors be so removed, new directors shall be elected at the same meeting. SECTION 3.11. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution adopted by a majority of the total number of directors, designate one or more committees, each to consist of two or more of the directors of the Corporation, which, to the extent provided in the resolution, may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committees shall have such name or names as may be determined by the resolution adopted by the directors. The committees shall keep regular minutes of their proceedings and report the same to the Board of Directors when required. SECTION 3.12. WRITTEN ACTION. Any action required or permitted to be taken at a meeting of the Board of Directors or any committee thereof may be taken without a meeting if all directors or committee members consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. SECTION 3.13. COMPENSATION. Directors who are not salaried officers of the Corporation may receive a fixed sum per meeting attended or a fixed annual sum and such other forms of reasonable compensation as may be determined by resolution of the Board of Directors. All directors shall receive their expenses, if any, of attendance at meetings of the Board of Directors or any committee thereof. Any director may serve the Corporation in any other capacity and receive proper compensation therefor. SECTION 3.14. CONFERENCE COMMUNICATIONS. Directors may participate in an meeting of the Board of Directors, or of any duly constituted committee thereof, by means of a conference telephone conversation or other comparable communication technique whereby all persons participating in the meeting can hear and communicate to each other. For the purposes of establishing a quorum and taking any action at the meeting, such directors participating pursuant to this Section 3.14 shall be deemed present in person at the meeting; and the place of the meeting shall be the place of origination of the conference telephone conversation or other comparable communication technique. 7 ARTICLE IV. OFFICERS SECTION 4.01. NUMBER. The officers of the Corporation shall consist of a President, at least one Vice President, a Secretary, a Treasurer, and any officers and agents as the Board of Directors by a majority vote of the total number of directors may designate. Any person may hold two or more offices. SECTION 4.02. ELECTION, TERM OF OFFICE, AND QUALIFICATIONS. At each annual meeting of the Board of Directors all officers, from within or without their number, shall be elected. Such officers shall hold office until the next annual meeting of the directors or until their successors are elected and qualified, or until such office is eliminated by a vote of the majority of all directors. Officers who may be directors shall hold office until the election and qualification of their successors notwithstanding an earlier termination of their directorship. SECTION 4.03. REMOVAL AND VACANCIES. Any officer may be removed from his office by a majority vote of the total number of directors with or without cause. Such removal shall be without prejudice to the contract rights of the person so removed. A vacancy among the officers by death, resignation, removal, or otherwise shall be filled for the unexpired term by the Board of Directors. SECTION 4.04. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is elected, shall preside at all meetings of the stockholders and directors and shall have such other duties as may be prescribed, from time to time, by the Board of Directors. SECTION 4.05. PRESIDENT. The President shall have general active management of the business of the Corporation. He shall preside at all meetings of the stockholders and directors. He shall be the chief executive officer of the Corporation and shall see that all orders and resolutions of the directors are carried into effect. He shall be ex officio a member of all standing committees. He may execute and deliver in the name of the Corporation any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the Corporation and in general shall perform all duties usually incident to the office of the president. He shall have such other duties as may, from time to time, be prescribed by the Board of Directors. SECTION 4.06. VICE PRESIDENT. Each Vice President shall have such powers and shall perform such duties as may be prescribed by the Board of Directors or by the President. In the event of absence or disability of the President, Vice Presidents shall succeed to his power and duties in the order designated by the Board of Directors. SECTION 4.07. SECRETARY. The Secretary shall by secretary of and shall attend all meetings of the stockholders and Board of Directors and shall record all 8 proceedings of such meetings in the minute book of the Corporation. He shall give proper notice of meetings of stockholders and the Board of Directors. He shall perform such other duties as may from time to time be prescribed by the Board of Directors or by the President. SECTION 4.08. TREASURER. The Treasurer shall keep accurate accounts of all moneys of the Corporation received or disbursed. He shall deposit all moneys, drafts and checks in the name of and to the credit of the Corporation in such banks and depositaries as a majority of the whole Board of Directors shall from time to time designate. He shall have the power to endorse for deposit all notes, checks and drafts received by the Corporation. He shall disburse the funds of the Corporation as ordered by the directors, making proper vouchers therefor. He shall render to the President and the Board of Directors whenever required an account of all his transactions as Treasurer and of the financial condition of the Corporation and shall perform such other duties as may from time to time be prescribed by the Board of Directors or by the President. SECTION 4.09. DUTIES OF OTHER OFFICERS. The duties of such other officers and agents as the Board of Directors may designate shall be set forth in the resolution creating such office or by subsequent resolution. SECTION 4.10. COMPENSATION. The officers of the Corporation shall receive such compensation for their services as may be determined from time to time by resolution of the Board of Directors or by one or more committees to the extent so authorized from time to time by the Board of Directors. ARTICLE V. SHARES AND THEIR TRANSFER SECTION 5.01. CERTIFICATES FOR STOCK. The shares of stock of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation's stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to a certificate, to be in such form as shall be prescribed by the Board of Directors, certifying the number of share in the Corporation owned by such person. The certificates for such shares shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman of the Board, the President or a vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Every certificate surrendered to the Corporation for exchange or transfer shall be canceled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such certificate shall have been so canceled, except in cases provided for in Section 5.05. 9 SECTION 5.02. ISSUANCE OF STOCK. The Board of directors is authorized to cause to be issued stock of the Corporation up to the bull amount authorized by the Certificate of Incorporation in such amounts and for such consideration as may be determined by the Board of Directors. No shares shall be allotted except in consideration of cash, labor, personal property, or real property, or leases thereof, or of an amount transferred from surplus to stated capital upon a share dividend. At the time of such allotment of stock, the Board of Directors shall state its determination of the fair value to the Corporation in monetary terms of any consideration other than cash for which share are allotted. Stock so issued shall be fully paid and non-assessable. The amount of consideration to be received in cash or otherwise shall not be less than the par value of the shares so allotted. Treasury shares may be disposed of by the Corporation for such consideration, expressed in dollars, as may be fixed by the Board of Directors. SECTION 5.03. PARTLY PAID STOCK. The Corporation may issue the whole or any part of its stock as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each certificate issued to represent any such partly paid stock, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid stock, the Corporation shall declare a dividend upon partly paid stock of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. The Board of Directors may, from time to time, demand payment, in respect of each share of stock not fully paid, of such sum of money as the necessities of the business may, in the judgment of the Board of Directors, require, not exceeding in the whole the balance remaining unpaid on such stock, and such sum so demanded shall be paid to the Corporation at such times and by such installments as the directors shall direct. The directors shall give written notice of the time and place of such payments, which notice shall be mailed at least 30 days before the time for such payment, to each holder of or subscriber for stock which is not fully paid at his last know post office address. SECTION 5.04. TRANSFER OF STOCK. Transfer of stock on the books of the Corporation may be authorized only by the stockholder, the stockholder's legal representative or the stockholder's duly authorized attorney-in-fact and only upon, for stock represented by certificates, the surrender of the certificate or the certificates representing such stock or, for stock not represented by certificates, the submission of a duly executed assignment covering such stock. The Corporation may treat as the absolute owner of stock of the Corporation the person or persons in whose name stock is registered on the books of the Corporation. SECTION 5.05. LOSS OF CERTIFICATES. Any stockholder claiming a certificate for stock to be lost, stolen or destroyed shall make an affidavit of that fact in such form as the Board of Directors may require and shall, if the Board of Directors may require, give the Corporation a bond of indemnity in form, in an amount, and with one or more sureties satisfactory to the Board of Directors, to indemnify the Corporation against any claims which may then be issued in the same tenor and for the same number of shares as the one claimed to have been lost, stolen or destroyed. 10 SECTION 5.06. FACSIMILE SIGNATURES. Whenever any certificate is countersigned by a transfer agent or by a registrar other than the Corporation or its employee, then the signatures of the officers or agents of the Corporation may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on any such certificate shall cease to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation as though the person who signed such certificate or whose facsimile signature or signatures had been placed thereon were such officer, transfer agent or registrar at the date of issue. ARTICLE VI. DIVIDENDS, SURPLUS, ETC. SECTION 6.01. DIVIDENDS. The Board of Directors may declare dividends from the Corporation's surplus, or if there be none, out of its net profits for the current fiscal year, and/or the preceding fiscal year in such amounts as in their opinion the condition of the affairs of the Corporation shall render it advisable unless otherwise restricted by law. SECTION 6.02. USE OF SURPLUS, RESERVES. The Board of Directors may use any of its property or funds, unless such would cause an impairment of capital, in purchasing any of the stock, bonds, debentures, notes, scrip or other securities or evidences of indebtedness of the Corporation. The Board of Directors may from time to time set aside from its surplus or net profits such sums as it deems proper as a reserve fund for any purpose. ARTICLE VII. BOOKS AND RECORDS, AUDIT, FISCAL YEAR SECTION 7.01. BOOKS AND RECORDS. The Board of Directors of the Corporation shall cause to be kept: (a) a share ledger which shall be a charge of an officer designated by the Board of Directors; (b) records of all proceedings of stockholders and directors; and (c) such other records and books of account as shall be necessary and appropriate to the conduct of the corporate business. SECTION 7.02. AUDIT. The Board of Directors shall cause the records and books of account of the Corporation to be audited at least once in each fiscal year and at such other times as it may deem necessary or appropriate. SECTION 7.03. ANNUAL REPORT. The Board of Directors shall cause to be filed with the Delaware Secretary of State in each year the annual report required by law. SECTION 7.04. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. 11 SECTION 7.05. EXAMINATION BY STOCKHOLDERS. Any stockholder of record of the Corporation, upon written demand under oath stating the purpose thereof, shall have the right to inspect in person or by agent or attorney, during usual business hours, for any proper purpose, the Corporation's stock ledger, a list of its stockholders and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. Holders of voting trust certificates representing stock of the Corporation shall be regarded as stockholders for the purpose of this subsection. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal office. ARTICLE VIII. INDEMNIFICATION SECTION 8.01. INDEMNIFICATION. The Corporation shall indemnify such persons for such liabilities in such manner under such circumstances and to such extent as permitted by Section 245 of the Delaware General Corporation Law, as now enacted or hereafter amended. The Board of Directors may authorize the purchase and maintenance of insurance and/or the execution of individual agreements for the purpose of such indemnification, and the Corporation shall advance all reasonable costs and expenses (including attorney's fees) incurred in defending any action, suit or proceeding to all persons entitled to indemnification under this section 8.01, all in the manner, under the circumstances and to the extent permitted by Section 145 of the Delaware General Corporation Law, as now enacted or hereafter amended. ARTICLE IX. MISCELLANEOUS SECTION 9.01. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, The Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. (b) If no record date is fixed: (1) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is 12 waived, at the close of business on the day next preceding the day on which the meeting is held. (2) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. (3) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) A determination of stockholders of record entitle to notice of or vote at a Meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 9.02. PERIODS OF TIME. During any period of time prescribe by these Bylaws, the date from which the designated period of time begins to run shall not be included, and the last day of the period so computed shall be included. SECTION 9.03. VOTING SECURITIES HELD BY THE CORPORATION. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the Corporation (a) to attend and to vote at any meeting of security holders of other corporations in which the Corporation may hold securities; (b) to execute any proxy for such meeting on behalf of the Corporation; or (c) to execute a written action in lieu of a meeting of such other corporation on behalf of the Corporation. At such meeting, by such proxy or by such writing in lieu of meeting, the President shall possess and may exercise any and all rights and powers incident to the ownership of such securities that the Corporation might have possessed and exercised if it had been present. The Board of Directors may, from time to time, confer like powers upon any person or persons. SECTION 9.04. PURCHASE AND SALE OF SECURITIES. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the Corporation to purchase, sell, transfer or encumber any and all securities of any other corporation owned by the Corporation and may execute and deliver such documents as may be necessary to effectuate such purchase, sale, transfer or encumbrance. The Board of Directors may, from time to time, confer like powers upon any other person or persons. 13 ARTICLE X. AMENDMENTS SECTION 10.01. These Bylaws may be amended, altered or repealed by a vote of the majority of the total number of directors or of the stockholders at nay meeting upon proper notice. EFFECTIVE DATE OF BYLAWS: DECEMBER 1, 1995 EX-4.1 10 SPECIMEN OF COMMON STOCK CERTIFICATE 1 EXHIBIT 4.1 No. Shares ----------- ------------ STOCKPOINT. THIS CERTIFIES THAT is the owner of ----------------------------------------- Shares of the Capital Stock of - ------------------------------------------------ transferable only on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this Certificate properly endorsed. IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunto affixed this day of A.D. -------------- -------------------- SHARES $ EACH 2 CERTIFICATE FOR SHARES OF THE CAPITAL STOCK ISSUED TO DATE For Value Received hereby sell, assign and transfer unto ------------ - ------------------------------------------------------------------------------- Shares - ----------------------------------------------------------------------- of the Capital Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint --------------------------------------------- Attorney to transfer the said Stock on the books of the within named Company with full power of substitution in the premises. Dated --------------------------- In presence of --------------------------------------------------- NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. EX-4.2 11 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is entered into as of August 15, 1997, by and among Neural Applications Corporation, a Delaware corporation (the "Company"), and the persons listed on the signature page hereof (the "Purchasers"). WHEREAS, the Purchasers have agreed to purchase shares of the Company's Convertible Series C Voting Preferred Stock (the "Series C Preferred Stock"). WHEREAS, in connection with such purchase, the Company and the Purchasers desire to enter into certain arrangements with respect to the registration for public sale under the Securities Act of 1933, as amended (the "Securities Act"), of the shares of the Company's Common Stock, $.01 par value per share, issuable upon conversion of the Series C Preferred Stock. NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchasers hereby agree as follows: 1. Definitions. 1.1 "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.2 "Company" shall mean Neural Applications Corporation, a Delaware corporation. 1.3 "Common Shares" shall mean the shares of common stock, par value $.01 per share, authorized by the Company's Certificate of Incorporation and any additional shares of common stock which may be authorized in the future by the Company, and any stock into which such Common Shares may hereafter be changed, and shall also include capital stock of any other class of the Company which is not preferred as to dividends or assets over any other class of stock of the Company and which is not subject to redemption. 1.4 "Public Offering" shall mean any offering of Common Shares to the public, either on behalf of the Company or any of its security holders, pursuant to an effective registration statement under the Securities Act. 1 2 1.5 "Purchasers" shall mean the holders from time to time of the Series C Preferred Stock. 1.6 "Registrable Securities" shall mean (a) the Common Shares at any time issued or subject to issuance upon the conversion of the Series C Preferred Stock and any other series of preferred stock, warrants, options or rights, the holders of which are granted registration rights by agreement with the Company and (b) any additional securities issued with respect to the above-described securities upon any stock split, stock dividend, recapitalization, or similar event. Registrable Securities shall cease to be Registrable Securities when (x) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (y) such securities shall be eligible to be distributed pursuant to Rule 144 under the Securities Act in a single three-month period by the holder thereof or (z) such securities shall have ceased to be outstanding. 1.7 "Registration Expenses" shall mean the expenses described in Section 5. 1.8 "Securities Act" shall mean the Securities Act of 1933, as amended. 1.9 "Series C Preferred Stock" shall mean the outstanding shares of the Convertible Series C Voting Preferred Stock, par value $.01 per share, of the Company, and any securities (other than Common Shares) into which such shares may hereafter be changed. 2. Demand Registration. 2.1 Subject to Sections 2.4 and 2.5, if at any time after one year has elapsed from the date the Company first consummates a Public Offering pursuant to a registration statement on Form S-1 or Form SB-2, the Company shall receive a written request therefor from the record holder or holders of an aggregate of at least 51% of the Registrable Securities, the Company shall prepare and file a registration statement under the Securities Act covering such number of Registrable Securities as are the subject of such request and shall use its best efforts to cause such registration statement to become effective. Upon the receipt of a registration request meeting the requirements of this Section 2.1, the Company shall promptly give written notice to all other record holders of Registrable Securities that such registration is to be effected. The Company shall include in such registration statement such additional Registrable Securities as such other record holders request in writing within thirty (30) days after the date of the Company's written notice to them. If (a) the holders of a majority of the Registrable Securities for which registration has been requested pursuant to this Section 2.1 determine for any reason not to proceed with the registration at any time before the related registration statement has been declared effective by the Commission, (b) such 2 3 registration statement, if theretofore filed with the Commission, is withdrawn and (c) the holders of the Registrable Securities subject to such registration statement agree to bear their own Registration Expenses incurred in connection therewith and to reimburse the Company for the Registration Expenses incurred by it in such connection or if such registration statement, if theretofore filed with the Commission, is withdrawn at the initiative of the Company, then the holders of the Registrable Securities shall not be deemed to have exercised their demand registration right pursuant to this Section 2.1. 2.2 At the request of the holders of a majority of the Registrable Securities to be registered, the method of disposition of all Registrable Securities included in such registration shall be an underwritten Public Offering. The managing underwriter of any such Public Offering shall be selected by the Company. If in the good faith judgment of the managing underwriter of such Public Offering, the inclusion of all of the Registrable Securities the registration of which has been requested would interfere with their successful marketing, the number of Registrable Securities to be included in the Public Offering shall be reduced, pro rata, among the requesting holders thereof in proportion to the number of Registrable Securities included in their respective requests for registration. Registrable Securities that are so excluded from such underwritten Public Offering shall be withheld by the holders thereof for such period, not exceeding one hundred and twenty (120) days, as the managing underwriter reasonably determines is necessary to effect such Public Offering. 2.3 The Company shall be obligated to prepare, file and cause to be effective only one (1) registration statement pursuant to Section 2.1. 2.4 Notwithstanding the foregoing, the Company may delay initiating the preparation and filing of any registration statement requested pursuant to Section 2.1 for a period not to exceed one hundred eighty (180) days if, in the good faith judgment of the Company's Board of Directors, effecting the registration would adversely affect a proposed Public Offering by the Company or would require the premature disclosure of any financing, acquisition, disposition of assets or stock, merger or other comparable transaction or would require the Company to make public disclosure of information the public disclosure of which could have material adverse effect on the Company. 2.6 Notwithstanding anything to the contrary contained herein, at any time within thirty (30) days after receiving a demand for registration pursuant to Section 2.1, the Company may elect to effect an underwritten primary registration in lieu of the requested registration. If the Company so elects, the Company shall give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and shall afford such holders the rights contained in Article 3 with 3 4 respect to "piggyback" registrations. In such event, the demand for registration pursuant to Section 2.1 shall be deemed to have been withdrawn. 3. Piggyback Registration. 3.1 From and after the date on which one year has elapsed from the date the Company first consummates a Public Offering pursuant to a registration statement on Form S-1 or Form SB-2, each time the Company shall determine to proceed with the actual preparation and filing of a registration statement under the Securities Act in connection with the proposed offer and sale for money of any of its securities by it or any of its security holders (other than a registration statement on Form S-8, Form S-4 or other limited purpose form), the Company will give written notice of its determination to all record holders of Registrable Securities. Upon the written request of a record holder of any Registrable Securities given within 30 days after the date of any such notice from the Company, the Company will, except as herein provided, cause all Registrable Securities the registration of which is requested to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Registrable Securities to be so registered; provided, however, that nothing herein shall prevent the Company from, at any time, abandoning or delaying any registration; and provided, further, that if the Company determines not to proceed with a registration after the registration statement has been filed with the Commission, and the Company's decision not to proceed is primarily based upon the anticipated Public Offering price of the securities to be sold by the Company, the Company shall promptly complete the registration for the benefit of those selling security holders who wish to proceed with a Public Offering of their Registrable Securities and who agree to bear all of the Registration Expenses in excess of $25,000 incurred by the Company as the result of such registration after the Company has decided not to proceed. In the discretion of the holders of the Registrable Securities to be included in the registration (provided that such holders are the record holders of at least 51% of the Registrable Securities), such registration may count as a demand registration under Section 2.1 (if it otherwise meets the requirements of Section 2.1) for which the Company will pay all Registration Expenses. 3.2 If any registration pursuant to Section 3.1 is underwritten in whole or in part, the Company may require that the Registrable Securities included in the registration be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. If, in the good faith judgment of the managing underwriter of the Public Offering, the inclusion of all of the Registrable Securities originally covered by requests for registration would reduce the number of shares to be offered by the Company or interfere with the successful marketing of the shares offered by the Company, the number of Registrable Securities to be included in the Public Offering may be reduced in the following manner: first, securities held by officers and directors of the Company (other than Registrable Securities) shall be excluded from such underwritten public offering to the extent 4 5 required by the managing underwriter, second, if a further reduction in the Public Offering is required, any securities, other than Registrable Securities, proposed to be sold in the Public Offering by persons other than the Company shall be excluded and third, if a further reduction in the Public Offering is required, the Registrable Securities requested to be included in the Public Offering shall be reduced, pro rata, among the requesting holders thereof in proportion to the number of Registrable Securities included in their respective requests for registration. The Registrable Securities which are thus excluded from the underwritten Public Offering shall be withheld from the market by the holders thereof for a period which the managing underwriter reasonably determines is necessary in order to effect the Public Offering. 4. Short Form Registration. In addition to the registration rights provided in Articles 2 and 3, if the Company qualifies for the use of Form S-3 or any similar registration form then in force, the Company shall on one occassion at its expense at the request of a majority of the holders of Registrable Securities then outstanding file a registration statement on such form covering Registrable Securities on behalf of such holder or holders. The Company shall give notice to all the holders of Registrable Securities who did not join in such request and afford them a reasonable opportunity to do so. 5. Registration Procedures. If and whenever the Company is required by the provisions of Article 2, Article 3 or Articles 4 to effect a registration of Registrable Securities under the Securities Act, the Company will use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended methods of disposition specified by the holders participating therein. Without limiting the foregoing, the Company in each such case will, as expeditiously as possible: 5.1 In the case of a demand registration pursuant to Section 2.1 or Article 4, prepare and file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations thereunder) and use its best efforts to cause such registration statement to become effective; provided, however, that as far in advance as practical before filing such registration statement or any amendment thereto, the Company will furnish counsel for the requesting holders of Registrable Securities with copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits), and any such holder shall have the opportunity to object to any information pertaining solely to such holder that is contained therein and the Company will make the corrections reasonably requested by such holder with respect to such information prior to filing such registration statement or amendment. 5.2 Prepare and file with the Commission such amendments and supplements to such registration statement and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply with the provisions of the Securities Act with respect to the 5 6 disposition of all Registrable Securities included in such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (a) such time as all of the Registrable Securities included in such registration statement have been disposed of in accordance with the intended methods of disposition by the holder or holders thereof as set forth in such registration statement or (b) one hundred eighty (180) days after such registration statement becomes effective. 5.3 Promptly notify each requesting holder and the underwriter or underwriters, if any, of: (a) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (b) any written request by the Commission for amendments or supplements to such registration statement or prospectus; (c) any notification received by the Company from the Commission regarding the Commission's initiation of any proceeding with respect to, or of the issuance by the Commission of, any stop order suspending the effectiveness of such registration statement; and (d) the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. 5.4 Furnish to each holder of Registrable Securities included in such registration statement such number of conformed copies of such registration statement and of each amendment and supplement thereto, and such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such seller's Registrable Securities, and such other documents, as such holder may reasonably request to facilitate the disposition of its Registrable Securities. 5.5 Use its best efforts to register or qualify all Registrable Securities included in such registration statement under the securities or "blue sky" laws of such states as each holder of Registrable Securities shall reasonably request within twenty (20) days following the original filing of such registration statement and to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such states of the Registrable 6 7 Securities owned by such holder, except that the Company shall not for any such purpose be required (a) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this Section 5.5 be obligated to be so qualified, (b) to consent to general service of process in any such jurisdiction or (c) to subject itself to taxation in any such jurisdiction by reason of such registration or qualification. 5.6 Use its best efforts to cause all Registrable Securities included in such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable each holder thereof to consummate the disposition of such Registrable Securities. 5.7 Notify each holder whose Registrable Securities are included in such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 5.8 Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission. 5.9 Use its best efforts to cause all Registrable Securities included in such registration statement to be listed, upon official notice of issuance, on any securities exchange or quotation system on which any of the securities of the same class as the Registrable Securities are then listed. 5.10 The Company may require each holder whose Registrable Securities are being registered to, and each such holder, as a condition to including Registrable Securities in such registration statement, shall, furnish the Company and the underwriters with such information and affidavits regarding such holder and the distribution of such Registrable Securities as the Company and the underwriters may from time to time reasonably request in writing in connection with such registration statement. At any time during the effectiveness of any registration statement covering Registrable Securities offered by a holder, if such holder becomes aware of any change materially affecting the accuracy of the information contained in such registration 7 8 statement or the prospectus (as then amended or supplemented) relating to such holder, it will immediately notify the Company of such change. 5.11 Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5.7, each holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder receives the copies of the supplemented or amended prospectus contemplated by Section 5.7 and, if so directed by the Company, shall deliver to the Company all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities. 6. Expenses. With respect to any registration requested pursuant to Article 2 (except as otherwise provided in such Article with respect to a registration voluntarily terminated at the request of the requesting holders of Registrable Securities), Article 3 (except as otherwise provided in such Article with respect to a registration continued by holders of Registrable Securities who wish to proceed with a Public Offering that is withdrawn by the Company) or Article 4, the Company shall bear all of the expenses ("Registration Expenses") incident to the Company's performance of or compliance with its obligations under this Agreement in connection with such registration including, without limitation, all registration, filing, securities exchange listing and NASD fees, all registration, filing, qualification and other fees and expenses or complying with state securities or "blue sky" laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, premiums and other costs of any policies of insurance against liabilities arising out of the Public Offering of the Registrable Securities being registered obtained by the Company (it being understood that the Company shall have no obligation to obtain such insurance) and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities; but excluding underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities and any fees and disbursements of counsel and accountants to the holders of the Registrable Securities, which discounts, commissions, transfer taxes, fees and disbursements shall in any registration be payable by the holders of the Registrable Securities being registered, pro rata in proportion to the number of Registrable Securities being sold by them. 7. Indemnification. 7.1 The Company will, to the full extent permitted by law, indemnify and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of this Agreement, and its directors, 8 9 officers and partners and each other person, if any, who controls such holder within the meaning of the Securities Act, from and against any and all losses, claims, damages, expenses or liabilities, joint or several (collectively, "Losses") to which such holder or any such director, officer, partner or controlling person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and the Company will reimburse the holder and each such director, officer, partner and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending against any such Losses (or action or proceeding in respect thereof); provided, however, that the Company will not be liable in any such case to the extent that any such Losses arise out of or are based upon (a) an untrue statement or alleged untrue statement or omission or alleged omission made in conformity with written information furnished by such holder specifically for use in the preparation of the registration statement or (b) such holder's failure to send or give a copy of the final prospectus to the persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, partner or controlling person of such holder and shall survive the transfer of such securities by such holder. The Company shall also indemnify each other person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent provided above with respect to holders of Registrable Securities. 7.2 Each holder of Registrable Securities which are included in a registration pursuant to the provisions of this Agreement will, to the full extent permitted by law, indemnify and hold harmless the Company, its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act from and against any and all Losses to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission 9 10 or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by such holder specifically for use in the preparation of such registration statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person of the Company. The holder of Registrable Securities included in a registration statement shall also indemnify each other person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent as provided above with respect to the Company. In no event shall the liability of any holder under this Section 7.2 exceed the net proceeds received by such holder from the sale of their Registrable Securities. 7.3 Promptly after receipt by a party indemnified pursuant to the provisions of Section 7.1 or Section 7.2 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2, promptly notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against any indemnified party, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if the defendants in any action include both the indemnified party and the indemnifying party and the indemnified party reasonably concludes that there is a conflict of interest that would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party shall have the right to select separate counsel to participate in the defense of such action on behalf of the indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of Section 7.1 or Section 7.2 for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof unless (a) the indemnified party shall have employed counsel in accordance with the proviso of the preceding sentence, (b) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (c) the 10 11 indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the indemnified parties with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of additional counsel or counsels for the indemnified parties. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation without the consent of the indemnified party. No indemnifying party shall be subject to any liability for any settlement made without its consent. An indemnified party may at any time elect to participate in the defense of any claim or proceeding at its own expense. 8. Covenants Relating to Rule 144. If at any time the Company is required to filed reports in compliance with either Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") the Company will (a) file reports in compliance with the Exchange Act and (b) comply with all rules and regulations of the Commission applicable to the use of Rule 144. 9. Underwritten Offerings. If a distribution of Registrable Securities pursuant to a registration statement is to be underwritten, the holders whose Registrable Securities are to be distributed by such underwriters shall be parties to such underwriting agreement. No requesting holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any requesting holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to the Company and the managing underwriter, and each of the remaining requesting holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining requesting holder bears to the total number of Registrable Securities being registered by all such remaining requesting holders. 10. Stand-Off Agreement. Each holder of Registrable Securities agrees, so long as such holder holds at least 1% of the Company's outstanding voting equity securities, in connection with the Company's initial Public Offering, upon request of the Company or the underwriters managing such Public Offering, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any 11 12 Common Shares of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not exceeding 180 days) from the effective date of the registration statement relating to such initial Public Offering as may be requested by the underwriters; provided, however, that all other holders of at least 1% of the Company's outstanding voting equity securities and all of the officers and directors of the Company who own stock of the Company must also agree to not less onerous restrictions. 11. Amendment. The Company shall not amend this Agreement without the written consent of the holders of more than 50% of the Registrable Securities. 12. Termination. This Agreement, and all of the Company's obligations hereunder (other than its obligations pursuant to Article 7, which obligations shall survive such termination), shall terminate upon the earlier to occur of (a) the date on which there are no Registrable Securities outstanding or (b) September 30, 2002. Neural Applications Corporation By: ____________________________ Name: _______________________ Title: ________________________ [NAMES OF ALL PURCHASERS] By: Neural Applications Corporation, as Attorney-in-Fact By: ____________________________ Name: _______________________ Title: ________________________ 12 EX-4.3 12 TRUST INDENTURES DATED 8/1/1997 1 EXHIBIT 4.3 -------------------------------------- NEURAL APPLICATIONS CORPORATION TO FIRST TRUST & SAVINGS BANK ------------- TRUST INDENTURE ------------- Dated as of August 1, 1997 -------------------------------------- -1- 2 TABLE OF CONTENTS (The Table of Contents is not part of the Indenture] ARTICLE I ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES............... 2 Section 101. Amount, Execution and Delivery............................................. 2 Section 102. Execution.................................................................. 2 Section 103. Form, Denominations and Dating............................................. 2 Section 104. Calculation and Payment of Interest........................................ 2 Section 105. Payment of Principal....................................................... 3 Section 106. Exchange and Registration of Transfer ..................................... 3 Section 107. Mutilated, Destroyed, Lost and Stolen Debentures .......................... 3 Section 108. Cancellation and Destruction of Debentures ................................ 4 Section 109. Paying Agents.............................................................. 4 ARTICLE II COVENANTS OF THE COMPANY ............................................................ 5 Section 201. Payment of Principal and Interest.......................................... 5 Section 202. Letter of Credit; Substitute Letter of Credit ............................. 5 Section 203. Office or Agency for Certain Purposes ..................................... 5 Section 204. Pledge, Mortgage or Sale of Assets......................................... 5 Section 205. Appointments to Fill Vacancies in Trustee's Office ........................ 6 Section 206. Certificate to Trustee..................................................... 6 Section 207. Waiver of Certain Covenants................................................ 6 ARTICLE III DEBENTURE HOLDERS LISTS, COMMUNICATIONS TO DEBENTURE HOLDERS, AND COMPANY AND TRUSTEE REPORTS................................................7 Section 301. Company to Furnish Trustee Information as to Names and Addresses of Debenture Holders ............................................................7 Section 302. Preservation of Information; Communications to Debenture Holders .............7 Section 303. Reports by Company............................................................8 ARTICLE IV REDEMPTION OF DEBENTURES ...............................................................8 Section 401. Right of Redemption and Redemption Price ................................... 8 Section 402. Notice of Redemption..........................................................8 Section 403. Payment of Debentures Called for Redemption ................................ 9 Section 404. Deposit of Redemption Price...................................................9 ARTICLE V REMEDIES OF THE TRUSTEE AND DEBENTURE HOLDERS ON EVENT OF DEFAULT.................................................................................9 Section 501. Events of Default Defined; Acceleration of Maturity; Waiver of Default ..... 9 Section 502. Collection of Indebtedness by Trustee; Call of Letter of Credit; Trustee May Prove Debt..............................................................10 Section 503. Application of Proceeds .....................................................11 Section 504. Limitations on Suits by Debenture Holders ................................. 12 Section 505. Powers and Remedies Cumulative; Delay or Omission Not Waiver .............. 13 Section 506. Control by Debenture Holders; Waiver of Default ........................... 13 Section 507. Trustee to Give Notice of Defaults Known to It, but May Withhold in Certain Circumstances........................................................13 Section 508. Right of Court to Require Filing of Undertaking to Pay Costs .............. 13 ARTICLE VI CONCERNING THE TRUSTEE ................................................................14 Section 601. Duties and Responsibilities of Trustee ......................................14
-2- 3 Section 602. Certain Rights of Trustee....................................................15 Section 603. Trustee Exoneration From Responsibility ................................... 16 Section 604. Moneys Held by Trustee ......................................................16 Section 605. Compensation of Trustee .....................................................16 Section 606. Right of Trustee to Rely on Certificate of Certain Officers .................16 Section 607. Conflicting Interests........................................................16 Section 608. Persons Eligible for Appointment as Trustee .................................19 Section 609. Resignation and Removal of Trustee; Appointment of Successor ................19 Section 610. Acceptance of Appointment by Successor Trustee ..............................20 Section 611. Merger or Consolidation of Trustee...........................................21 Section 612. Preferential Collection of Claims Against Company ...........................21 ARTICLE VII CONCERNING THE DEBENTURE HOLDERS.......................................................24 Section 701. Evidence of Action Taken by Debenture Holders ...............................24 Section 702. Proof of Execution of Instruments and of Holding of Debentures ..............24 Section 703. When Deemed Absolute Owners..................................................25 Section 704. Debentures Owned by Company Deemed Not Outstanding...........................25 Section 705. Right of Revocation of Action Taken .........................................25 ARTICLE VIII DEBENTURE HOLDERS' MEETINGS............................................................25 Section 801. Purposes for Which Debenture Holders' Meetings May Be Called ................25 Section 802. Call of Meetings by Trustee..................................................26 Section 803. Company and Debenture Holders May Call Meetings .............................26 Section 804. Persons Entitled to Vote at Meeting .........................................26 Section 805. Determination of Voting Rights; Conduct and Adjournment of Meeting ..........26 Section 806. Counting Votes and Recording Action of Meeting ..............................27 Section 807. Meeting Does Not Hinder Exercise of Rights ..................................27 ARTICLE IX SUPPLEMENTAL INDENTURES................................................................27 Section 901. Supplemental Indentures Without Consent of Debenture Holders.................27 Section 902. Supplemental Indentures with Consent of Debenture Holders....................28 Section 903. Effect of Supplemental Indentures............................................29 Section 904. Notation on Debentures in Respect of Supplemental Indentures.................29 ARTICLE X CONSOLIDATION, MERGER, AND SALE........................................................29 Section 1001. Company May Consolidate or Merge on Certain Terms............................29 Section 1002. Sale of Assets by the Company................................................29 ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE; UNCLAIMED MONEYS.......................................................................30 Section 1101. Satisfaction and Discharge of Indenture......................................30 Section 1102. Application by Trustee of Funds Deposited for Payment of Debentures..........30 Section 1103. Defeasance and Discharge of Indenture and the Debentures.....................30 Section 1104. Legal Defeasance and Discharge...............................................30 Section 1105. Covenant Defeasance..........................................................31 Section 1106. Conditions to Legal or Covenant Defeasance. ............................. 31 Section 1107. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions....................................................32 Section 1108. Reinstatement................................................................32 Section 1109. Return of Unclaimed Moneys...................................................33
-3- 4 ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS..............................................................................33
-4- 5 ARTICLE XIII MISCELLANEOUS PROVISIONS AND DEFINITIONS...............................................33 Section 1301. Successors...................................................................33 Section 1302. Benefit of Indenture Restricted to Parties and Debenture Holders.............33 Section 1303. Payments Due on Sundays and Holidays.........................................33 Section 1304. Notices and Demands on Company and Trustee ..................................33 Section 1305. Laws of Iowa to Govern.......................................................34 Section 1306. Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein........................................................34 Section 1307. Counterparts.................................................................34 Section 1308. Definitions..................................................................34 Section 1311. TIA Not Applicable...........................................................36
EXHIBITS TO INDENTURE Exhibit A - Form of Debenture Exhibit B - Letter of Credit -5- 6 TRUST INDENTURE THIS TRUST INDENTURE (the "Indenture") dated as of August 1, 1997, is entered into by and between NEURAL APPLICATIONS CORPORATION, a Delaware corporation (hereinafter referred to as the "Company") and FIRST TRUST & SAVINGS BANK, a state banking association duly organized and existing under the laws of the State of Iowa (the "Trustee"). RECITALS OF THE COMPANY WHEREAS, the Company has duly authorized the issuance of a series of debentures to be designated 8.75% Senior Secured Debentures due 2002 (the "Debentures") in an aggregate principal amount not to exceed Nine Million Dollars ($9,000,000); and WHEREAS, to provide the terms and conditions upon which the Debentures are to be issued and delivered, the Company has duly authorized the execution and delivery of this Indenture; and WHEREAS, the Debentures and the Certificate of Authentication to be borne by each of same are to be substantially in the form set forth as Exhibit A to this Indenture; and WHEREAS, all things have been done which are necessary to make the Debentures, when executed, issued and delivered by the Company hereunder, the valid obligations of the Company and to constitute this Indenture a valid contract for the security of the Debentures, in accordance with the terms of the Debentures and this Indenture; GRANTING CLAUSE NOW, THEREFORE, to secure the payment of the principal of and interest on the Debentures and the performance of the covenants therein and herein contained and to declare the terms and conditions on which the Debentures are secured, and in consideration of the premises and of the purchase of the Debentures by the Holders thereof, the Company by these presents does grant, convey, assign, transfer, mortgage, pledge and confirm to the Trustee the rights of the Trustee pursuant to the Irrevocable Standby Letter of Credit (the "Letter of Credit") as more specifically described in Sections 202 of this Indenture and in the Letter of Credit (a copy of which is attached hereto as Exhibit B), to assure the payment of the principal and interest of the Debentures for the purposes herein expressed. NOW, THEREFORE, in consideration of the premises and of the purchase and acceptance of the Debentures by the Holders thereof and of the sum of One Dollar duly paid by the Trustee at the execution of these presents, the receipt whereof is hereby acknowledged, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of all present and future Holders of the Debentures as follows: -6- 7 ARTICLE I ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES Section 101. Amount, Execution and Delivery. Debentures for an aggregate principal sum of up to Nine Million Dollars ($9,000,000) may be executed by the Company and delivered to the Holders of the Debentures upon the execution of this Indenture or from time to time thereafter subject to the terms and conditions of this Indenture. Section 102. Execution. The Debentures shall be signed on behalf of the Company by its President or a Vice President and by its Treasurer or an Assistant Treasurer. Such signatures may be manual or facsimile signatures and may be imprinted or otherwise reproduced on the Debentures. In case any officer of the Company who shall have signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Debentures may nevertheless be authenticated, and delivered or disposed of as though the person who signed such Debentures had not ceased to be such officer of the Company and shall bind the Company; and any Debenture signed on behalf of the Company by any such person who at the actual date of the execution of the Debenture shall be a proper officer of the Company, although at the date of the execution of this Indenture any such person shall not have been such an officer, may likewise be authenticated and delivered or disposed of and shall bind the Company. Section 103. Form, Denominations and Dating. The Debentures to be issued pursuant to this Indenture shall be identified as 8.75% Senior Secured Debentures due 2002. Each of the Debentures shall be substantially in the form of the 8.75% Senior Secured Debenture due 2002 attached hereto as Exhibit A. The Debentures may have such letters, numbers, or other marks of identification and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto, or to conform to usage. The Debentures shall be issuable as registered Debentures without coupons in denominations of Fifty Thousand Dollars ($50,000), or multiples thereof. Every Debenture shall be dated from the date of its issuance and shall bear interest from such date, said interest and the principal sum of such Debenture to be paid pursuant to the payment terms of such Debenture. Section 104. Calculation and Payment of Interest. Each Debenture shall bear interest at the rate of 8.75% per annum from the date of its original issuance. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Interest shall be payable on March 31 and September 30 of each year beginning on March 31, 1998 (each such date an "Interest Payment Date"). The person in whose name any Debenture is registered at the close of business on any Record Date (as hereinafter defined) with respect to interest payable on an Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date (subject to the provisions of Article IV, in the case of any Debenture or Debentures, or portion thereof, redeemed on a date subsequent to the relevant Record Date and prior to such Interest Payment Date) notwithstanding the cancellation of such Debenture upon any registration or transfer or exchange subsequent to the Record Date and prior to such Interest Payment Date; provided, however, that if and to the extent of Default in the payment of the interest due on such Interest Payment Date, such defaulted interest shall be paid to the persons in whose names Outstanding Debentures are registered at the close of business on a subsequent Record Date -7- 8 (which shall be not less than fifteen (15) days prior to the date of payment of such defaulted interest) which the Company shall establish for such payment by notice given by mail on behalf of the Company to the Holders of Debentures and the Trustee not less than ten (10) days preceding such Record Date. Payment of any defaulted interest may be made in any other lawful manner if, after notice given by the Company to the Trustee of the proposed payment pursuant to this sentence, such payment shall be deemed practicable by the Trustee. The term "Record Date" as used in this Section with respect to any Interest Payment Date shall mean the March 15 or September 15 immediately preceding such Interest Payment Date. Section 105. Payment of Principal. Principal of, and interest accrued to maturity on, the Debentures shall be considered paid on the date due, whether such principal and interst are due at maturity, upon acceleration or otherwise, if the Company shall deposit funds sufficient to pay the principal of and accrued interest on the Debentures with the Trustee at or before 10:00 a.m. Central Time on such date. The Trustee shall promptly return to the Company any funds deposited with the Trustee by the Company that are in excess of the amount necessary to pay the principal of, and accrued interest on, the Debentures. Section 106. Exchange and Registration of Transfer. Debentures may be exchanged for a like aggregate principal amount of Debentures of other authorized denominations. The Debentures to be exchanged shall be surrendered at the office or agency to be maintained by the Company in accordance with Section 203, and the Company shall execute in exchange therefor the Debenture or Debentures which the Debenture Holder making the exchange shall be entitled to receive. The Company shall keep, at the office or agency to be maintained by the Company in accordance with Section 203, a register or registers in which, subject to such reasonable regulations as it may prescribe, the Company shall register Debentures and shall register the transfer of Debentures as in this Article provided. Upon due presentment for registration of transfer of any Debenture at such office or agency (including compliance with the conditions to transfer noted on the form of Debenture attached hereto as Exhibit A), the Company shall execute and register and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Debenture or Debentures for a like aggregate principal amount. The Trustee shall deliver the authenticated Debenture or Debentures to the Company for delivery to the transferee or transferees. All Debentures presented or surrendered for registration of transfer or for exchange, redemption or payment (if so required by the Company or the Trustee) shall be duly endorsed by, or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Company and the Trustee, duly executed by the Holder or by such Holder's attorney duly authorized in writing. No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. The Company shall not be required to exchange or register any transfer of any Debentures from and after the mailing date of the notice of redemption provided for in Section 402. Section 107. Mutilated, Destroyed, Lost and Stolen Debentures. In case any Debentures shall become mutilated or be destroyed, lost or stolen, the Company, in the case of a mutilated Debenture shall, and in the case of a destroyed, lost, or stolen Debenture in its discretion may, execute and deliver, a new Debenture bearing a number not contemporaneously Outstanding, in exchange and substitution for the mutilated Debenture, or in lieu and substitution for the Debenture so destroyed, lost or stolen and the Trustee shall authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. In every case the applicant for a substituted Debenture -8- 9 shall furnish to the Company and to the Trustee such reasonable security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss, or theft, the applicant shall also furnish to the Company and to the Trustee evidence to their satisfaction of the destruction, loss, or theft of such Debenture and of the ownership thereof. Upon the issue of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debenture which has matured or is about to mature or in respect of which a notice of redemption under Section 402, has been mailed shall become mutilated or be destroyed, lost, or stolen, the Company may, instead of issuing a substitute Debenture, pay the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and to the Trustee such reasonable security or indemnity as they may require to save each of them harmless, and, in case of destruction, loss, or theft, evidence satisfactory to the Company and the Trustee of the destruction, loss, or theft of such Debenture and of the ownership thereof. Every substituted Debenture issued pursuant to this Section shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost, or stolen Debenture shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost, or stolen Debentures, and shall preclude any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures, and shall preclude any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 108. Cancellation and Destruction of Debentures. All Debentures surrendered for payment, redemption, exchange, or registration of transfer shall, if surrendered to the Company or any paying agent, be delivered to the Trustee for cancellation, or, if surrendered to the Trustee, shall be canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee shall destroy, or make appropriate arrangements for the destruction of, canceled Debentures and deliver a certificate of such destruction to the Company. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation. Section 109. Paying Agents. The Company shall serve as Paying Agent for payments of interest on the Debentures and the Trustee shall serve as Paying Agent for payments of principal of, and accrued interest on, the Debentures at maturity, upon redemption, upon acceleration or otherwise (each, in such capacity, the "Paying Agent"). ARTICLE II COVENANTS OF THE COMPANY Section 201. Payment of Principal and Interest. The Company will duly and punctually pay or cause to be paid the principal of and interest on each of the Debentures at the times and place and in the manner specified in this Indenture and in the Debentures. Section 202. Letter of Credit; Substitute Letter of Credit. -9- 10 (a) The Company shall obtain in favor of the Trustee, for the benefit of the Holders of the Debentures, and maintain until the earlier of November 29, 2002 or such time as the principal amount and all interest payable pursuant to the Debentures have been paid in full, an Irrevocable Standby Letter of Credit (the "Letter of Credit") in substantially the form attached hereto as Exhibit B, providing for payment to the Trustee, for the benefit of the Holders of the Debentures, of the Outstanding principal amount of the Debentures, plus all interest due and unpaid pursuant to the Debentures, and all costs of collection recoverable hereunder or pursuant to the Debenture, upon a Notice of Acceleration as provided for by Article V below and call by the Trustee as required by the Letter of Credit. The amount of the Letter of Credit shall at all times total at least one hundred seven percent (107%) of the Outstanding principal amount of the Debentures. (b) Subject to the terms and conditions hereof, at any time before December 31 of any year commencing in 1999 the Company may, at its option, obtain a substitute Letter of Credit meeting the conditions contained below (a "Substitute Letter of Credit"), in replacement of or substitution for the Letter of Credit then in effect. Any Substitute Letter of Credit shall be a letter of credit in favor of the Trusteee, for the benefit of the Holders of the Debentures, (i) the terms of which shall in all material respects be the same as those of the original Letter of Credit and (ii) the issuer of which shall be a bank, trust company or financial lender with assets in excess of $1 billion and with long-term obligations rated by Standard & Poors or a similar rating service of A (or the equivalent) or better. In order for such letter of credit to qualify as a Substitute Letter of Credit, the Company shall deliver to the Trustee at least forty-five (45) days prior to the effective date of such proposed Substitute Letter of Credit (iii) a copy of such proposed Substitute Letter of Credit, (iv) a copy of the agreement pursuant to which such Substitute Letter of Credit is proposed to be issued and (v) evidence that the issuer meets the qualifications contained in (ii) above. Unless the Trustee shall have given written notice to the Company within such forty-five (45) day period that the Substitute Letter of Credit does not, in the Trustee's reasonable opinion, meet the qualifications listed above, then upon the effective date of any qualifying Substitute Letter of Credit and the receipt thereof, the Trustee shall surrender the Letter of Credit previously in effect to the issuer thereof. Thereafter, any Substitute Letter of Credit shall be deemed the Letter of Credit for all purposes of this Indenture. Section 203. Office or Agency for Certain Purposes. As long as any of the Debentures remain Outstanding, the Company will maintain an office or agency (or offices or agencies) in the City of Coralville, Iowa, or in such other city in the State of Iowa as the Company shall notify the Trustee and the Holders of Debentures in writing, where the Debentures may be presented for registration of transfer and exchange as in this Indenture provided, and where notices and demands to or upon the Company in respect to the Debentures or this Indenture may be served. The principal office of the Company shall be the office or agency for the registration or transfer and exchange of Debentures unless the Company shall maintain some other office or agency for such purpose and shall give the Trustee written notice of the location thereof. Section 204. Pledge, Mortgage or Sale of Assets. The Company shall not pledge, mortgage, grant a security interest in, agree to the placement of any lien upon, or, other than in the ordinary course of its business, sell, any of its assets; provided, that the Company may grant a security interest in, or agree to the placement of a lien upon, any asset or assets if such security interest is granted or lien incurred to secure all or part of the purchase price, or to secure indebtedness incurred to pay all or part of the purchase price, of such asset or assets; and provided, further, that (a) any such security interest or lien shall be confined solely to the asset or assets so acquired and, if required by the terms of the instrument originally creating such security interest or lien, other assets which are an improvement to or are acquired for specific use in connection with such acquired assets or assets, together with any proceeds, including insurance proceeds, thereof and (b) any such security interest or lien shall be created within 120 days after the acquisition of such asset or assets; and provided, further, that in the event that the Company merges with another corporation (as permitted by Section 1001), the covenant contained in this Section 204 shall -10- 11 not apply to any pledge, mortgage, security interest or lien that existed upon the assets of such other corporation prior to such merger and was not created in contemplation of such merger, even if, after the merger, such pledge, mortgage, security interest or lien shall also apply to assets owned by the Company prior to the merger. Section 205. Appointments to Fill Vacancies in Trustee's Office. The Company, whenever necessary to avoid or fill a vacancy in the office of the Trustee, will appoint, in the manner provided in Section 609, a Trustee, so that there shall at all times be a Trustee hereunder. Section 206. Certificate to Trustee. The Company will deliver to the Trustee on or before April 1 in each year (beginning with 1998) an Officers' Certificate stating: (a) That the signing officers have conducted a review of the activities of the Company during the preceding year to determine whether there has been any Default by the Company in the performance of any covenants contained in this Article II, and Sections 1001 or 1002, and further stating whether or not they have obtained knowledge of any such Default and, if so, specifying each such Default of which the signers have knowledge and the nature thereof; (b) That the Company is not required to file any reports with the Securities and Exchange Commission (the "Commission") pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or, if the Company is required to file any reports with the Securities and Exchange Commission, it has timely filed all such reports and has provided the Trustee with a copy of each such report; and (c) The identity of each director duly elected by the stockholders of the Company and the identity of each officer duly appointed by the board of directors of the Company as of such date. Section 207. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 204 with respect to the Debentures if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Debentures, by act of such Holders, either shall waive such compliance in such instance or generally shall have waived compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE III DEBENTURE HOLDERS LISTS, COMMUNICATIONS TO DEBENTURE HOLDERS, AND COMPANY AND TRUSTEE REPORTS Section 301. Company to Furnish Trustee Information as to Names and Addresses of Debenture Holders. The Company shall furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of Debentures. The Company shall also furnish or cause to be furnished to the Trustee an updated list reflecting any changes in the names or addresses of any of the Debenture Holders within fifteen (15) days after such change is furnished or caused to be furnished to the Company. Section 302. Preservation of Information; Communications to Debenture Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders of Debentures contained in the most recent list -11- 12 furnished to it as provided in Section 301. The Trustee may destroy any list furnished to it as provided in Section 301 upon receipt of a new list so furnished. (b) In case three (3) or more Holders of Debentures, hereinafter referred to as applicants, apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least six (6) months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Debentures with respect to their rights under this Indenture or under the Debentures, and is accompanied by a copy of the communication which such applicants propose to transmit, then the Trustee shall, within five (5) business days after the receipt of such application, at its election, either: (1) Afford such applicants access to the information preserved at the time by the Trustee in accordance Section 302(a); or (2) Inform such applicants as to the approximate number of Holders of Debentures whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with Section 302(a), and as to the approximate cost of mailing to such Debenture Holders the communication specified in such application. (c) If the Trustee shall elect not to afford such applicants' access to such information, the Trustee shall, upon the written request of such applicants, mail to each Debenture Holder whose name and address appears in the information preserved at the time by the Trustee in accordance with Section 302(a), a copy of the communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or the provision for the payment, of the reasonable expenses of mailing, unless within five (5) days after such tender the Trustee shall mail to such applicants a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Debentures or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. (d) Each and every Holder of the Debentures, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Debentures in accordance with Section 302(b), regardless of the source from which such information was derived and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 302(b). Section 303. Reports by Company. (a) If the Company is required to file reports with the Commission, the Company agrees to file with the Trustee, within fifteen (15) days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act. (b) The Company agrees, if required by law to do so, to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations. -12- 13 (c) The Company agrees to transmit to the Holders of Debentures as the names and addresses of such Holders appear upon the registration books of the Company, within thirty (30) days after filing thereof with the Trustee, such summaries of any information, documents, and Reports required to be filed by the Company pursuant to Section 303(a) or (b) as may be required by rules and regulations prescribed from time to time by the Commission. (d) The Company agrees to transmit to the Holders of Debentures as the names and addresses of such Holders appear upon the registration books of the Company, within thirty (30) days after receipt by the Company thereof, a copy of any audited annual financial statements of the Company. ARTICLE IV REDEMPTION OF DEBENTURES Section 401. Right of Redemption and Redemption Price. (a) Debentures may be redeemed in the manner, at the time and at the redemption prices specified in this Article. (b) The Company may, at its option, redeem all, but not part, of the Debentures, prior to maturity, at any time within one hundred eighty (180) days after the closing of a public offering of the common stock of the Company, registered pursuant to the Securities Act of 1933, as amended (the "Securities Act"), that results in net proceeds to the Company of at least Fifteen Million Dollars ($15,000,000), at a price of at least Eight Dollars ($8.00) per share, subject to adjustment for splits, reverse stock splits and stock dividends (a "Qualifying Public Offering"). (c) Redemption shall be made only upon notice as set forth in Section 402, at a redemption price equal to One Hundred Percent (100%) of the principal amount plus accrued but unpaid interest to the date fixed for redemption. Section 402. Notice of Redemption. In case the Company shall desire to exercise its option to redeem all of the Debentures in accordance with Section 401 above, it shall fix a date for redemption, which date shall be not later than one hundred eighty (180) after the closing date of the Qualifying Public Offering, and shall mail or cause to be mailed a notice of such redemption at least thirty (30) days prior to the date fixed for redemption to the Holders of Debentures at their last addresses as the same appear on the registry books. Such mailing shall be by first class mail. Notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Debenture shall not affect the validity of the proceeding for the redemption of that Debenture or any other Debenture. The notice of redemption shall specify the date fixed for redemption and the redemption price at which Debentures are to be redeemed, and shall state that payment of the redemption price of the Debentures, together with accrued interest to the date fixed for redemption, will be made at the office or agency to be maintained by the Company in accordance with Section 203, upon presentation and surrender of such Debentures and that, unless the Company defaults in making the redemption payment, from and after the redemption date named in the notice of redemption interest will cease to accrue on the Debentures. Section 403. Payment of Debentures Called for Redemption. If the giving of notice of redemption shall have been completed as above provided, the Debentures shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest -13- 14 accrued to the date fixed for redemption, and on and after such date of redemption (unless the Company defaults in the payment of such Debentures) interest on the Debentures shall cease to accrue, and such Debentures shall be deemed not to be Outstanding hereunder and shall not be entitled to any benefit under this Indenture except to receive payment of the redemption price, together with accrued interest to the date fixed for redemption. On presentation and surrender of such Debentures at said place of payment in said notice specified, such Debentures shall be paid and redeemed by the Company at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption. Section 404. Deposit of Redemption Price. At or before 10:00 a.m. Central Time on the date of redemption, the Company shall deposit with the Trustee an amount of money, sufficient to pay the applicable redemption price of and accrued interest on the Debentures. The Trustee shall promptly return to the Company any money deposited with the Trustee by the Company in excess of the amounts necessary to pay the applicable redemption price of and accrued interest on, the Debentures. ARTICLE V REMEDIES OF THE TRUSTEE AND DEBENTURE HOLDERS ON EVENT OF DEFAULT Section 501. Events of Default Defined; Acceleration of Maturity; Waiver of Default. The following events shall be Events of Default: (a) Default in the payment when due of any interest upon any of the Debentures as and when the same shall become due and payable, and continuance of such Default for a period of forty five (45) days; or (b) Default in payment when due of principal on any of the Debentures at maturity, upon redemption or otherwise, and continuance of such Default for a period of ten (10) days; or (c) Failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Debentures or in this Indenture for a period of ninety (90) days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company and the Trustee by Holders of at least twenty-five percent (25%) in aggregate principal amount of the Debentures at the time Outstanding; or (d) If the Company shall: (1) Admit in writing its inability to pay its debts generally as they become due; or (2) File a petition in bankruptcy or a petition to take advantage of any insolvency act; or (3) Make an assignment for the benefit of its creditors; or (4) Consent to the appointment of a receiver of itself or of the whole or any substantial part of its property; or (e) If the Company shall, on a petition in bankruptcy filed against it, be adjudicated a bankrupt or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of the Company, a receiver of the Company or of the whole or substantially all of its property, or approving a petition filed against it seeking reorganization or arrangement of the Company under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any -14- 15 State thereof, and such adjudication, order, or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of entry thereof; or (f) The occurrence of any Event of Default under the terms of the Debentures. If an Event of Default has occurred and is continuing, the Trustee by written notice to the Company, or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Debentures at the time Outstanding by written notice to the Company and the Trustee (such written notice to the Company or to the Company and the Trustee, as applicable, a "Notice of Acceleration"), may declare the principal of all Debentures to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable. This provision, however, is subject to the condition that if, at any time after the principal of the Debentures shall have been so declared due and payable, the Company shall voluntarily pay to the Holders of the Debentures a sum sufficient to pay all interest theretofore due and payable upon all the Debentures and the expenses of the Trustee, and any and all Events of Default under this Indenture or the Debentures, other than nonpayment of principal on Debentures which shall have become due solely as the result of such Notice of Acceleration, shall have been remedied, then and in every such case the Holders of a majority in aggregate principal amount of the Debentures then Outstanding, by written notice to the Company and to the Trustee, may on behalf of the Holders of all of the Debentures waive all Defaults and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent Event of Default, or shall impair any right consequent thereon. Section 502. Collection of Indebtedness by Trustee; Call of Letter of Credit; Trustee May Prove Debt. The Trustee covenants that upon (a) the acceleration of the maturity of the Debentures pursuant to Section 501 hereof or (b) the occurrence of an Event of Default under Section 501(b) above, the Trustee shall, within five (5) business days, deliver to the institution issuing the Letter of Credit (the "Issuing Institution") such drafts and other documents as shall be required pursuant to the Letter of Credit to call and obtain payment of the amount that then shall have become due and payable pursuant hereto and pursuant to the Debentures for principal and interest, with interest upon the overdue principal and (to the extent legally enforceable under applicable law) upon overdue installments of interest at the rate borne by the Debentures; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys, and counsel, and any expenses or liabilities incurred by the Trustee hereunder other than through its gross negligence or bad faith. In case the Issuing Institution shall fail forthwith to pay such amounts upon presentment of such drafts and documents, the Trustee, in its own name as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid from and by the Issuing Institution, and may prosecute any such action or proceeding to judgment or final decree and may enforce any such judgment or final decree against the Issuing Institution pursuant to the Letter of Credit, and may collect in the manner provided by law from the Issuing Institution, the moneys adjudged or decreed to be payable pursuant to the Letter of Credit. In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company under the federal bankruptcy laws or any other applicable law relative to the Company, its creditors, or its property, or in case a receiver or trustee shall have been appointed for its property or in case of any other judicial proceedings relative to the Company, its creditors, or its property, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to this Section 502, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Debentures, and to file such other papers or documents as -15- 16 may be necessary or advisable in order to have the claims of the Trustee and the Debenture Holders allowed in any judicial proceeding relative to the Company, its creditors, or its property, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Debenture Holders to make such payments to the Trustee on behalf of the Holders, and, in the event that the Trustee shall consent to the making of such payments directly to the Debenture Holders, to pay to the Trustee any amount due it for compensation and expenses, including counsel fees incurred by it up to the date of such distribution; provided, however, that nothing in this Indenture shall be deemed to give to the Trustee any right to accept or consent to any plan of reorganization or otherwise by action of any character in any such proceeding to waive or change in any way any right of any Debenture Holders. All rights of action and of asserting claims under this Indenture, or under any of the Debentures or under the Letter of Credit, may be enforced by the Trustee without the possession of any of the Debentures, or of the production thereof on any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Debentures. In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceedings in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. Section 503. Application of Proceeds. Any moneys collected by the Trustee pursuant to Section 502 shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such moneys: (a) To the payment of costs and expenses of collection, and of all amounts payable to the Trustee under Section 605; (b) In case the principal of the Outstanding Debentures shall not have become and be then due and payable, to the payment of interest on the Debentures, in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the rate per annum expressed in the Debentures, such payments to be made ratably to the persons entitled thereto, without discrimination or preference; (c) In case the principal of the Outstanding Debentures shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Debentures for principal and interest, with interest on the overdue principal and interest (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the rate per annum expressed in the Debentures; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Debentures, then, to the payment of such principal and interest, without preference or priority of principal over interest, or of interest over principal or of any installment of interest over any other installment of interest, or of any Debenture over any other Debenture, ratably to the aggregate of such principal and accrued and unpaid interest. (d) To the payment of the remainder, if any, to the Company, its successors or assigns, or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. -16- 17 Section 504. Limitations on Suits by Debenture Holders. No Debenture Holder shall have the right by virtue or by availing of any provision of the Debentures or this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to the Debentures or this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holder or Holders of at least 25% in principal amount of the Debentures make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders of at least 25% in principal amount of the Debentures offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 90 days after receipt of the request and the offer of indemnity and, if requested, the provision of indemnity; and (e) during such 90 period the Holder or Holders of a majority in principal amount of the Debentures do not give the Trustee a direction inconsistent with the request; it being understood and intended, and being expressly covenanted by the Holder of every Debenture with every other Holder and the Trustee, that no one or more Holders of Debentures shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb, or prejudice the rights of the Holders of any other of such Debentures, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable, and common benefit of all Holders of Debentures. For the protection and enforcement of this Section 504, each and every Debenture Holder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Notwithstanding any provision of this Indenture, however, the right of any Holder of any Debenture to receive payment on the principal of, and premium, if any, and interest on, such Debenture, on and after the respective due dates thereof as provided in such Debenture and this Indenture, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 505. Powers and Remedies Cumulative; Delay or Omission Not Waiver. All powers and remedies given by this Article V to the Trustee or to the Debenture Holders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Debenture Holders, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or any Holder of any of the Debentures to exercise any right or power accruing upon any Default occurring and continuing as aforesaid, shall impair any such right or power, or shall be construed to be a waiver of any such Default or an acquiescence therein; and, subject to the provisions of Section 504, every power and remedy given by this Article or by law to the Trustee or to the Debenture Holders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Debenture Holders. Section 506. Control by Debenture Holders; Waiver of Default. The Holders of a majority in aggregate principal amount of the Debentures at the time Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, however, that subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee, -17- 18 having been advised by counsel, shall determine that the action so directed may not be lawfully taken or if a responsible officer shall determine that the action so directed would be unduly prejudicial to the Debenture Holders not taking part in such direction. Prior to the giving of a Notice of Acceleration as provided in Section 501, the Holders of a majority in aggregate principal amount of the Debentures at the time Outstanding may on behalf of the Holders of all the Debentures waive any past Default or Event of Default hereunder and its consequences, except a Default in the payment of the principal of or interest on any of the Debentures. In the case of any such waiver, the Company, the Trustee, and the Holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 507. Trustee to Give Notice of Defaults Known to It, but May Withhold in Certain Circumstances. The Trustee shall, within ninety (90) days after the occurrence of a Default, mail to the Debenture Holders, as the names and addresses of such Holders appear upon the registration books of the Company, notice of each Default hereunder known to the Trustee, unless such Events of Default have been cured before the giving of such notice; provided, that, except in the case of default in the payment of the principal or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as responsible officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Debenture Holders. Section 508. Right of Court to Require Filing of Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Debenture by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but this Section 508 shall not apply to any suit instituted by the Trustee, or any suit instituted by any Debenture Holder, or group of Debenture Holders, holding in the aggregate more than twenty-five percent (25%) in principal amount of the Debentures Outstanding, or to any suit instituted by any Debenture Holder for the enforcement of the payment of the principal of and premium, if any, or interest, on any Debenture on or after the due date expressed in such Debenture. ARTICLE VI CONCERNING THE TRUSTEE Section 601. Duties and Responsibilities of Trustee. The Trustee, prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred, undertakes to perform such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders, or other instruments, furnished to the Trustee pursuant to any provision of this Indenture, shall examine them to determine whether they conform to the requirements of this Indenture. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: -18- 19 (a) Prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default which may have occurred: (1) The duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) In the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) The Trustee shall not be liable for any error or judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in principal amount of the Debentures at the time Outstanding relating to the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for belief that the repayment of such funds or liability is not reasonably assured to it. Section 602. Certain Rights of Trustee. Except as otherwise provided in Section 601: (a) The Trustee may rely and shall be protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, bond or other paper, or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) Any request, direction, order, or demand of the Company mentioned herein shall be sufficiently evidenced by an instrument signed in the name of the Company by the President or any Vice President and the Secretary or an Assistant Secretary or Treasurer or an Assistant Treasurer (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors of the Company may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) The Trustee may consult with counsel and any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered, or omitted by it hereunder in good faith and in accordance with such opinion of counsel; (d) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order, or direction of any of the Debenture Holders, pursuant to the provision of this Indenture, unless such Debenture Holders shall have offered to the Trustee reasonable -19- 20 security or indemnity against the costs, expenses, and liabilities which may be incurred therein or thereby; nothing herein contained shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default (which has not been cured or waived) to exercise such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs; (e) The Trustee shall not be liable for any action taken, suffered, or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (f) Prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the acts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, or other paper documents, unless requested in writing to do so by the Holders of not less than a majority in aggregate principal amount of the Debentures then Outstanding; provided, that if the payment within a reasonable time to the Trustee of the costs, expenses, or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to so proceeding; (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney employed with due care by the Trustee; and (h) The Trustee shall not be required to see that insurance on the property of the Company is effected or maintained, or to keep itself informed as to the performance or observance by the Company of any covenant or condition herein contained. Section 603. Trustee Exoneration From Responsibility. The recitals contained herein and in the Debentures (except in the Trustee's certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee shall not be accountable for the use or application by the Company of any of the Debentures or of the proceeds of such Debentures, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture, or for the use or application of any moneys received by any paying agent other than the Trustee. Section 604. Moneys Held by Trustee. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall not be under any liability for interest on any moneys received by it hereunder except as it may agree with the Company to pay thereon. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by its President or any Vice President or its Treasurer or an Assistant Treasurer, its Secretary or an Assistant Secretary. Section 605. Compensation of Trustee. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and, except as otherwise expressly provided, the Company will pay or reimburse the Trustee, upon its request, for all reasonable expenses, disbursements, and advances incurred or made by the Trustee in accordance -20- 21 with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement, or advance as may arise from its negligence or bad faith. Section 606. Right of Trustee to Rely on Certificate of Certain Officers. Except as otherwise provided in Section 601, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered, or omitted by it under the provisions of this Indenture upon the faith thereof. Section 607. Conflicting Interests. (a) If the Trustee has or shall acquire any conflicting interest, as defined in this Section 607, it shall, within ninety (90) days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign in the manner and with the effect specified in this Section 609. (b) In the event that the Trustee shall fail to comply with the provisions of Section 607(a), the Trustee shall, within ten (10) days after the expiration of such ninety (90) day period, transmit notice of such failure to the Debenture Holders as the names and addresses of such Holders may appear upon the registration books of the Company. (c) For the purpose of this Section 607, the Trustee shall be deemed to have a conflicting interest if: (1) The Trustee or, any of its directors or executive officers, is an obligor upon the Debentures issued under this Indenture or an underwriter for the Company; (2) The Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company; (3) The Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or representative of the Company, or of an underwriter (other than the Trustee itself) for the Company who is currently engaged in the business of underwriting, except that: (A) One individual may be a director and/or an executive officer of the Trustee and a director and/or an executive officer of the Company, but may not be at the same time an executive officer of both the Trustee and the Company; (B) If and so long as the number of directors of the Trustee in office is more than nine (9), one (1) additional individual may be a director and/or an executive officer of the Trustee and a director of the Company; and (C) The Trustee may be designated by the Company or by an underwriter for the Company to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent, or depository, or in any other similar -21- 22 capacity, or, subject to this Section 607(c)(1), to act as trustee whether under an indenture or otherwise; (4) Ten percent (10%) or more of the voting securities of the Trustee is beneficially owned either by the Company or by any director, partner, or executive officer thereof, or twenty percent (20%) or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or ten percent (10%) or more is owned either by an underwriter for the Company or any director, partner, or executive officer thereof, or is beneficially owned, collectively, by any two or more persons; (d) For the purposes of this Section 607: (1) The term "underwriter" when used with reference to the Company shall mean every person, who, within three (3) years prior to the time as of which the determination is made, has purchased from the Company with a view to, or has offered or sold for the Company in connection with, the distribution of any security of the Company Outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. (2) The term "director" shall mean any director of a corporation or any individual performing similar functions with respect to any organization whether incorporated or unincorporated. (3) The term "person" shall mean an individual, a corporation, a limited liability company, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or a government or political subdivision thereof. As used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (4) The term "voting security" shall mean any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement, or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person. (5) The term "executive officer" shall mean the president, every vice president, every trust officer, the secretary, and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. The percentages of voting securities and other securities specified in this Section shall be calculated in accordance with the following provisions: (A) A specified percentage of the voting securities of the Trustee, the Company or any other person referred to in this Section 607 (each of whom is referred to as a "person" in this paragraph), means such amount of the Outstanding voting securities of such person as entitle the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the -22- 23 outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person. (B) A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding. (C) The term "amount," when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security. (D) The term "outstanding" means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition: (i) Securities of an issuer held in a sinking fund relating to securities of the issuer of the same class. (ii) Securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise. (iii) Securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise. (iv) Securities held in escrow if placed in escrow by the issuer thereof. Provided, however, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof. (E) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series as different classes and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. Section 608. Persons Eligible for Appointment as Trustee. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States or any state authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least Three Million Five Hundred Thousand Dollars ($3,500,000), subject to supervision or examination by federal or state authority and having a place of business at the City of Iowa City or Cedar Rapids, Iowa, if there be such a corporation having a place of business in such cities willing and able to act as Trustee on reasonable and customary terms. If such corporation publishes reports of condition at least -23- 24 annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 609. Section 609. Resignation and Removal of Trustee; Appointment of Successor. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof to the Holders of Debentures at their addresses as they shall appear on the registration books of the Company. Upon receiving such notice of resignation the Company shall promptly appoint a successor trustee by written instrument executed by order of the Board of Directors of the Company. If no successor trustee shall have been so appointed and have accepted appointment within thirty (30) days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Debenture Holder who has been a bona fide Holder of a Debenture or Debentures for at least six (6) months may, subject to the provisions of Section 508, on behalf of such Holder and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe appoint a successor trustee. (b) In case at any time any of the following shall occur: (1) The Trustee shall fail to comply with Section 607(a) after written request therefor by the Company or by any Debenture Holder who has been a bona fide Holder of a Debenture or Debentures for at least six (6) months; or (2) The Trustee shall cease to be eligible under Section 608 and shall fail to resign after written request therefor by the Company or by any such Debenture Holder; or (3) The Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, the Company may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors of the Company, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or subject to Section 508, any Debenture Holder who has been a bona fide Holder of a Debenture or Debentures for at least six (6) months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Debentures at the time Outstanding may at any time remove the Trustee and appoint a successor trustee. (d) Any resignation or removal of the Trustee and any appointment of a successor trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee as provided in Section 610. -24- 25 Section 610. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed under Section 609 shall execute, acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed, or conveyance, shall become vested with all the rights, powers, duties, and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Company or of the successor trustee, the trustee ceasing to act shall upon payment of any amounts then due it pursuant to the provisions of Section 605 execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon request of any such successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. No successor trustee shall accept appointment as provided in this Section 610, unless at the time of such acceptance such successor trustee shall be eligible under Section 608. Upon acceptance of appointment as provided in this Section 610, the Company shall mail notice of the succession of such trustee hereunder to the Holders of Debentures at their addresses as they shall appear on the registration books of the Company. If the Company fails to mail such notice within ten (10) days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Company. Section 611. Merger or Consolidation of Trustee. Any corporation into which the Trustee may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without execution or filing any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of the original Trustee or any successor to the Trustee hereunder and deliver such Debentures so authenticated; and in the case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor trustee; and in all such cases such certificate shall have the same full force and effect as that provided in the Debentures or in this Indenture with respect to a certificate of the original Trustee hereunder; provided, however, that the right to authenticate Debentures in the name of the Trustee herein shall apply only to its successor or successors by merger, conversion or consolidation. Section 612. Preferential Collection of Claims Against Company. (a) Subject to Section 612(b), if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company within four (4) months prior to a default (as defined for purposes of this Section 612 in Section 612(c)) or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Debentures, and the holders of other indenture securities (as defined for purposes of this Section 612 in Section 612(c)): (1) An amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such four (4) month period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in Section 612(a)(2), -25- 26 or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such default; and (2) All property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such four (4) month period, or an amount equal to the proceeds of such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds. Nothing contained herein, however, shall affect the right of the Trustee: (A) To retain for its own account (i) payments made on account of any such claim by any person (other than the Company) who is liable thereon; and (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third person; and (iii) distributions made in cash, securities, or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the federal bankruptcy laws or applicable state law; (B) To realize for its own account, upon any property held by it as security for any such claim, if such property was held prior to the beginning of such four (4) month period; (C) To realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such four (4) month period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default, as defined in paragraph (c) of this Section 612, would occur within four (4) months; (D) To receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in such paragraph (B) or (C), as the case may be, to the extent of the fair value of such property. For the purposes of paragraphs (B), (C), and (D), property substituted after the beginning of such four (4) month period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any preexisting claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee, the Debenture Holders, and the holders of other indenture securities in such manner that the Trustee, the Debenture Holders, and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the federal bankruptcy laws or applicable state law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Company of the funds and property in such special account and before crediting to the respective claims of the Trustee, the Debenture Holders, and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the federal bankruptcy laws or applicable state law, but after -26- 27 crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for applicable state law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership, or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, the Debenture Holders, and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special accounts and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee, the Debenture Holders and the holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee who has resigned or been removed after the beginning of such four (4) month period shall be subject to paragraph (a) of this Section 612, as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such four (4) month period, it shall be subject to Section 612(a) if and only if the following conditions exist: (i) The receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as Trustee, occurred after the beginning of such four (4) month period; and (ii) Such receipt of property or reduction of claim occurred within four (4) months after such resignation or removal. (b) There shall be excluded from the operation of paragraph (a) of this Section 612, a creditor relationship arising from: (1) The ownership or acquisition of securities issued under any indenture, or any security or the securities having a maturity of one year or more at the time of acquisition by the Trustee; (2) Advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by this Indenture, for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advance and of the circumstances surrounding the making thereof is given to the Debenture Holders at the time and in the manner provided in this Indenture; (3) Disbursements made in the ordinary course of business in the capacity of trustee, under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depository, or other similar capacity; -27- 28 (4) An indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction (as defined in paragraph (c) of this Section 612); (5) The ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; or (6) The acquisition, ownership, acceptance, or negotiation of any drafts, bills of exchange, acceptances, or obligations which fall within the classification of self-liquidating paper (as defined in paragraph (c) of this Section 612). (c) As used in this Section 612: (1) The term "default" shall mean any failure to make payment in full of the principal of or interest upon any of the Debentures or upon other indenture securities when and as such principal or interest becomes due and payable. (2) The term "other indenture securities" shall mean securities upon which the Company is an obligor (as defined in the Trust Indenture Act of 1939, as amended (the "TIA")) outstanding under any other indenture (A) under which the Trustee is also trustee, (B) which contains provisions substantially similar to the provisions of paragraph (a) of this Section 612, and (C) under which a default exists at the time of the apportionment of the funds and property held in said special account. (3) The term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven (7) days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand. (4) The term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated, or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares of merchandise, and which is secured by documents evidencing title to, possession of, or lien upon the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares, or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiation, or incurring of the draft, bill of exchange, acceptance, or obligation. ARTICLE VII CONCERNING THE DEBENTURE HOLDERS Section 701. Evidence of Action Taken by Debenture Holders. Whenever in this Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the Holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by Debenture Holders in person or by agent or by proxy appointed in writing, or (b) by the record of the Holders of Debentures voting in favor thereof at any meeting of Debenture Holders duly called and held in accordance with the provisions of Article VIII, or (c) by a -28- 29 combination of such instrument or instruments and any such record of such a meeting of Debenture Holders. Section 702. Proof of Execution of Instruments and of Holding of Debentures. Subject to the provisions of Sections 601, 602 and Section 806, proof of the execution of any instrument by a Debenture Holder or such Holder's agent or proxy and proof of the holding by any person of any of the Debentures shall be sufficient if made in accordance with such reasonable rules and regulation as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debentures shall be proved by the register of such Debentures or by a certificate of the Debenture registrar. The record of any Debenture Holders' meeting shall be proved in the manner in Section 806. Section 703. When Deemed Absolute Owners. Prior to due presentment for registration of transfer, the Company, the Trustee, any paying agent, and any Debenture registrar may deem and treat the person in whose name any Debenture shall be registered upon the books of the Company as the absolute owner of such Debenture (whether or not such Debenture shall be overdue and notwithstanding any notice of ownership or writing thereon) for the purpose of receiving payment of or on account of the principal of and premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any paying agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payment so made to any such registered Holder for the time being, or upon such Holder's order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture. Section 704. Debentures Owned by Company Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent, or waiver under this Indenture, Debentures which are owned by the Company or by any person directly or indirectly controlling or controlled by or under common control with the Company shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction or consent or waiver only Debentures which the Trustee knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 704 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures and that the pledgee is not a person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Section 705. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 701, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any Holder of a Debenture which is shown by the evidence to be included in the Debentures the Holders of which have consented to such action may, by filing written notice with the Trustee at its principal office and upon proof of holding as provided in Section 702, revoke any such action so far as concerns such Debenture. Except as aforesaid any such action taken by the Holder of any Debenture shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Debenture or of any Debenture issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon such Debenture. Any action taken by the Holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the Holders of all the Debentures. -29- 30 ARTICLE VIII DEBENTURE HOLDERS' MEETINGS Section 801. Purposes for Which Debenture Holders' Meetings May Be Called. A meeting of Debenture Holders may be called at any time and from time to time pursuant to the provisions of this Article VIII, for any of the following purposes: (1) To give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Debenture Holders pursuant to Article V; (2) To remove the Trustee and appoint a successor trustee pursuant to Article VI; (3) To consent to the execution of an indenture or indentures supplemental hereto pursuant to Section 902; or (4) To take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Debentures under any other provision of this Indenture or under applicable law. Section 802. Call of Meetings by Trustee. The Trustee may at any time call for a meeting of Debenture Holders to take any action authorized in Section 801, to be held at such time and at such place in the Cities of Cedar Rapids, Iowa City or Coralville, Iowa, as the Trustee shall determine. Notice of every meeting of the Debenture Holders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to Holders of Debentures at their addresses as they shall appear on the registration books of the Company not less than twenty (20) nor more than one hundred eighty (180) days prior to the date fixed for the meeting. Section 803. Company and Debenture Holders May Call Meetings. In case at any time the Company, pursuant to the resolution of its Board of Directors, or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Debentures then Outstanding, shall have requested the Trustee to call a meeting of Debenture Holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within twenty (20) days after receipt of such request, then the Company or the Holders of Debentures in the amount above specified may determine the time and place in the Cities of Cedar Rapids, Iowa City or Coralville, Iowa, for such meeting and may call such meeting to take any action authorized in Section 801, by mailings notice thereof as provided in Section 802. Section 804. Persons Entitled to Vote at Meeting. To be entitled to vote at any meeting of Debenture Holders a person shall be (a) a Holder of one or more Debentures, or (b) a person appointed by an instrument in writing as proxy by a Holder of one or more Debentures. The only persons who shall be entitled to be present or to speak at any meeting of Debenture Holders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. Section 805. Determination of Voting Rights; Conduct and Adjournment of Meeting. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Debenture Holders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. -30- 31 The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Debenture Holders as provided in Section 803, in which case the Company or the Debenture Holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Holders of a majority in principal amount of the Debentures represented at the meeting and entitled to vote. At any meeting, the presence of persons holding or representing Debentures in an aggregate principal amount sufficient to take action upon the business for the transaction of which such meeting was called shall be necessary to constitute a quorum; but, if less than a quorum be present, the persons holding or representing a majority of the Debentures represented at the meeting may adjourn such meeting with the same effect, for all intents and purposes, as though a quorum had been present. Subject to the provisions of Section 704, at any meeting each Debenture Holder or proxy shall be entitled to one (1) vote for each One Dollar ($1.00) of principal amount of Debentures held or represented by such Holder, provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by such person or instruments in writing as aforesaid duly designating such person as the person to vote on behalf of other Debenture Holders. Any meeting of Debenture Holders duly called pursuant to Section 802 or 803, may be adjourned from time to time, by vote of the Holders of a majority in principal amount of the Debentures represented at the meeting and entitled to vote, and the meeting may be held as so adjourned without further notice. Section 806. Counting Votes and Recording Action of Meeting. The vote upon any resolution submitted to any meeting of Debenture Holders shall be by written ballots on which shall be subscribed the signatures of the Holders of Debentures or of their representatives by proxy and the principal amount of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Debenture Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 802. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. Section 807. Meeting Does Not Hinder Exercise of Rights. Nothing in this Article VIII shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Debenture Holders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Debenture Holders under any of the provisions of this Indenture or of the Debentures. ARTICLE IX SUPPLEMENTAL INDENTURES -31- 32 Section 901. Supplemental Indentures Without Consent of Debenture Holders. The Company, when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) To transfer, assign, mortgage or pledge to the Trustee as security for the Debentures any property or assets which the Company may desire to transfer, assign, mortgage or pledge; (b) To evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements, and obligations of the Company pursuant to Article X hereof; (c) To add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the Holders of the Debentures as its Board of Directors and the Trustee shall consider to be for the protection of the Holders of Debentures, and to make the occurrence, or the occurrence and continuance, of a Default in any such additional covenants, restrictions, or conditions a Default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction, or condition, such supplemental indenture may provide for a particular period of grace after Default (which period may be shorter or longer than that allowed in the case of other Defaults) or may provide for an immediate enforcement upon such Default or may limit the remedies available to the Trustee upon such Default or may limit the right of the Holders of a majority in aggregate principal amount of the Debentures to waive such Default; and (d) To cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provisions contained herein or in any supplemental matters or questions arising under this Indenture as shall not adversely affect the interests of the Holders of the Debentures. (e) To conform this Indenture with any requirements of the Securities Act, the Exchange Act, or the TIA, or any similar state statute to which this Indenture, the Debentures issues pursuant hereto, or the Company shall hereinafter become subject to and governed by. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations as may be therein contained and to accept the conveyance, transfer, assignment, mortgage, or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties, or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 901 may be executed by the Company and the Trustee without the consent of the Holders of any of the Debentures at the time Outstanding, notwithstanding any of the provisions of Section 902. Section 902. Supplemental Indentures with Consent of Debenture Holders. With the consent (evidenced as provided in Section 701) of the Holders of not less than sixty-six and two-thirds percent (66-2/3%) in aggregate principal amount of the Debentures at the time Outstanding, the Company, when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Debentures; provided, however, that no supplemental indenture shall (a) extend the fixed maturity of any Debentures, or reduce the principal amount thereof or any premium thereon, without the consent of the Holder of -32- 33 each Debenture so affected, or (b) reduce the aforesaid percentage of Debentures, the Holders of which are required to consent to such supplemental indenture, without the consent of the Holders of all Debentures then Outstanding. Upon the request of the Company, accompanied by a copy of a resolution of its Board of Directors certified by the Secretary or Assistant Secretary of the Company authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Debenture Holders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. It shall not be necessary for the consent of the Debenture Holders under this Section 902 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 902, the Company shall mail a notice, setting forth in general terms the substance of, such supplemental indenture, to the Holders of Debentures, at their addresses as they shall appear on the registration books of the Company. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 903. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 904. Notation on Debentures in Respect of Supplemental Indentures. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation in form approved by the Trustee as to any matter provided in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee, and delivered in exchange for the Debentures then Outstanding. ARTICLE X CONSOLIDATION, MERGER, AND SALE Section 1001. Company May Consolidate or Merge on Certain Terms. Provided that the obligations of the Indenture and the Debentures survive, nothing contained in this Indenture or in any of the Debentures shall prevent any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company), or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties. -33- 34 Section 1002. Sale of Assets by the Company. The Company may not make a sale of all or substantially all of its assets, outside the ordinary course of business, without the consent of Holders of two-thirds (2/3) of the aggregate principal amount of the Debentures then Outstanding. ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE; UNCLAIMED MONEYS Section 1101. Satisfaction and Discharge of Indenture. If (a) the Company shall deliver to the Trustee for cancellation all Outstanding Debentures, or (b) all Outstanding Debentures not delivered to the Trustee for cancellation shall have become due and payable or by their terms are to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee as trust funds the entire amount sufficient to pay at maturity or upon redemption all such Debentures not delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption, as the case may be, and if in either case the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then (1) This Indenture shall cease to be of further effect, and on and after such maturity date or redemption date, as the case may be, the Trustee, on demand of the Company accompanied by an Officers' Certificate and an opinion of counsel and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of, and discharging, this Indenture; and (2) All obligations of the Company in respect of the Debentures shall cease and be discharged and, subject to the provisions of Section 1103, the Holders of the Debentures shall thereafter be restricted exclusively to such funds for any and all claims of whatsoever nature on their part under this Indenture or with respect to the Debentures. Section 1102. Application by Trustee of Funds Deposited for Payment of Debentures. In the event the Trustee is designated as a paying agent, or in the event that funds come into the possession of the Trustee (whether by exercise of any remedy due to Default or otherwise), all moneys deposited with the Trustee pursuant to Section 1101, shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Company acting as its own paying agent), to the Holders of the particular Debentures, for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest. Section 1103. Defeasance and Discharge of Indenture and the Debentures. The Company may at any time elect to have either Section 1104 or 1105 be applied to the Outstanding Debentures upon compliance with the conditions set forth in Section 1106. Section 1104. Legal Defeasance and Discharge. Upon the Company's exercise under Section 1103 of the option applicable to this Section 1104, the Company shall be deemed to have been discharged from its obligations with respect to the Debentures on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Debentures, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1107 and the other Sections of this Indenture referred to in clauses (a) and (b) of this Section 1104, and to have satisfied all its other obligations under the Debentures and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except -34- 35 for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Outstanding Debentures to receive solely from the trust fund described in Section 1106, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on the Debentures when such payments are due, (b) the Company's obligations under Sections 106, 107 and 203, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv) this Article XI. Subject to compliance with this Article XI, the Company may exercise its option under this Section 1104 notwithstanding the prior exercise of its option under Section 1105 with respect to the Debentures. Section 1105. Covenant Defeasance. Upon the Company's exercise under Section 1103 of the option applicable to this Section 1105, the Company shall be released from its obligations under the covenants contained in Sections 202, 204, 206, 302, 303 and 1002 on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Debentures shall thereafter be deemed not "Outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders of Debentures (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such Covenant Defeasance means that, with respect to the Outstanding Debentures, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default with respect to the Debentures under Section 501(c) or (f) but, except as specified above, the remainder of this Indenture and the Debentures shall be unaffected thereby. In addition, upon the Company's exercise under Section 1103 of the option applicable to this Section 1105, Sections 501(d) and (e) shall not constitute Events of Default. Section 1106. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to application of either Section 1104 or Section 1105 to the Debentures: (a) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 608 who shall agree to comply with the provisions of this Article XI applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Debentures, (i) cash in U.S. Dollars in an amount, or (ii) non-callable Government Securities which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (iii) a combination thereof, in such amounts, as will be sufficient to pay and discharge and which shall be applied by the Trustee to pay and discharge (A) interest payments on the Debentures on each Interest Payment Date and (B) the principal of the Outstanding Debentures on September 30, 2002; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such non-callable Government Securities to said payments with respect to the Debentures. (b) In the case of an election under Section 1104, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably satisfactory to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Debentures will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance has not occurred. -35- 36 (c) In the case of an election under Section 1105, the Company shall have delivered to the Trustee an opinion of counsel in the United States to the effect that the Holders of the Outstanding Debentures will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax in the same amount, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred. (d) No Default or Event of Default with respect to the Debentures shall have occurred and be continuing on the date of such deposit or, in so far as subsection 501(d) or (e) is concerned, at any time in the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (e) Such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which the Company is bound. (f) The Company shall have delivered to the Trustee an opinion of counsel to the effect that the deposit with the Trustee of the assets deposited in connection with such Legal Defeasance or Covenant Defeasance, as the case may be, and the payment, from the assets so deposited or the proceeds thereof, of the principal of and interest on the Outstanding Debentures in accordance with the terms of the Indenture and the Debentures, would not be avoidable under Section 544, 547 or 548 of Title 11 of the United States Code (the "Bankruptcy Code") as in effect on the date of such opinion in the event a petition naming the Company as debtor were filed under the Bankruptcy Code after the 91st day following such deposit. Section 1107. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 1108, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee pursuant to Section 1106 in respect of the Outstanding Debentures shall be held in trust and applied by the Trustee, in accordance with the provisions of the Debentures and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of the Debentures of all sums due and to become due thereon in respect of principal and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 1106 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Debentures. Anything in this Article XI to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the Company's request any money or non-callable Government Securities held by it as provided in Section 1106 which are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 1108. Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. Dollars or non-callable Government Securities in accordance with Section 1104 or 1105, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Debentures shall be revived and reinstated as though no deposit had occurred pursuant to Section 1104 or 1105 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1104 or 1105, as the case may be; provided, however, that, if the Company makes any payment of principal of or interest on any Debenture following the reinstatement of its obligations, the Company -36- 37 shall be subrogated to the rights of the Holders of such Debenture to receive such payment from the money held by the Trustee or Paying Agent. Section 1109. Return of Unclaimed Moneys. Any moneys deposited with the Trustee or any Paying Agent not applied but remaining unclaimed by the Holders of Debentures for one (1) year after the date upon which the principal of and premium, if any, or interest on such Debentures shall have become due and payable, shall be repaid to the Company by the Trustee or such agent on demand; and the Holder of any of the Debentures entitled to receive such payment shall thereafter look only to the Company for the payment thereof. ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS Section 1201. Personal Immunity from Liability of Incorporators, Stockholders, Officers and Directors. No recourse under or upon any obligation, covenant, or agreement of this Indenture, or of any Debenture, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, or against any past, present, or future stockholder, officer, or director, as such, of the Company or of any successor corporation, either directly or through the Company, whether by virtue of any constitution, statute, or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability and all such claims being hereby expressly waived and released as a condition of, and as consideration for, the execution of this Indenture and the issue of the Debentures, it being expressly understood that this Indenture and the obligations issued hereunder are solely non-recourse corporate obligations, and that any and all such personal liability is hereby expressly waived and released by every Holder of Debentures as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Debentures. ARTICLE XIII MISCELLANEOUS PROVISIONS AND DEFINITIONS Section 1301. Successors. All the covenants, stipulations, promises, and agreements in this Indenture by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not. Section 1302. Benefit of Indenture Restricted to Parties and Debenture Holders. Nothing in this Indenture or in the Debentures, express or implied, shall give or be construed to give to any person, firm, or corporation, other than the parties hereto and the Debenture Holders, any legal or equitable right, remedy, or claim under or in respect of the Indenture, or under any covenant, condition, or provision herein contained; and subject to the provisions of Section 1201, all its covenants, conditions, and provisions shall be for the sole benefit of the parties hereto and of the Debenture Holders. Section 1303. Payments Due on Sundays and Holidays. In any case where the date of maturity of interest on or principal of the Debentures or the date fixed for redemption of any Debentures shall be a Saturday, Sunday or legal holiday or a day on which banking institutions in the City of Cedar Rapids, Iowa, are authorized by law to close, then payment of interest or principal and premium, if any, may be made on the next succeeding business day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. Section 1304. Notices and Demands on Company and Trustee. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Debentures on the Company shall be deemed to have been sufficiently given or served, for all -37- 38 purposes, if given or served on the Company at 2600 Crosspark Road, Coralville, Iowa 52241-3212 (until another address is filed by the Company with the Trustee). Any notice, direction, request, or demand by any Debenture Holder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made at the principal office of the Trustee at 1800 First Avenue NE, P.O. Box 2189, Cedar Rapids, IA 52406 (until another address is filed by the Trustee with the Company). Section 1305. Laws of Iowa to Govern. This Indenture and each Debenture shall be deemed to be a contract made under the laws of the State of Iowa, and for all purposes shall be construed in accordance with the laws of such State. Section 1306. Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an opinion of Counsel stating that in the opinion of such counsel all conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relative to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture, and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture, shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with. Section 1307. Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. Section 1308. Definitions. The terms defined in this Section 1308 (except as otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto, shall have the respective means specified in this Section. (a) Affiliate. The term "Affiliate" shall mean a person controlling, controlled by, or under common control with, another person. (b) Board of Directors. The term "Board of Directors" shall mean the Board of Directors of the Company, or the Executive Committee of such Board. (c) Debenture; Outstanding. The term "Debenture" or "Debentures" shall mean any Debentures authenticated and delivered under this Indenture. The term "Outstanding," when used with reference to Debentures, shall, subject to the provisions of Section 704, mean, as of any particular time, all Debentures authenticated and delivered by the Trustee under this Indenture, except: (1) Debentures theretofore canceled by the Trustee or delivered to the Trustee for cancellation; -38- 39 (2) Debentures for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent), provided that if such Debentures are to be redeemed prior to the maturity thereto, notice of such redemption shall have been given as in Article IV provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (3) Debentures in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to Section 107. (d) Default. The term "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. (e) Event of Default. The term "Event of Default" shall mean any event specified in Section 501, continued for the period of time, if any, and after the giving of the notice, if any, thereof designated in the Indenture. (f) Government Securities. The term "Government Securities" means securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof. (g) Holder. The terms "Debenture Holder" and "Holder," and other similar terms, shall mean the person in whose name a particular Debenture is registered on the books of the Company kept for that purpose in accordance with the terms of this Indenture. (h) Officers' Certificate. The term "Officers' Certificate" shall mean a certificate signed by the President or a Vice President and the Treasurer or an Assistant Treasurer or any accounting officer of the Company. (i) Opinion of Counsel. The term "Opinion of Counsel" shall mean a written opinion of counsel (who may be an employee of or of counsel to the Company). (j) Responsible Officer. The term "responsible officer," when used with respect to the Trustee, shall mean the chairman or the vice chairman of the board of directors or trustees, the chairman or vice chairman of the executive committee of the board of directors or trustees, the president, any vice president, the treasurer, the secretary, any trust officer, any second or assistant vice president, or any officer or assistant officer of the Trustee other than those specifically above mentioned customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with a particular subject. (k) Trustee. The term "Trustee" shall mean First Trust & Savings Bank, a state banking association duly organized and existing under the laws of the State of Iowa and, subject to the provisions of Article VII, shall also include its successors and assigns. The term "principal office" of the Trustee shall mean the principal office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be administered. Section 1311. TIA Not Applicable. This Indenture is exempt from application of the TIA as in effect on the date of execution of this Indenture. In no event shall the amount of Debentures issued and Outstanding under this Indenture exceed Ten Million Dollars ($10,000,000). -39- 40 SIGNATURE PAGE FOR TRUST INDENTURE IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. NEURAL APPLICATIONS CORPORATION -------------------------------------- By /s/ Robert A. Squires ---------------------------------- -------------------------------------- Robert A Squires, President ....FIRST TRUST & SAVINGS BANK, Cedar Rapids, Iowa -------------------------------------- By /s/ [illegible] ---------------------------------- -------------------------------------- ---------------------------------- -------------------------------------- and Trust Officer -40- 41 EXHIBIT "A" No. $ ----- -------- NEURAL APPLICATIONS CORPORATION 8.75% SENIOR SECURED DEBENTURES DUE 2002 THE DEBENTURE EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAS BEEN TAKEN BY THE HOLDER SOLELY FOR INVESTMENT PURPOSES. SAID DEBENTURE MAY NOT BE SOLD OR TRANSFERRED UNLESS (A) IT HAS BEEN REGISTERED UNDER SAID ACT AND REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR (B) THE COMPANY IS PRESENTED WITH EITHER A WRITTEN OPINION OF COUNSEL OR A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION AND ANY APPLICABLE STATE SECURITIES COMMISSION, IN EITHER CASE IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR TRANSFER. NEURAL APPLICATIONS CORPORATION, a Delaware corporation, hereinafter referred to as the "Company," for value received, hereby promises to pay, solely in conformity with the terms of this Debenture and the Indenture (as such terms are defined below), to the Debenture Holder, or registered assigns, the principal sum of_________________ Thousand Dollars ($_______) on June 30, 2002 (or upon earlier redemption, as provided in the Indenture) in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debt, and to pay interest on the principal sum at the rate of 8.75% per annum from the date of issue of this Debenture until full payment of the principal sum has been made or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months and shall be payable on March 31 and September 30 of each year beginning on March 31, 1998 (each such date an "Interest Payment Date") to the person in whose name any Debenture is registered at the close of business on the March 15 or September 15 immediately preceding such Interest Payment Date. All payments to be paid hereunder shall be paid by check mailed to the registered Holder entitled thereto at such Holder's last address as it appears on the records of the Company. 1. DEBENTURES. This Debenture is one of a duly authorized issue of Debentures of the Company designated as its "8.75% Senior Secured Debentures due 2002" (hereinafter referred to as the "Debentures") limited to an aggregate principal amount not to exceed Nine Million Dollars ($9,000,000), issued or to be issued under and pursuant to an Indenture dated as of August 1, 1997 (hereinafter referred to as the "Indenture") duly executed and delivered by the Company to First Trust & Savings Bank, Cedar Rapids, Iowa, as trustee (hereinafter referred to as the "Trustee"), to which Indenture and all indentures supplemental thereto (whether entered into with or without the consent of the Holder hereof, as provided in the Indenture) reference is hereby made for a complete description of the respective rights, limitations of rights, obligations, duties, and immunities thereunder of the Trustee, the Company, and the Holders of the Debentures. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Indenture; in the event of any conflict or inconsistency between the terms of this Debenture and the terms of the Indenture, the terms of the Indenture shall govern. 2. DEFAULT. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect, and subject to the conditions provided in the Indenture. -41- 42 3. LIMITATION ON SUITS BY DEBENTURE HOLDERS; UNDERTAKING TO PAY COSTS. The Indenture provides that, if the Trustee and the Company shall have been given a Notice of Acceleration (as defined in the Indenture) in accordance with the terms of the Indenture, no Debenture Holder shall have the right by virtue or by availing of any provision of the Debentures or the Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to the Debentures or the Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder; it being understood and intended, and being expressly covenanted by the Holder of every Debenture with every other Holder and the Trustee, that no one or more Holders of Debentures shall have any right in any manner whatever by virtue or by availing of any provision of the Indenture to affect, disturb, or prejudice the rights of the Holders of any other Debentures, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under the Indenture, except in the manner provided in the Indenture and for the equal, ratable, and common benefit of all Holders of Debentures. Notwithstanding any provision of the Indenture, however, the right of any Holder of any Debenture to receive payment on the principal of, and premium, if any, and interest on, such Debenture, on and after the respective due dates thereof as in such Debenture and the Indenture provided, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. The Indenture further provides that any court may in its discretion require, in any suit for the enforcement of any right or remedy under the Indenture, or any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but this provision shall not apply to any suit instituted by the Trustee, or any suit instituted by any Debenture Holder, or group of Debenture Holders, holding in the aggregate more than twenty-five percent (25%) in principal amount of the Debentures Outstanding, or to any suit instituted by any Debenture Holder for the enforcement of the payment of the principal of and premium, if any, or interest, on any Debenture on or after the due date expressed in such Debenture. 4. REGISTRATION. The Debentures shall be registered as to principal and interest in the Holders' name in the manner hereinafter provided. Books for the registry of the Debentures shall be maintained at the office of the Company, and no transfer hereof shall be valid unless made on the Company's books at the office of the Company, by the registered Holder hereof, in person, or such Holder's attorney duly authorized in writing, and similarly noted hereon. Payment to the registered Holder hereof of the principal hereof or interest hereon shall be a complete discharge of the Company's liability with respect to any such payment, but the Company may, at any time, require the presentation hereof as a condition precedent to such payment. 5. REDEMPTION. The Debentures constituting this series are subject to redemption by the Company on a date not later than sixty (60) days following the closing date of a Qualifying Public Offering (as defined in the Indenture), upon the terms and subject to the conditions described in the Indenture. Such redemption shall be at a redemption price equal to One Hundred Percent (100%) of the principal amount hereof plus accrued but unpaid interest hereon to the date fixed for redemption. Notice of redemption to the Holders of Debentures shall be in the form of written notice mailed by the Company at least thirty (30) days prior to the date fixed for redemption to the registered Holders of Debentures at their last addresses as they shall appear on the registry books of the Company, said notice to be by first class mail, postage prepaid. Payment of the redemption price of the Debentures, together with accrued interest to the date fixed for redemption, will be made at the office or agency to be maintained by the Company in accordance with the Indenture, upon presentation and surrender of such Debentures. Unless the Company defaults in making the redemption payment, from and after the redemption date named in the notice of redemption, interest will cease to accrue on the Debentures. -42- 43 6. REGISTERED HOLDER DEEMED OWNER. The Company and the Trustee may deem and treat the registered Holder hereof as the absolute owner of this Debenture (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon or thereon made by anyone other than the Company or any Debenture registrar), for the purpose of receiving payment hereof or thereof or an account hereof or thereof and for all other purposes, and neither the Company nor the Trustee shall be affected by any notice to the contrary. 7. LETTER OF CREDIT. The Company has obtained in favor of the Trustee, for the benefit of the Holders of the Debentures, and shall maintain until the earlier of November 29, 2002 or such time as the principal amount and all interest payable pursuant to the Debentures have been paid in full, an Irrevocable Standby Letter of Credit (the "Letter of Credit"), providing for payment to the Trustee, for the benefit of the Holders of the Debentures, of the Outstanding principal amount of the Debentures, plus all interest due and unpaid pursuant to the Debentures, and all costs of collection recoverable hereunder or pursuant to the Indenture, upon a Notice of Acceleration as provided for by the Indenture and call by the Trustee as required by the Letter of Credit. The amount of the Letter of Credit shall at all times total at least one hundred seven percent (107%) of the Outstanding principal amount of the Debentures. The Indenture further provides that, subject to the terms and conditions contained therein, the Company may, at its option, obtain a substitute Letter of Credit (a "Substitute Letter of Credit"), the terms of which shall in all material respects be the same as those of the original Letter of Credit and the issuer of which shall be a bank, trust company or financial lender with assets in excess of $1 billion and with long-term obligations rated by Standard & Poors or a similar rating service of B+ or better. 8. NEGATIVE COVENANT. In the Indenture, and subject to the terms and provisions thereof, the Company has agreed that it shall not pledge, mortgage, grant a security interest in, agree to the placement of any lien upon, or, other than in the ordinary course of its business, sell, any of its assets; provided, that the Company may grant a security interest in, or agree to the placement of a lien upon, any asset or assets if such security interest is granted or lien incurred to secure all or part of the purchase price, or to secure indebtedness incurred to pay all or part of the purchase price, of such asset or assets; and provided, further, that (a) any such security interest or lien shall be confined solely to the asset or assets so acquired and, if required by the terms of the instrument originally creating such security interest or lien, other assets which are an improvement to or are acquired for specific use in connection with such acquired assets or assets, together with any proceeds, including insurance proceeds, thereof and (b) any such security interest or lien shall be created within 120 days after the acquisition of such asset or assets. 9. NON-RECOURSE AGAINST INCORPORATORS, STOCKHOLDERS, OFFICERS, OR DIRECTORS; LIABILITY OF TRUSTEE. No recourse under or upon any obligation, covenant, or agreement of this Debenture, or of the Indenture, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, or against any past, present, or future stockholder, officer, or director, as such, of the Company or of any successor corporation, either directly or through the Company, whether by virtue of any constitution, statute, or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability and all such claims being hereby expressly waived and released as a condition of, and as consideration for, the execution of the Indenture and the issue of the Debentures, it being expressly understood that the Indenture and the Debentures issued thereunder are solely non-recourse corporate obligations, and that any and all such personal liability is hereby expressly waived and released by every Holder of Debentures as a condition of, and as a consideration for, the execution of the Indenture and the issue of such Debentures. Except as provided for in the Indenture, the Trustee shall not be liable to the Holders on the Debentures. 10. AUTHORIZATION. The Company represents that all things necessary to make this Debenture, when executed by the Company as provided in the Indenture, the valid, binding and legal obligation of the Company as set forth in and limited by the terms of the Indenture, and to constitute -43- 44 these presents a valid Debenture and agreement according to its terms and the terms of the Indenture and that the execution of the Indenture and the execution and issue of this Debenture have in all respects been duly authorized. Witness the original or facsimile signature of the duly authorized officers of the Company. Dated: -------------------- By: -------------------------------- Name: -------------------------- Title: ------------------------- By: -------------------------------- Name: -------------------------- Title: ------------------------- -44- 45 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Debentures described above issued pursuant to the above-mentioned Indenture. Dated: ------------- FIRST TRUST & SAVINGS BANK, as Trustee By ------------------------------------- Authorized Signatory Name ------------------------------- Title ------------------------------ -45- EX-4.4 13 ROBERT B. STAIB VOTING TRUST DATED 12/3/1999 1 Exhibit 4.4 VOTING TRUST AGREEMENT VOTING TRUST AGREEMENT (this "Agreement") dated as of December 3, 1999, between Robert Staib ("Staib" or "Shareholder"), Stockpoint, Inc., a Delaware corporation ("Stockpoint") and U.S. Bank, National Association (the "Voting Trustee"). WHEREAS, Staib holds 246,000 shares of common stock and 1600 Shares of Series B Preferred Stock of Stockpoint (the "Shares") and warrants ("Warrants") to purchase an additional 500,000 shares of Stockpoint"s common stock (the "Warrant Shares"); WHEREAS, Staib deems it to be in the best interests of Stockpoint to vest voting power of the Shares and the Warrant Shares issuable upon exercise of the Warrants, in the Voting Trustee as provided in this Agreement; and WHEREAS, the Voting Trustee is willing to act in such capacity pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth below and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Delivery of Shares. Concurrently with the execution of this Agreement, Staib shall deliver to the Voting Trustee stock certificates evidencing the Shares. Staib shall also deliver to the Voting Trustee stock certificates evidencing the Warrant Shares issued upon exercise of the Warrants. Staib hereby agrees that any shares of common stock issued upon exercise of the Warrants shall be issued directly in the name of the Voting Trustee for retention pursuant to this Agreement. All certificates delivered to the Voting Trustee shall be properly endorsed for transfer on the books of Stockpoint. 2. Voting Trust Certificates. Upon receipt from Staib of a stock certificate or certificates for Shares or Warrant Shares issued upon exercise of the Warrants (together, the "Staib Shares"), the Voting Trustee shall deliver or cause to be delivered to Staib a voting trust certificate or certificates for the number of shares represented by the certificate or certificates so deposited with the Voting Trustee, which voting trust certificate or certificates shall be in substantially the following form: VOTING TRUST CERTIFICATE For Shares of Common Stock of STOCKPOINT, INC. No. _____________ _______________ Shares This certifies that Robert Staib has deposited ____________ shares of __________ stock of Stockpoint, Inc. (the "Company"), with the Voting Trustee hereinafter named, pursuant to a voting trust agreement dated December ___,1999, between Robert Staib, a shareholder of Stockpoint and _____________ as Voting Trustee (the "Agreement"). This certificate and the interest represented thereby is transferable only on the books of the Voting Trustee upon the surrender of this certificate, properly endorsed. The holder of this certificate shall be subject to all the terms and conditions of the Agreement and shall be entitled to the benefits thereof. IN WITNESS WHEREOF, the Voting Trustee have caused this certificate to be signed this ______ day of ________________, ______. ________________________________________ Voting Trustee ________________________________________ Voting Trustee Record ownership of the Staib Shares shall be vested in the Voting Trustee and shall be transferred to the Voting Trustee upon the books and records of Stockpoint. In the event of a stock split, stock dividend, distribution of shares of any class of Stockpoint or recapitalization, the Voting Trustee shall issue additional or substitute certificates to Staib, which additional certificates shall be modified as necessary to indicate the class of shares so represented and to reflect Staib's interest in such shares. 3. Transfer of Staib Shares. The Voting Trustees shall have no right or power to sell, pledge or otherwise transfer the Staib Shares except as specifically provided in Section 4 of this Agreement. 2 4. Powers of Voting Trustee. The record ownership of the Staib Shares shall be vested in the Voting Trustee and shall be transferred into the names of the Voting Trustee upon the books of Stockpoint. (a) Subject to Section 5, the Voting Trustee shall, with respect to the Staib Shares, be entitled to exercise all shareholders" rights of every kind, including the right to vote and express a consent and the right to take part in any meeting. The holders of voting trust certificates shall not have any right to vote or express a consent with respect to the Staib Shares or to take part in any meeting. (b) The Voting Trustee may deliver certificates representing the Staib Shares to Stockpoint for exchange or surrender pursuant to any amendment to the articles of incorporation or any plan of reclassification, merger, consolidation, exchange, liquidation or dissolution of Stockpoint. (c) The Voting Trustee shall transfer certificates representing the Staib Shares to any person designated by both Staib and Stockpoint and the shares represented by such voting trust certificates shall no longer be subject to this Agreement. Staib and the Company shall provide the Voting Trustee with written notice of consent to transfer signed by both parties and authorizing the transfer by the Voting Trustee of any Staib Shares transferred in accordance with this Agreement. The Voting Trustee shall be entitled to rely upon such written notice of consent with respect to the delivery and transfer of any Staib Shares (as evidenced by a voting trust certificate or certificates) hereunder, as evidenced, with respect to Stockpoint, by a notice signed by any two individuals holding the title of Chief Executive Officer, President, Chief Operating Officer, Chief Technology Officer, Vice President--Finance, General Counsel, Vice President--Sales, or similar position. (d) The Voting Trustee shall have all other rights and obligations specifically provided elsewhere in this Agreement or as otherwise reasonably necessary to carry out the provisions of this Agreement. 5. Exercise of Voting Rights by Voting Trustee; Appointment of Proxy. (a) The Voting Trustee shall vote on all matters that may come before any shareholders" meeting and may express consent as shareholder. With respect to any matter submitted to Stockpoint"s shareholders for approval at any regular or special meeting of the shareholders or by written action in lieu of such meeting, the Voting Trustee shall vote the Staib Shares in the same proportion as the shares of Stockpoint not held by the Voting Trustee voting on such matter shall vote. (b) To secure the Voting Trustee" obligations to vote the Staib Shares in accordance with the provisions of Section 5(a) hereof, the Voting Trustee hereby appoints Stockpoint, Inc. and its officers, or any one or more of them, as the Voting Trustee"s proxy and attorney, with full power of substitution, to vote all of the Staib Shares which the Voting Trustee is entitled to vote in accordance with Section 5(a) hereof at any meeting of the shareholders and to transact such other business as may come before any such meeting or any adjournment thereof or that may be taken by written action of the shareholders in lieu of a meeting. The proxies granted by the Voting Trustee pursuant to this Section 5(b) are coupled with an interest and are given to secure performance of the Voting Trustee"s agreements under this Agreement. Such proxies are irrevocable and shall survive the death and disability of the Voting Trustee and the merger, reorganization, consolidation or dissolution of any Voting Trustee that is a corporation or other entity. 6. Distributions. Staib or any transferee of the Staib Shares, shall be entitled to receive, from time to time, their pro rata share of the dividends or distributions payable in cash or property (other than shares of any class of Stockpoint), if any, received by the Voting Trustee in respect of the Staib Shares subject to the ratable payment of expenses of the Voting Trustee. The Voting Trustee shall promptly deliver to Staib any tax forms relating to the Staib Shares that are received by the Voting Trustee. 7. Exculpation; Indemnification. The Voting Trustee shall not be liable for any error of judgment or mistake of law, or other mistake, except for his or her own willful misconduct or gross negligence. Staib shall indemnify the Voting Trustee against all expenses, liabilities and other costs incurred by the Voting Trustee which arise out of actions or omissions relating to their duties under this Agreement. The Voting Trustee shall not be liable for transferring Staib Shares in reliance on written notice of consent to transfer delivered pursuant to Section 4(c) hereof. 8. Compensation; Expense Reimbursement. The Voting Trustee shall be reimbursed by Staib for any expenses, liabilities or other costs incurred by the Voting Trustee in connection with its duties under this Agreement or in connection with any lawsuit brought against any of the Voting Trustee for which they are entitled to be indemnified under Section 7, including the disbursements and reasonable compensation of their agents, attorneys, employees and officers whom they may employ in carrying out the terms and provisions of this Agreement. Further the Voting Trustee shall be entitled to compensation for its services in accordance with the schedule attached hereto. The Voting Trustee shall be entitled to reimburse itself for all expenses incurred in the performance of their duties, and to deduct any compensation due the Voting Trustee, out of any monies held or received by it as distributions with respect to the Staib Shares. In the event that Staib fails to promptly pay such compensation or fees of the Voting Trustee, Stockpoint agrees to pay the same, and Stockpoint shall thereafter be entitled to recover the same from Staib or from any monies held or distributions received by the Trustee under this Agreement. 9. Filing of this Agreement. A copy of this Agreement shall be filed by the Voting Trustee with 3 Stockpoint. 10. Amendment. The Voting Trustee may submit an amendment to this Agreement to Staib and Stockpoint for their approval at a meeting called for that purpose upon at least 10 days" prior written notice. If the proposed amendment is approved by both Staib and the Board of Directors of Stockpoint, a certificate to that effect shall be made and certified by the Voting Trustee and filed in the offices in which a copy of this Agreement is required to be filed. 11. Term; Termination. (a) This Agreement shall automatically terminate upon the earliest of any of the following events to occur: (i) the Voting Trustee has resigned, died, or dissolved and no substitute Voting Trustee is selected by Stockpoint within 30 days after the date of resignation or death of the Voting Trustee; (ii) Stockpoint is dissolved and liquidated; (iii) voting trust certificates representing all of the Staib Shares have been transferred to one or more transferees pursuant to Section 4, except in the event such voting trust certificates are held by a custodian or trustee for the benefit of Staib; (iv) Stockpoint has commenced a voluntary case under any applicable bankruptcy law or has had an involuntary case under any such law filed in its name; (v) Staib and Stockpoint mutually agree in writing to terminate this Agreement; or (vi) Upon the later to occur of December 31, 2002 or the date that Staib beneficially owns (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) less than five percent (5%) of the outstanding common stock of Stockpoint. (b) At any time after such termination, the holders of voting trust certificates shall be entitled, upon surrender of such certificates to the Voting Trustee for cancellation, to receive certificates for the number of Staib Shares of Stockpoint"s common stock or other securities then represented by their respective voting trust certificates. Upon delivery of certificates representing the shares of common stock or other securities represented by any voting trust certificate by the Voting Trustee, this Agreement shall no longer be in force or effect with respect to such securities. The Voting Trustee shall deliver to each person who surrendered a voting trust certificate the certificate(s) therefor properly endorsed for transfer on the books of Stockpoint. 12. Successor Trustees. In the event of the death, dissolution or resignation of the Voting Trustee, Stockpoint shall select a replacement Voting Trustee. If the Voting Trustee shall be declared incompetent by any court of competent jurisdiction, such Voting Trustee shall be deemed to have resigned. Stockpoint may replace the Voting Trustee, with or without cause, at any time. The Voting Trustee may resign upon 30 days" prior written notice to Stockpoint. 13. Acceptance by Voting Trustee. The Voting Trustee hereby accepts the trust created by the terms of this Agreement and agree to perform their duties hereunder. 14. Miscellaneous Provisions. (a) Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes any prior understandings, agreements or representations, written or oral, relating to the subject matter hereof. (b) Counterparts. This Agreement may be executed in separate counterparts, each of which will be an original and all of which taken together shall constitute one and the same agreement, and any party hereto may execute this Agreement by signing any such counterpart. (c) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule, the validity, legality and enforceability of the other provision of this Agreement will not be affected or impaired thereby. (d) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives and successors and assigns. (e) Modification, Amendment, Waiver or Termination. No provision of this Agreement may be modified, amended, waived or terminated except by an instrument in writing signed by the parties to this Agreement. No course of dealing between the parties will modify, amend, waive or terminate any provision of this Agreement or any rights or obligations of any party under or by reason of this Agreement. (f) Headings. The headings and any table of contents contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 4 (g) Governing Law. ALL MATTERS OF CORPORATE LAW UNDER THIS AGREEMENT SHALL BE GOVERNED BY THE DELAWARE GENERAL CORPORATION LAW. ALL OTHER MATTERS RELATING TO THE INTERPRETATION, CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF. (h) Third-Party Benefit. This Agreement is for the benefit of the parties hereto and their permitted successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights, remedies, obligations or liabilities of any nature whatsoever. IN WITNESS WHEREOF, the parties hereof have executed this Agreement as of the date set forth in the first paragraph of this Agreement. U.S. BANK NATIONAL ASSOCIATION, as Voting Trustee By:_______________________________________ Its:______________________________________ STOCKPOINT, INC. By:_______________________________________ Its:______________________________________ ROBERT STAIB __________________________________________ SHAREHOLDER
Name and Address No. of Shares - ---------------- ------------- Robert Staib 246,000 shares of common stock as evidenced by Certificates Nos. ________; 1600 shares of Series B preferred Stock as evidenced by Certificate No.______ ________________ ________________ Warrant to purchase an aggregate of 312,500 shares of Common Stock dated as of the date of this Agreement and that certain Warrant to Purchase Common Stock of Neural Applications Corporation dated June 1, 1996 representing the right to purchase 187,500 shares of Common Stock.
EX-4.5 14 MASTER AGREEMENT DATED 12/3/1999 1 EXHIBIT 4.5 MASTER AGREEMENT DATED AS OF DECEMBER 3, 1999, AMONG STOCKPOINT, INC., AS THE COMPANY, AND JOHN PAPPAJOHN, GERALD M. KIRKE IOWA FARM BUREAU FEDERATION DERACE SCHAFFER MATTHEW P. KINLEY DOMINION SECURITIES INC. MICHAEL J. RICHARDS JOSEPH DUNHAM AS THE GUARANTORS, AND EQUITY DYNAMICS, INC., AS THE AGENT FOR THE GUARANTORS. 2 TABLE OF CONTENTS SECTION 1. CREDIT SUPPORT AGREEMENTS.........................................1 SECTION 2. AGENT.............................................................4 2.1. ACTIONS........................................................4 2.2. EXCULPATION....................................................4 2.3. SUCCESSOR......................................................5 SECTION 3. WARRANTS..........................................................5 3.1. ISSUANCE.......................................................5 3.2. REGISTRATION RIGHTS............................................6 SECTION 4. CLOSING...........................................................6 SECTION 5. REPRESENTATIONS AND WARRANTIES OF COMPANY.........................6 5.1. ORGANIZATION...................................................6 5.2. CORPORATE AUTHORIZATION; ENFORCEABILITY........................6 5.3. NO CONFLICT....................................................6 5.4. CAPITALIZATION.................................................7 5.5. FINANCIAL INFORMATION..........................................8 5.6. SECURITIES LAWS................................................8 5.7. TITLE TO ASSETS................................................8 5.8. REAL PROPERTY..................................................9 5.9. INTELLECTUAL PROPERTY RIGHTS...................................9 5.10. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS.............9 5.11. MATERIAL AGREEMENTS...........................................9 5.12. LITIGATION...................................................10 5.13. SOLVENCY.....................................................10 5.14. ENVIRONMENTAL MATTERS........................................10 5.15. TAX MATTERS..................................................10 5.16. ERISA........................................................11 5.17. DISCLOSURE...................................................11 SECTION 6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS.....................11 6.1. INVESTMENT INTENT.............................................11 6.2. DUE ORGANIZATION AND REQUISITE POWER..........................12 6.3. ACTION AND EXECUTION..........................................12 3 6.4. NO CONFLICT...................................................12 SECTION 7. PRIOR OR SIMULTANEOUS ACTIONS....................................12 SECTION 8. COVENANTS........................................................13 8.1. ACCESS TO RECORDS.............................................13 8.2. FINANCIAL REPORTING; DRAWS ON LINE OF CREDIT..................13 8.3. PAYMENT; PREPAYMENT...........................................14 8.4. PAYMENT OF OBLIGATIONS........................................14 8.5. INSURANCE.....................................................14 8.6. NOTICE OF DISPUTES, MATERIAL ADVERSE CHANGE...................15 8.7. CONDUCT OF BUSINESS...........................................15 8.8. DEBT..........................................................15 8.9. RESTRICTED PAYMENTS...........................................15 8.10. NEGATIVE PLEDGE..............................................16 8.11. TERMINATION..................................................16 SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS...........16 SECTION 10. INDEMNIFICATION.................................................16 SECTION 11. PURCHASE OF BANK'S RIGHTS AND INTERESTS; EVENTS OF DEFAULT......17 SECTION 12. FEES AND EXPENSES...............................................18 SECTION 13. CONFIDENTIALITY.................................................18 SECTION 14. ASSIGNMENT; PARTIES IN INTEREST.................................18 SECTION 15. ENTIRE AGREEMENT................................................18 SECTION 16. FURTHER ASSURANCES..............................................19 SECTION 17. NOTICES.........................................................19 4 SECTION 18. AMENDMENTS......................................................21 SECTION 19. COUNTERPARTS....................................................21 SECTION 20. HEADINGS, GENDER, TENSE.........................................21 SECTION 21. GOVERNING LAW, JURISDICTION.....................................21 SECTION 22. WAIVER OF JURY TRIAL............................................21 5 MASTER AGREEMENT dated as of December 3, 1999, among (a) STOCKPOINT, INC., a Delaware corporation (the "Company"), and (b)(i) JOHN PAPPAJOHN ("Pappajohn") (ii) GERALD M. KIRKE, IOWA FARM BUREAU FEDERATION, DERACE SCHAFFER, MATTHEW P. KINLEY, DOMINION SECURITIES INC., MICHAEL J. RICHARDS, JOSEPH DUNHAM (together with Pappajohn, the "Guarantors"), and (c) EQUITY DYNAMICS, INC., an Iowa corporation, as agent (the "Agent") for the Guarantors. RECITALS WHEREAS, the Company requested that the Guarantors execute guarantees in favor of and/or arrange for the issuance of standby letters of credit or pledge certificates of deposit (collectively, the "Credit Support Agreements") naming Norwest Bank Iowa, National Association, or any successor or assign thereof approved by the Agent (the "Bank") as beneficiary or pledgee in connection with a line of credit with a maximum principal amount of $2,500,000 (the "Facility") to be made available by the Bank to the Company; WHEREAS, the Company offered to issue warrants in the form attached hereto as Exhibit A ("Warrants") to purchase its common stock, $.01 par value (the "Common Stock") to the Guarantors if they would provide the Credit Support Agreements; WHEREAS, the Guarantors agreed to provide the Credit Support Agreements in accordance with terms and conditions set forth herein. ACCORDINGLY, the parties agree as follows: SECTION 1. CREDIT SUPPORT AGREEMENTS. (a) Upon the terms and subject to the conditions set forth in the this Agreement, the Warrants, and the registration rights agreement in the form attached hereto as Exhibit B (the "Registration Rights Agreement") (the "Documents"), the Guarantors shall, for the benefit of the Company, arrange for the issuance by one or more institutions acceptable to the Bank of standby letters of credit or, in the alternative, pledge such Guarantors' right, title and interest in and to certificates of deposit (each a "Guarantor Commitment") in the aggregate amount of $2,500,000 naming the Bank as beneficiary or pledgee, as the case may be, thereunder. The maximum Guarantor Commitment of each of the Guarantors shall be as follows: (i) Pappajohn - $1,250,000; (ii) Gerald M. Kirke - $500,000; Iowa Farm Bureau Federation - $250,000; Derace Schaffer - $250,000; Matthew P. Kinley - $100,000; Dominion Securities Inc. - $100,000; Michael J. Richards - $25,000 and Joseph Dunham - $25,000. Each Guarantor's Commitment as a proportion of the maximum amount of the loans (the "Loans") available under the Facility ($2,500,000.00) shall be its "Pro Rata Share." In addition, if necessary, Pappajohn shall execute a personal guaranty (the "Pappajohn Guaranty") of the Company's obligations to the Bank in an amount agreed to by Pappajohn and the Bank. (b) The obligation of the Guarantors to provide the Credit Support Agreements shall be subject to the following conditions precedent: 6 (i) the Company's execution and delivery of this Agreement and the Documents; (ii) the Company's execution and delivery to the Bank of (A) a security agreement, in form satisfactory to the Agent, which includes provision for security agreements in favor of the Bank by each subsidiary of the Company (the "Bank Security Agreement"); (B) a pledge agreement, in form satisfactory to the Agent (the "Pledge Agreement"); (C) a conditional assignment of intellectual property covering trademarks, in form satisfactory to the Agent (the "Bank Intellectual Property Assignment," and, together with Bank Security Agreement, Pledge Agreement and all documents executed in connection therewith, the "Bank Security Documents"); (D) the Credit Agreement dated December 3, 1999, between the Company and the Bank (the "Credit Agreement"); and (E) the Promissory Note dated December 3, 1999, executed by the Company in favor of the Bank (the "Promissory Note"). (iii) the Company's payment to the Agent of the Agent's costs and expenses incurred in connection herewith and the Documents, as provided in Section 12 below; (iv) the Bank's agreement with the Guarantors, satisfactory to the Guarantors, regarding the respective remedies of the Bank and the Guarantors with respect to the Facility; (v) the Company's delivery to the Bank of waivers by the Series C Debenture Holders to the transactions contemplated by the Agreement, in a form satisfactory to the Agent; (vi) the Company's delivery to the Bank of a release of lien on form UCC-3 by Iowa State Bank and Trust and Robert Staib, and a confirmation, waiver and consent by Northern Trust to the first lien position by the Bank, in each case in a form satisfactory to the Agent; (vii) review and approval by the Agent of all outstanding liens on the Company's assets by CEBA, Kirkwood Community College and Berthel Fisher; (viii) a cash flow budget in form and content acceptable to the Agent, and attached hereto as Exhibit C (the "Budget"); (ix) evidence satisfactory to the Agent that the Settlement Agreement and Release by and between the Company and Robert Staib has been executed; (x) satisfaction by the Agent with the senior management team and structure and long term management plan; (xi) evidence satisfactory to the Agent that certain California-based employees received grants under the Employee option plan; and (xiii) confirmation satisfactory to Agent of employment agreements of William Staib and other key management. -2- 7 (c) The Company has agreed to pay the Bank all sums due and owing in connection with the Facility. The Company realizes and understands that the reason it was able to obtain the Facility was due to the willingness of the Guarantors to provide the Credit Support Agreements in respect of the Company's obligations to the Bank. The Company agrees that at any time the Guarantors, individually, or collectively, deem themselves to be insecure they may acquire the position of the Bank in the Facility by paying the obligation of the Company to the Bank. The Company fully agrees that upon acquisition of the Bank's position or the Bank's exercise of its remedies against the Guarantor Commitments and/or Pappajohn Guaranty, the Guarantors shall be subrogated to all rights of the Bank under the Company's agreements with the Bank (including, without limitation, the Credit Agreement, the Promissory Note, and the Bank Security Documents; together, the "Bank Documents") whether or not the Bank may have canceled all or any portion of the Company's obligations to the Bank under the Facility. (d) As between the Guarantors, each of the Guarantors agrees that no Guarantor should bear a proportionately greater loss under the Credit Support Agreements than any other Guarantor. Therefore, each of the Guarantors shall bear any losses under the Credit Support Agreements in accordance with its Pro Rata Share. Each Guarantor promises each other Guarantor that it will pay, on demand, his or its Pro Rata Share of the Company's obligations to the Bank, in connection with such party's obligations under the Credit Support Agreements, either to the Bank, if the obligations under the Facility have not been satisfied, or to another Guarantor who has made payment to the Bank in satisfaction of the Company's obligations under the Facility. The demand for payment made by any Guarantor to any other Guarantor shall be made in writing to the Agent, accompanied by proof of the demanding party's payment under a Credit Support Agreement. Each Guarantor (an "Indemnifying Guarantor") hereby agrees to indemnify and hold harmless each other Guarantor from and against any and all losses, claims, damages or liabilities, joint or several, which such other party may suffer by reason of the failure of an Indemnifying Guarantor to pay his or its Pro Rata Share on demand. The Company promises to pay each Guarantor any and all sums which that Guarantor has paid to the Bank in satisfaction of all or any portion of the Company's obligations to the Bank when such obligations are due, plus all costs, including, without limitation, interest and reasonable attorney's fees, incurred in connection therewith. (e) In the event the indemnification referred to in the immediately preceding paragraph above is determined to be invalid or unenforceable for any reason whatsoever, each Guarantor agrees that the common law principle of contribution shall apply and that each Guarantor shall be obligated to contribute his or its Pro Rata Share towards satisfaction of any payment made or to be made under the Credit Support Agreements or made by any other Guarantor, if the payments by such other Guarantor exceeds such other Guarantor's Pro Rata Share of the Company's obligations to the Bank. -3- 8 SECTION 2. AGENT. 2.1. ACTIONS (a) Each Guarantor hereby irrevocably appoints the Agent as its agent under and for purposes of this Agreement and the Documents. Each Guarantor authorizes the Agent to act on behalf of such Guarantor under this Agreement and each Document and, in the absence of written instructions from the Guarantors received from time to time by the Agent (with respect to which the Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are delegated to or required of the Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Guarantor hereby indemnifies and holds harmless (which indemnity shall survive any termination of this Agreement) the Agent, and the directors, officers, agents or employees of the Agent, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent in any way relating to or arising out of this Agreement and any Documents, including, without limitation, attorneys' fees, and as to which the Agent is not indemnified or reimbursed by the Company. The Agent shall not be required to take any action hereunder or under any Document, or to prosecute or defend any suit in respect of this Agreement or any Document, unless it is indemnified hereunder to the Agent's satisfaction. If any indemnity in favor of the Agent shall be or become, in the Agent's determination, inadequate, the Agent may demand additional indemnification from the Guarantors and cease to act as Agent hereunder until such additional indemnity is given. (b) Each Guarantor acknowledges that it has, independently and without reliance upon the Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the transactions contemplated hereby. Each Guarantor also acknowledges that it will, independently and without reliance upon the Agent, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. 2.2. EXCULPATION. Neither the Agent nor any of its directors, officers, employees or agents shall be liable to any Guarantor for any action taken or omitted to be taken by it under this Agreement or any Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor shall they be responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Document, nor for the creation, perfection or priority of any liens purported to be created by any of the Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Company of its obligations hereunder or under any Document. Any such inquiry which may be made by the Agent shall not obligate it to make any further inquiry or to take any action. The Agent shall be -4- 9 entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Agent believes to be genuine and to have been presented by a proper person. 2.3. SUCCESSOR. The Agent may resign as such at any time upon at least 30 days' prior notice to the Company and all Guarantors. If the Agent at any time shall resign, the Guarantors may appoint another Guarantor as a successor Agent which shall thereupon become the Agent hereunder. If no successor Agent shall have been so appointed by the Guarantors, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Guarantors, appoint a successor Agent, which shall be one of the Guarantors. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the, retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as the Agent the provisions of this Section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement. SECTION 3. WARRANTS. 3.1. ISSUANCE. At the Closing (defined below in Section 4), the Company shall sell to the Guarantors, and the Guarantors shall purchase from the Company, Warrants to purchase an aggregate of 500,000 shares of the Common Stock (the "Warrant Shares") upon the terms set forth in the Warrants. Each Guarantor shall purchase a Warrant at the purchase price stated below to purchase the number of Warrant Shares set forth below:
Common Shares Guarantors Purchase Guarantor Exercisable Price - ---------------------------------------------------------- ------------------------- --------------------------------- Pappajohn 250,000 $2,500 Gerald M. Kirke 100,000 $1,000 Iowa Farm Bureau Federation 50,000 $500 Derace Schaffer 50,000 $500 Matthew P. Kinley 20,000 $200 Dominion Securities Inc. 20,000 $200 Michael J. Richards 5,000 $50 Joseph Dunham 5,000 $50
-5- 10 3.2. REGISTRATION RIGHTS. At the Closing, the Company and the Guarantors shall enter into the Registration Rights Agreement. SECTION 4. CLOSING. The closing of the Transactions (the "Closing") shall take place at the offices of BELIN LAMSON McCORMICK ZUMBACH FLYNN, a Professional Corporation, The Financial Center, 666 Walnut Street, Suite 2000, Des Moines, Iowa 50309, simultaneously with the execution and delivery of this Agreement and the other Documents to be executed and delivered at Closing. SECTION 5. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company hereby represents and warrants to the Guarantors as follows: 5.1. ORGANIZATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate the assets used in its business, to carry on its business as presently- conducted, to enter into the Documents, to perform its obligations thereunder, and to consummate the transactions contemplated thereby. Attached as Schedule 5.1 are correct and complete copies of the Certificate of Incorporation and the Bylaws of the Company, as in effect on the date of the Closing (the "Certificate of Incorporation" and the "Bylaws," respectively). 5.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The Company has taken all corporate action necessary to authorize its execution and delivery of the Documents and the Bank Documents, its performance of its obligations thereunder, and its consummation of the transactions contemplated thereby. Each Document and each Bank Document has been executed and delivered by an officer of the Company in accordance with such authorization. Each Document and each Bank Document constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent transfer, and similar laws affecting creditors' rights generally, and the effect of general principles of equity. 5.3. NO CONFLICT. The execution and delivery by the Company of the Documents and the Bank Documents, its consummation of the transactions contemplated thereby, and its compliance with the provisions thereof, will not (i) violate or conflict with its Certificate of Incorporation or Bylaws, (ii) violate, conflict with, or give rise to any right of termination, cancellation, or acceleration under any -6- 11 material agreement, lease, security, license, permit, or instrument to which the Company is a party, or to which it or any of its assets is subject (except where same would not individually or in the aggregate have a Material Adverse Effect (as defined below)), (iii) result in the imposition of any Encumbrance on any asset of the Company, other than pursuant to the Bank Documents and the Documents, (iv) violate or conflict with any Laws, which violation would cause a Material Adverse Change (as defined below), or (v) require any consent, approval or other action of, notice to, or filing with any entity or person (governmental or private), except for those that have been obtained or made, or where the failure to obtain such consent or approval would not cause a Material Adverse Change. "Encumbrance" means any security interest, mortgage, lien, pledge, charge, easement, reservation, restriction, or similar right of any third party except for Encumbrances in favor of the Bank in connection with the Facility. "Laws" means all laws, rules, regulations, ordinances, orders, judgments, injunctions and decrees. "Material Adverse Change" means any material adverse change in the business, operations, properties, assets, or financial condition of the Company. "Material Adverse Effect" means a material adverse effect on the business, financial condition, assets, liabilities, property or operations of the Company, or a material impairment of the Company's ability to perform its obligations under the Documents. 5.4. CAPITALIZATION. (a) The authorized equity securities of the Company consist of 25,000,000 shares of capital stock, including 20,000,000 shares of common stock, $.01 par value, of which there are 2,172,028 shares issued and outstanding, 5,000,000 shares of preferred stock, initially undesignated as to terms, of which the Company has designated the terms and preferences of 320,000 shares of Convertible Series A Voting Preferred Stock (of which there are 320,000 shares outstanding), 282,720 shares of Convertible Series B Voting Preferred Stock (of which there are 282,720 shares outstanding), and 1,179,540 shares of Convertible Series C Voting Preferred Stock (of which there are 773,254 shares outstanding). The persons set forth on Schedule 5.4 own the shares and common stock equivalents set forth opposite such persons' names. All of the outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. Except for the Documents and the common stock equivalents set forth on Schedule 5.4 there are no agreements of any sort relating to the issuance, sale, or transfer of any equity securities or other securities of the Company. None of the outstanding equity securities or other securities of the Company was issued in violation of the Securities Act or any other legal requirement. Except as set forth in paragraph (b) below, the Company does not own, nor has any contract to acquire, any equity securities or other securities of any person or any direct or indirect equity or ownership interest in any other business. The fully diluted common stock equivalents of the Company outstanding before issuance of the Warrants do not exceed 7.1 million shares. -7- 12 (b) The Company owns 100% of the capital stock of Neural, Inc. and Ethos Corporation (collectively, the "Subsidiaries", and the capital stock of the Subsidiaries being the "Subsidiary Stock"). The Subsidiary Stock is free and clear of all Encumbrances. 5.5. FINANCIAL INFORMATION. The Company has delivered to Agent: (a) audited consolidated balance sheets of the Company as at December 31 for each of the years 1996 through 1998, and the related audited consolidated statements of income, changes in stockholders' equity, and cash flow for each of the fiscal years then ended, including in each case the notes thereto and (b) an unaudited consolidated balance sheet of the Company as at September 30, 1999 (the "Interim Balance Sheet") and the related unaudited consolidated statements of income, changes in stockholders' equity, and cash flow for the nine months then ended. Such financial statements and notes fairly present the financial condition and the results of operations, changes in stockholders' equity, and cash flow of the Company as at the respective dates of and for the periods referred to in such financial statements, all in accordance with United States generally accepted accounting principles consistently applied ("GAAP"). No financial statements of any persons other than the Company and the Subsidiaries are required by GAAP to be included in the consolidated financial statements of the Company. 5.6. SECURITIES LAWS. Based upon the representation of each Guarantor contained in Section 6.1 below, the Transactions contemplated hereby are exempt from registration under the Securities Act. 5.7. TITLE TO ASSETS. The Company has good and marketable title to all of its assets, free and clear of all encumbrances except for Permitted Liens (defined below). Such assets are in good operating condition and repair (ordinary wear and tear excepted), and are suitable for their intended use in the business of the Company as conducted at the date hereof. "Permitted Liens" means (i) liens in favor of the Bank granted in connection with the Facility and in favor of the Agent granted in connection herewith, (ii) liens arising by operation of law in the ordinary course of business that, individually and in the aggregate, do not in any material respect interfere with the use or value of any of the assets subject thereto, (iii) liens for taxes not yet due and payable or that are being contested in good faith, (iv) liens created by the Documents, (v) purchase money liens to finance property of the Company acquired in the ordinary course of business, (vi) liens existing on the date hereof listed in Schedule 5.7 or incurred in connection with extension or renewal of indebtedness secured by such liens, (vii) liens consisting of deposits or pledges to secure the performance of trade contracts, bids, leases, public or statutory obligations and similar obligations incurred in the ordinary course of business, and (viii) any judgment, attachment or similar lien unless the judgment secured is not covered by insurance or not discharged or stayed or bonded pending appeal or vacated within 30 days of entry thereof. -8- 13 5.8. REAL PROPERTY. The Company does not own, directly or indirectly, any fee title to real property. 5.9. INTELLECTUAL PROPERTY RIGHTS. The Company owns or is licensed to use, and has the right to bring infringement actions with respect to, all material patents, trademarks, copyrights, service marks, and applications and registrations therefor, and all trade names, customer lists, trade secrets, proprietary processes and formulae, inventions, know-how, other confidential and proprietary information, and other industrial and intellectual property rights necessary to permit the Company to carry on its business as presently conducted. Schedule 5.9 sets forth a list of all material patents, trademarks, copyrights, service marks, and applications and registrations therefor, and all trade names held or owned by the Company and all rights (except for know-how and similar other undocumented intellectual property) of the Company. All registered patents, copyrights, trademarks, and service marks listed on Schedule 5.9 are in full force and effect and are not subject to any taxes or maintenance fees which are delinquent. Except as set forth on Schedule 5.9, the Company (i) did not license or grant to anyone rights of any nature to use any intellectual property right that is material to its business, and (ii) to the Company's knowledge, does not market or sell any product or service that violates any intellectual property right of a third party. Except as set forth on such Schedule, there is no pending or, to the knowledge of the Company, threatened claim or litigation against the Company contesting the right to use any of its material intellectual property rights, asserting the misuse of any thereof, or asserting the infringement or other violation of any intellectual property rights of a third party. 5.10. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS. To the Company's knowledge after due inquiry, it is not in violation of any Law, which violation could reasonably be expected to have a Material Adverse Effect. 5.11. MATERIAL AGREEMENTS. Schedule 5.11 sets forth each agreement or understanding which is material to the business of the Company. Except as set forth on Schedule 5.11, each agreement or understanding set forth on Schedule 5.11 is in full force and effect and, to the knowledge of the Company, constitutes a valid and binding obligation of all parties thereto. Except as set forth on Schedule 5.11, to the Company's knowledge, the Company has in all material respects performed the obligations required to be performed by it and is not in default or alleged to be in default in any material respect under any material agreement or understanding. Except as set forth on Schedule 5.11, to the Company's knowledge, there exists no event or condition which, after notice or lapse of time, or both, would constitute such a default in a material respect under such agreements. The Company is not aware of any material defaults by any other party to any such agreement or understanding. -9- 14 5.12. LITIGATION. Except as set forth on Schedule 5.12 hereto, there are no (i) actions, suits, claims, investigations or other proceedings by or before any governmental authority or arbitrator pending or, to the knowledge of the Company, threatened against the Company which, if determined adversely to the Company, would have a Material Adverse Effect, or (ii) judgments, decrees, injunctions or orders of any governmental authority or arbitrator against the Company. 5.13. SOLVENCY. The Company is solvent, meaning that the fair salable value of the Company's assets is in excess of its liabilities. 5.14. ENVIRONMENTAL MATTERS. Except as otherwise stated in this Section 5.14, the Company is in compliance with all Laws relating to the protection of the environment (the "Environmental Laws"). The Company has not handled, stored or released, or exposed any person to, any hazardous substance, as defined in 42 U.S.C.A. Section 9601(14) or any other applicable Environmental Laws (a "Hazardous Substance"). To the Company's knowledge, the Company is not and will not be liable or responsible for clean-up costs, remedial work or damages in connection with the handling, storage, release, or exposure by the Company of any Hazardous Substance in excess of $25,000 in the aggregate. No claims for clean-up costs, remedial work or damages have been made by any person or entity in connection with the handling, storage, release, or exposure by the Company of any Hazardous Substance. 5.15. TAX MATTERS. (a) (i) The Company has filed or been included in all required returns, declarations of estimated tax, reports, and statements relating to any Taxes (defined below) payable by it (collectively, the "Returns"); (ii) all Returns were correct and complete in all material respects as of the time of filing; (iii) the Company has timely paid all Taxes required to be paid by it through the date hereof, except to the extent that Taxes are being contested in good faith; (iv) the Company has made provision on the Interim Balance Sheet in accordance with GAAP for all Taxes payable by it for all periods prior to the date of the Interim Balance Sheet for which no Returns have yet been filed; (v) the Company is not delinquent in the payment of any Taxes, except to the extent that Taxes are being contested in good faith; (vi) there are no pending tax audits of any Returns; and (vii) except with respect to Taxes which are being contested in good faith, no deficiency or addition to any Taxes or interest or penalty for any Taxes has been proposed, asserted or assessed in writing against the Company. (b) "Taxes" means, with respect to any person or entity, (i) all Federal, state, local, and foreign taxes, including, without limitation, all taxes on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings, or profits, and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, -10- 15 or windfall profits taxes, alternative or add-on minimum taxes, customs duties, or other taxes, fees, assessments or charges of any kind, together with any interest, penalties, additions to tax or additional amounts imposed by any taxing authority on such person or entity, and (ii) any liability for the payment of any amount of the type described in the preceding clause (i) as a result of being a "transferee" (within the meaning of Section 6901 of the Internal Revenue Code of 1986, as amended (the "Code"), or any other applicable Laws) of another person or entity. 5.16. ERISA. Any plan maintained or contributed to by the Company that is an "employee benefit plan," as defined in Section 3(3) or 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA") is being administered in compliance with the terms of such plan and applicable law in all material respects. 5.17. DISCLOSURE. None of the documents or materials relating to the Company referred to herein or on any Schedule, or furnished to the Guarantors by the Company in connection with this Agreement, contains any untrue statement of a material fact by the Company or, to the knowledge of the Company, by any other person or entity. Neither this Agreement (including the Schedules) nor any such document or material omits to state a material fact necessary in order to make the statements contained herein or therein not materially misleading. SECTION 6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS. Each Guarantor, severally and only with respect to itself, represents and warrants to the Company as of the date of this Agreement as follows: 6.1. INVESTMENT INTENT. (a) Each Guarantor is acquiring the Warrants, and it will acquire any Warrant Shares issuable upon exercise of the Warrants, for its own account, for investment and not with a view to the distribution thereof, nor with any present intention of distributing the same. (b) Each Guarantor understands that the Warrants have not been, and any Warrant Shares issuable upon exercise of the Warrants will not be, registered under the Securities Act, and that they must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from registration. (c) Each Guarantor understands that the exemption from registration afforded by Rule 144 of the Securities Act (the provisions of which are known to the Guarantors) depends on the satisfaction of various conditions and that, if applicable, Rule 144 may only afford the basis for sales under certain circumstances only in limited amounts. -11- 16 (d) Each Guarantor is an "accredited investor," as such term is defined in Rule 501 promulgated under the Securities Act. (e) Each Guarantor (i) has received copies of the financial statements of the Company described in Section 5.5 and (ii) believes that such Guarantor, either alone or with the assistance of such Guarantor's own professional advisor, has such knowledge and experience in financial and business matters that such Guarantor is capable of reading and interpreting the Company's financial statements and evaluating the merits and risks of the transactions contemplated by this Agreement. (f) In addition to the Company's financial statements referenced in paragraph (e) above, each Guarantor has been given access to full and complete information regarding the Company and has utilized such access to his, her or its satisfaction. 6.2. DUE ORGANIZATION AND REQUISITE POWER. Each Guarantor has all requisite power and authority, including, where applicable, corporate power and authority, necessary to perform its obligations to the Company and to the Bank as provided for in this Agreement. 6.3. ACTION AND EXECUTION. Each Guarantor has taken all action necessary for the authorization, execution, delivery and performance of this Agreement and the Credit Support Agreements. When executed, each of this Agreement and the Credit Support Agreements will be the legal, valid and binding obligation of each Guarantor enforceable in accordance with its terms. 6.4. NO CONFLICT. Neither the execution nor the delivery nor the performance of this Agreement or the Credit Support Agreements by any Guarantor will violate or otherwise contravene, where applicable, the Guarantor's articles or certificate of incorporation or bylaws or the terms of any agreement, the breach of which would invalidate this Agreement. SECTION 7. PRIOR OR SIMULTANEOUS ACTIONS. Prior to or at the Closing, concurrently with the execution and delivery of this Agreement, the following actions have been or are being taken: (a) Fees and Expenses. The fees and expenses of the Agent are being paid by the Company to the Agent as provided under Section 12 below. (b) Warrants. The Warrants are being executed and delivered by the Company. (c) Security Agreement. The Bank Security Agreement has been executed and delivered by the Company to the Bank. -12- 17 (d) Registration Rights Agreement. The Registration Rights Agreement is being executed and delivered by the Company to the Agent for the benefit of the Guarantors. (e) Intellectual Property Assignment. The Bank Intellectual Property Assignment have been executed and delivered by the Company to the Bank. (f) Required Consents. All consents, approvals and other actions of, and notices and filings with, all entities and persons as may be necessary or required with respect to the execution and delivery by the parties of the Documents, and the consummation by the parties of the transactions contemplated thereby, have been obtained or made. (g) Authorizing Actions of the Company. The Guarantors are receiving certified copies of all requisite corporate actions taken by the Company to authorize its execution and delivery of the Documents and its consummation of the transactions contemplated thereby, and such other corporate documents and other papers as the Guarantors may reasonably request. (h) Opinion of Counsel. The Guarantors are receiving an opinion dated the date hereof of counsel to the Company, in form reasonably satisfactory to the Agent. SECTION 8. COVENANTS. 8.1. ACCESS TO RECORDS. The Company shall afford to the Guarantors and their authorized employees, counsel, accountants and other representatives, upon reasonable notice and during ordinary business hours, (i) reasonable access to all books, records, and properties of the Company, as the same may relate to the Agreement and the Documents and (ii) the opportunity to interview any officer of the Company regarding its affairs as the same may relate to the Agreement and the Documents. 8.2. FINANCIAL REPORTING; DRAWS ON LINE OF CREDIT. (a) The Company shall deliver to each Guarantor the following: (i) within 45 days after the end of each fiscal quarter of the Company, (i) the balance sheet of the Company at the end of such quarter, and (ii) the statements of income and cash flows of the Company for such quarter; (ii) within 90 days after the end of each fiscal year of the Company, (i) the balance sheet of the Company at the end of such fiscal year, (ii) the statements of income and cash flows of the Company for such fiscal year, and (iii) an audit report of a nationally-recognized firm of independent certified public accountants on such balance sheets and statements; and (iii) All financial statements to be delivered under this Section shall be in accordance with the books and records of the Company and shall have been prepared in accordance with generally accepted accounting principles consistently applied. At any time at which -13- 18 the Company has any subsidiaries, all such financial statements shall be the consolidated financial statements of the Company and such subsidiaries. (b) The Company agrees that it shall not without the Agent's prior written approval draw more than $500,000 against the Facility in the aggregate during any seven day time period during the term thereof. In addition, the Company agrees that it shall provide written notice of all draw requests to the Agent at the same time that any draw requests are made to the Bank under the Facility. The Company shall not request any draws more than ten percent in excess of the Budget, on a cumulative basis. 8.3. PAYMENT; PREPAYMENT. (a) The Company shall pay all its obligations to the Bank under the Facility on or before June 30, 2001. (b) Notwithstanding paragraph (a) above, the net cash proceeds of any of the following shall be applied immediately and in full against Company's obligations to the Bank under the Facility (i) any sale, lease, transfer or other disposition of the Company's direct or indirect assets including any sale, lease, transfer or other disposition of the assets of any direct or indirect subsidiary of the Company (except equipment leases and pledges under purchase money obligations which in the aggregate do not exceed those dollar amounts set forth in Section 8.8(c) and trade sales, in each case in the ordinary course of business), (ii) any equity or debt issuance by the Company, including, without limitation, an initial public offering or private placement of debt or equity securities or, (iii) after default under the Bank Documents or Section 11 hereof, collection of any assets (including accounts receivable) of the Company. Further, the Company agrees to prepay its obligations to the Bank under the Facility upon any consolidation or merger of the Company with or into another entity, or a transfer of all or substantially all of the assets of the Company. 8.4. PAYMENT OF OBLIGATIONS. The Company shall pay or discharge or cause to be paid or discharged all material claims or demands, and all Taxes levied or imposed upon the Company or upon the income, profits or property of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such claim, demand, or Tax the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate provision has been made. 8.5. INSURANCE. The Company shall maintain with financially sound and reputable insurers such insurance as may be required by law and such other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated and in the same or similar business. -14- 19 8.6. NOTICE OF DISPUTES, MATERIAL ADVERSE CHANGE. The Company shall promptly notify the Agent of (i) the commencement or threat of any action, suit, proceeding, labor dispute or grievance, governmental investigation, or arbitration against or affecting the Company, which, if adversely determined, could reasonably be expected to result in a Material Adverse Change, (ii) any monetary or other material default under any indebtedness of the Company in excess of $100,000; and (iii) any other Material Adverse Change. 8.7. CONDUCT OF BUSINESS; BOARD OF DIRECTORS. (a) The Company shall (i) take all actions required to assure that the Company remains duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) take all actions required to assure that the Company maintains all requisite governmental authority, licenses, and permits necessary for the conduct its business, and (iii) conduct its business in compliance with all Laws except where noncompliance could not reasonably be expected to result in a Material Adverse Change. (b) Upon request by the Agent, the Company agrees to appoint a person identified by the Agent to fill the vacancy on the Board of Directors caused by the resignation of Robert Staib and to nominate as a member of the Board of Directors a person identified by the Agent in connection with each election of directors that occurs while the Facility remains outstanding. 8.8. DEBT. The Company will not directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to, any Debt (defined below), except for: (a) Debt of the Company to the Bank or hereunder; (b) Accounts payable to trade creditors for goods and services, and current operating liabilities incurred in the ordinary course of business; (c) Debt of the Company with respect to capital leases in an aggregate amount less than $750,000 in calendar 1999; $1,500,000 in calendar 2000 and $1,500,000 during the first six months of calendar 2001; or (d) Permitted Liens. "Debt" means all indebtedness (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or similar instruments, or (iii) evidenced by guaranties or similar contingent obligations. 8.9. RESTRICTED PAYMENTS. While any amount payable to the Bank, or the Guarantors or the Agent in connection herewith, including the Documents, is outstanding or the Company has the ability to borrow under the -15- 20 Facility, the Company shall not directly or indirectly pay or declare any dividend or authorize or make any distribution upon, or redeem, retire, repurchase or otherwise acquire, any shares of capital stock of the Company (except that the Company may adjust the conversion price of the Series C Preferred Stock pursuant to the accumulating dividend provisions set forth in the Series C designation). Furthermore, the Company shall not (i) invest more than $200,000 in any existing or $100,000 in any newly-created subsidiary or affiliate during any one year period or (ii) make any voluntary prepayments on Debt unrelated to the Facility. 8.10. NEGATIVE PLEDGE. The Company will not create, assume or suffer to exist any encumbrance on any asset now owned or hereafter acquired by it, except: (a) any lien on any asset securing Debt permitted under Section 8.8 above; (b) Permitted Liens; (c) liens securing the payment of taxes, assessments and governmental charges or levies, either not yet due and payable or which are being actually contested; and (d) any lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any lien permitted by any of the foregoing clauses of this Section; provided, however, that the principal amount of such Debt is not increased and is not secured by any additional assets. The Company shall at all times from and after the date hereof keep reserved, free from Encumbrances solely for the purpose of effecting the exercise of the Warrants, sufficient Warrant Shares to provide for the full exercise of the Warrants. 8.11. TERMINATION. The obligations of the Company hereunder shall terminate when the Guarantors are released from their obligations under the Credit Support Agreements and no amounts are owing in connection with the Facility or the Credit Support Agreements. SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. The representations, warranties and covenants contained in this Agreement shall survive the Closing indefinitely. SECTION 10. INDEMNIFICATION. (a) The Company shall indemnify, defend and hold the Agent and Guarantors harmless against all liability, loss or damage, together with all reasonable costs and expenses related thereto (including reasonable legal fees and expenses), relating to or arising from the transactions described herein and the untruth, inaccuracy or breach of any of the 21 representations, warranties or agreements of the Company contained in this Agreement or the other Documents; provided however, that none of the Agent or the Guarantors will be indemnified for any costs or expenses that have resulted primarily from its own gross negligence or willful misconduct. (b) The Guarantors shall indemnify and hold the Company harmless against all liability, loss or damage, together with all reasonable costs and expenses related thereto (including reasonable legal fees and expenses), relating to or arising from the untruth, inaccuracy or breach of any of the representations, warranties or agreements of the Guarantors contained in this Agreement. SECTION 11. PURCHASE OF BANK'S RIGHTS AND INTERESTS; EVENTS OF DEFAULT. If one or more of the Guarantors purchases the Bank's rights and interests under the Bank Documents (collectively, the "Bank's Position"), violation by the Company of any representation, warranty or covenant in this Agreement shall be deemed to be an event of default under the Bank Documents, as will any one or more of the following events (each, an "Event of Default"): (a) if one of more judgments, decrees or orders for the payment of money in excess of $100,000 shall be rendered against the Company, any such judgments, decrees, or orders shall continue unsatisfied and in effect for a period of 30 consecutive days without being vacated, discharged, satisfied or stayed or bonded pending appeal; or (b) if the Company shall become insolvent, or is adjudicated insolvent or bankruptcy; or (c) if the Company admits in writing its inability to pay its debts; or (d) if the Company shall come under the authority of a custodian, receiver or trustee for it or for substantially all its property; or (e) if the Company makes an assignment for the benefit of creditors, or suffers proceedings under any law related to bankruptcy, insolvency, liquidation or the reorganization, readjustment or the release of debtors to be instituted against it and if contested by it not dismissed or stayed within 60 days; or (f) if proceedings under any law related to bankruptcy, insolvency, liquidation or the reorganization, readjustment or the release of debtors are instituted or commenced by the Company; or (g) if any order for relief is entered relating to any of the foregoing proceedings under clauses (d) through (f); or (h) the acquisition by any person (whether an individual, corporation, association or other entity), or two or more persons acting in concert, of beneficial ownership (within the meaning -17- 22 of Rule l3d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 30% or more of the outstanding voting securities of the Company; or (i) if there is a Material Adverse Effect, as determined in the reasonable discretion of the Agent; or (j) if the Company or any of its subsidiaries shall fail to make any material payment in respect of any indebtedness (including all amounts owed Northern Trust) or other material contract when due or within any applicable grace period; or any event or condition shall occur which results in the acceleration of the maturity of any indebtedness or material contract or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of any indebtedness or material contract or any Person acting on such holder's behalf to accelerate the maturity thereof or obligations thereunder. The Events of Default set forth in this Section 11 shall be applicable only upon a purchase of the Bank's Position by one or more of the Guarantors. SECTION 12. FEES AND EXPENSES. The Company, shall pay or reimburse the Agent for all direct expenses associated with this Agreement, the transactions contemplated hereby, and/or the enforcement of or collection under this Agreement, including in each case, without limitation, the reasonable fees and charges of BELIN LAMSON McCORMICK ZUMBACH FLYNN, a Professional Corporation, counsel to the Agent and all letter of credit fees or other fees related to the Guarantor Commitments. SECTION 13. CONFIDENTIALITY. Each Guarantor shall keep all confidential, non-public information on the business operations and affairs of the Company, which it receives as a consequence of this Agreement and the other Documents, strictly confidential and shall not disclose such information to any third party without the Company's prior consent. SECTION 14. ASSIGNMENT; PARTIES IN INTEREST. This Agreement and the rights and obligations of the parties hereunder shall be assignable by the Guarantors, but not the Company. This Agreement shall bind and inure to the benefit of the Company, the Guarantors, the Agent, and their respective successors and permitted assigns. SECTION 15. ENTIRE AGREEMENT. This Agreement and the other Documents contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect to such subject matter. -18- 23 SECTION 16. FURTHER ASSURANCES. The Company agrees to do such further acts and things and to execute and deliver to Agent such additional assignments, agreements, powers and instruments, as Agent may reasonably require to carry into effect the purposes of this Agreement or any of the Documents. SECTION 17. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company: Stockpoint, Inc. 2600 Crosspark Road Coralville, IA 52241-3212 with a copy to: Thomas Martin, Esq. Dorsey & Whitney LLP 220 South 6th Street Minneapolis, MN 55402 if to the Agent: Equity Dynamics, Inc. 2116 Financial Center 666 Walnut Street Des Moines, Iowa 50309 with a copy to: Belin Lamson McCormick Zumbach Flynn A Professional Corporation The Financial Center 666 Walnut Street Suite 2000 Des Moines, Iowa 50309 ATTN: Garth D. Adams, Esq. if to the Guarantors: John Pappajohn c/o Equity Dynamics -19- 24 2116 Financial Center 666 Walnut Street Des Moines, Iowa 50309 Gerald M. Kirke Kirke Financial Services, L.L.C. 417 Locust Street Des Moines, Iowa 50309 Iowa Farm Bureau Federation 5400 University Avenue West Des Moines, Iowa 50266 Attn: James Christenson, Director of Finance Derace Schaffer 3489 Elmwood Avenue Rochester, New York 14610 Matthew Kinley c/o Equity Dynamics 2116 Financial Center 666 Walnut Street Des Moines, Iowa 50309 Dominion Securities Inc. 211 First Avenue S.E. Cedar Rapids, Iowa 52401 Michael J. Richards Kirke Financial Services, L.L.C. 417 Locust Street Des Moines, Iowa 50309 Joseph Dunham c/o Equity Dynamics 2116 Financial Center 666 Walnut Street Des Moines, Iowa 50309 or to such other address as the party to whom notice is to be given may have furnished to the other parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of telecopy transmission, upon receipt of electronic confirmation of transmission, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. -20- 25 SECTION 18. AMENDMENTS. The terms and provisions of this Agreement may only be modified or amended pursuant to an instrument signed by all parties. Notwithstanding the foregoing, the obligations of the Company under Sections 8.1 through 8.10 may also be waived, temporarily or permanently, but solely with respect to any Guarantor, pursuant to an instrument signed by such Guarantor. SECTION 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. SECTION 20. HEADINGS, GENDER, TENSE. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever from the context it appears appropriate, each term stated in either of the singular or the plural will include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender will include the masculine, the feminine and the neuter. Unless otherwise expressly stated in the Agreement, the words "herein," "hereof," "hereto," "hereunder" and others of similar inference refer to the Agreement as a whole and not to any particular section, subsection or clause contained in the Agreement. The term "including" shall not be deemed to be exclusive and shall be deemed to mean "including, without limitation." SECTION 21. GOVERNING LAW, JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF IOWA WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF IOWA TO BE APPLIED. THE PARTIES HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF IOWA AND OF ANY IOWA STATE COURT SITTING IN DES MOINES FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 22. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE GUARANTORS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL -21- 26 PROCEEDING ARISING OUT OF OR RELATING TO THE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. -22- 27 IN WITNESS WHEREOF the parties have executed and delivered this Master Agreement on the date first above written. STOCKPOINT, INC. By: /s/ [illegible] --------------------------------------- By: /s/ John Pappajohn --------------------------------------- John Pappajohn By: /s/ Gerald M. Kirke --------------------------------------- Gerald M. Kirke IOWA FARM BUREAU FEDERATION By: /s/ James Christenson --------------------------------------- James Christenson By: /s/ Derace Schaffer --------------------------------------- Derace Schaffer By: /s/ Matthew P. Kinley --------------------------------------- Matthew P. Kinley DOMINION SECURITIES INC. By: /s/ Steve Michalicek --------------------------------------- Steve Michalicek By: /s/ Michael J. Richards --------------------------------------- Michael J. Richards -23- 28 By: /s/ Joseph Dunham --------------------------------------- Joseph Dunham EQUITY DYNAMICS, INC., as Agent By: /s/ [illegible] --------------------------------------- -24- EX-4.6 15 FORM OF STOCK PURCHASE WARRANT ISSUED 12/3/1999 1 EXHIBIT 4.6 STOCKPOINT, INC. STOCK PURCHASE WARRANT To Purchase Common Stock of STOCKPOINT, INC. 2 THE ISSUANCE OF THIS WARRANT AND THE OFFER AND SALE OF THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAW AND THIS WARRANT AND ANY SUCH SHARES OF COMMON STOCK MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (IF SO REQUESTED) TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER. STOCKPOINT, INC. WARRANT NUMBER: Void after 5:00 p.m. Eastern Standard Time, on December , 2004. Warrant to Purchase ,000 Shares of Common Stock. WARRANT TO PURCHASE COMMON STOCK OF STOCKPOINT, INC. This is to Certify That, for United States Dollars ($ ) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ("Holder") is entitled to purchase, subject to the provisions of this Warrant, from Stockpoint, Inc., a Delaware corporation ("Company"), 000 fully paid, validly issued and nonassessable shares of Common Stock, $0.01 par value per share, of the Company ("Common Stock") at a price initially set at Seven Dollars and Fifty Cents ($7.50) per share at any time or from time to time during the period from the date hereof to expiration, but not later than 5:00 p.m. Eastern Standard Time, on December __, 2004. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price". (a) EXERCISE OF WARRANT. (1) This Warrant may be exercised in whole or in part at any time or from time to time on or after the date hereof and until 5:00 p.m. Eastern 3 Standard Time on December __, 2004; provided, however, that if either such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day. This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form. As soon as practicable after each such exercise of this Warrant warrants, but not later than seven (7) days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificate for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable thereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise together with payment in full of the exercise price for the Warrant Shares to be purchased, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. (2) In lieu of delivering the Exercise Price in cash or check the Holder may elect to receive shares equal to the value of the Warrant or portion thereof being exercised ("Net Issue Exercise"). If the Holder wishes to elect the Net Issue Exercise, the Holder shall notify the Company of its election in writing at the time it delivers to the Company the Purchase Form. In the event the Holder shall elect Net Issue Exercise, the Holder shall receive the number of shares of Common Stock equal to the product of (a) the number of shares of Common Stock purchasable under the Warrant, or portion thereof being exercised, and (b) the current market value, as defined in paragraph (c) below, of one share of Common Stock minus the Exercise Price, divided by (c) the current market value, as defined in paragraph (c) below, of one share of Common Stock. (b) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of this Warrant. (c) FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to 2 4 the Holder an amount in cash equal to such fraction multiplied by the current market value of a share, determined as follows: (1) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the NASDAQ system, the current market value shall be the last reported sale price of the Common Stock on such exchange or system on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the mean of the last reported bid and asked prices for such day on such exchange or system; or (2) If the Common Stock is not so listed or admitted to unlisted trading privileges, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value of a share of Common Stock shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company. (d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. Subject to the restrictions noted at the beginning of this Warrant, this Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this Warrant to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be cancelled. This Warrant may be divided or combined with other warrants which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and 3 5 date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. (e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (f) ANTI-DILUTION AND ADJUSTMENT PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (1) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (2) In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (the "Subscription Price") (or having a conversion price per share) less than the Exercise Price on such record date the Exercise Price shall be adjusted so that the same shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of issuance by a fraction, the numerator of which shall be the sum of the number of shares outstanding on the record date mentioned above and the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered) would purchase at the Exercise Price in effect immediately prior to the date of such issuance, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding on the record date mentioned above and the number of additional shares of Common Stock offered for subscription or purchase (or into which the 6 convertible securities so offered are convertible). Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered (or securities convertible into Common Stock are not delivered) after the expiration of such rights or warrants the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into Common Stock) actually delivered. (3) In case the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (1) above) or subscription rights or warrants (excluding those referred to in Subsection (2) above), then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined in Section (c) above), less the fair market value (as determined by the Company's Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (4) (A). In case the Company shall issue shares of its Common Stock excluding shares issued (i) in any of the transactions described in Subsection (1) above, (ii) upon exercise of options granted to the Company's employees under a plan or plans adopted by the Company's Board of Directors and approved by its shareholders, if such shares would otherwise be included in this Subsection (4), (iii) upon exercise of options and warrants outstanding at December ____, 1999, and this Warrant, (iv) to shareholders of any corporation which merges into the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) in a bona fide public offering pursuant to a firm commitment underwriting, or (vi) on conversion or exchange of any securities for which full adjustment has already been made in accordance with Subsection 4(B) below but only if no adjustment is required pursuant to any other specific subsection of this Section (f) 5 7 (without regard to Subsection (9) below) with respect to the transaction giving rise to such rights for a consideration per share (the "Offering Price") less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal such Offering Price. Such adjustment shall be made successively whenever such an issuance is made. (B). In case the Company shall issue any securities convertible into or exchangeable for its Common Stock excluding securities issued in transactions described in Subsections (2) and (3) above for a consideration per share of Common Stock (the "Conversion Price") initially deliverable upon conversion or exchange of such securities determined as provided in Subsection (7) below less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal such Conversion Price Such adjustment shall be made successively whenever such an issuance is made. (C). In case the Company shall issue shares of its Common Stock excluding shares issued (i) in any of the transactions described in Subsection (1) above, (ii) upon exercise of options granted to the Company's employees under a plan or plans adopted by the Company's Board of Directors and approved by its shareholders, if such shares would otherwise be included in this Subsection (4), (iii) upon exercise of options and warrants outstanding at December __, 1999, and this Warrant, (iv) to shareholders of any corporation which merges into the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) in a bona fide public offering pursuant to a firm commitment underwriting, or (vi) on conversion or exchange of any securities for which full adjustment has already been made in accordance with Subsection 4(B) above or Subsection 4(D) below but only if no adjustment is required pursuant to any other specific subsection of this Section (f) (without regard to Subsection (9) below) with respect to the transaction giving rise to such rights for a consideration per share (the "Offering Price") less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of issuance by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares and the number of shares of Common Stock which the aggregate consideration received determined as provided in subsection (7) below for the issuance of such additional shares would purchase at the Exercise Price in effect immediately prior to the date of such issuance, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. 6 8 (D). In case the Company shall issue any securities convertible into or exchangeable for its Common Stock excluding securities issued in transactions described in Subsections (2) and (3) above for a consideration per share of Common Stock (the "Conversion Price") initially deliverable upon conversion or exchange of such securities determined as provided in Subsection (7) below less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of issuance by a fraction, the numerator of which shall be the sum of the number of shares outstanding immediately prior to the issuance of such securities and the number of shares of Common Stock which the aggregate consideration received determined as provided in subsection (7) below for such securities would purchase at the Exercise Price in effect immediately prior to the date of such issuance, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such securities and the maximum number of shares of Common Stock of the Company deliverable upon conversion of or in exchange for such securities at the initial conversion or exchange price or rate. Such adjustment shall be made successively whenever such an issuance is made. (5) In case the Company shall (i) issue shares of its Common Stock in a bona fide public offering pursuant to a firm commitment at a price per share ("Public Offering Price") less than 200% of the then current Exercise Price, the Exercise Price shall be adjusted immediately so that it shall equal the price determined by multiplying the Public Offering Price by a factor of 0.50, or (ii) issue or exchange shares of its Common Stock in connection with a Change of Control (defined as the acquisition by any person (whether an individual, corporation, association or other entity), or two or more persons acting in concert, of beneficial ownership (within the meaning of 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 50% or more of the outstanding voting securities of the Company) for a consideration per share ("Exchange Consideration") less than 200% of the then current Exercise Price, the Exercise Price shall be adjusted immediately so that it shall equal the price determined by multiplying the Exchange Consideration by a factor of 0.50. No more than one adjustment shall be made pursuant to this Subsection (5), which adjustment shall be made at the time of such issuance. (6) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on 7 9 the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (7) For purposes of any computation respecting consideration received pursuant to Subsections (4) and (5) above, the following shall apply: (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and (C) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (7). (8) INTENTIONALLY OMITTED. (9) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($0.05) in such price; provided, however, that any adjustments which by reason of this Subsection (9) are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section (f) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section (f) to the contrary notwithstanding, the Company shall be entitled, but shall not be required, to make such changes in the Exercise Price, in addition to those required by this Section (f), as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal Income tax liability to the holders of Common Stock or securities convertible into Common Stock (including Warrants). 8 10 (10) The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section (f), and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment. (11) In the event that at any time, as a result of an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (1) to (9), inclusive above. (12) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. (13) The provisions of Subsections (4)(A), (4)(B), and (5) above shall cease to have any effect immediately after the closing of the Company's first bona fide public offering after the date of this Warrant and thereafter no adjustments in the Exercise Price shall be made pursuant to such Subsections. The provisions of Subsections (4)(C) and (4)(D) shall not be effective as long as Subsections (4)(A) and (4)(B) remain effective. Immediately after the closing of the Company's first bona fide public offering the provisions of Subsections (4)(C) and (4)(D) shall become effective and adjustments in the Exercise Price shall be made pursuant to such Subsections. (g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section, the Company shall promptly and in no event later than 20 days after the effective date of adjustment cause to be mailed by certified mail to each Holder at his last address appearing in the Warrant Register and shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall be 9 11 made available at all reasonable times for inspection by the Holder or any holder of a Warrant executed and delivered pursuant to Section (a). (h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least fifteen days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (i) shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, 10 12 consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (1) of Section (f) hereof. (j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company and the Holder have entered into a Registration Rights Agreement as of even date herewith providing for certain rights and obligations related to registration of the shares of Common Stock issuable upon exercise of this Warrant. (k) RESTRICTIVE LEGEND. Each Warrant Share, when issued, shall include a legend in substantially the following form: THE ISSUANCE OF THESE SHARES HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAW AND THESE SHARES MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (IF SO REQUESTED) TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER. (l) NO IMPAIRMENT. The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. Dated: December __, 1999 STOCKPOINT, INC. Attest: ______________________________ By:_____________________________ Name: William McNally Name: William E. Staib Title: Secretary Title: President & CEO 11 13 PURCHASE FORM Dated____________________ The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing shares of Common Stock and hereby makes payment of in payment of the actual exercise price thereof. In lieu of such payment of the actual exercise price, the undersigned may direct the Company to net issue such shares of Common Stock in accordance with Section (a)(2) of the within Warrant by writing "net issue" in the space after "payment of" in the preceding sentence. ________________ INSTRUCTIONS FOR REGISTRATION OF STOCK Name ___________________________________________________________ (Please typewrite or print in block letters) Address_________________________________________________________ Signature ______________________________________________ ________________ ASSIGNMENT FORM FOR VALUE RECEIVED, ________________________________ hereby sells, assigns and transfers unto Name____________________________________________________________ (Please typewrite or print in block letters) Address ________________________________________________________ the right to purchase Common Stock represented by this Warrant to the extent of _______ shares as to which such right is exercisable and does hereby irrevocably constitute and appoint ________________ Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Date ______________,_______ Signature __________________________ 12 14 Date ______________,_______ Signature __________________________ 13 EX-4.7 16 REGISTRATION RIGHTS AGREEMENT DATED 12/3/1999 1 EXHIBIT 4.7 EXHIBIT B REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is entered into as of December 3, 1999, by and among Stockpoint, Inc., a Delaware corporation (the "Company"), and the persons listed on the signature page hereof (the "Purchasers"). WHEREAS, the Purchasers (the "Purchasers") have purchased Stock Purchase Warrants (the "Warrants") for the purchase of Common Stock, $.01 par value per share, of the Company; WHEREAS, the Company and the Purchasers desire to provide for certain arrangements with respect to the registration under the Securities Act of 1933, as amended (the "Securities Act"), of shares of Common Stock of the Company, $.01 par value per share, to be issued upon exercise of the Warrants held by the Purchasers as provided in this Agreement: NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchasers hereby agree as follows: 1. Definitions. 1.1 "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.2 "Company" shall mean Stockpoint, Inc., a Delaware corporation. 1.3 "Common Shares" shall mean the shares of common stock, par value $.01 per share, authorized by the Company's Certificate of Incorporation and any additional shares of common stock which may be authorized in the future by the Company, and any stock into which such Common Shares may hereafter be changed, and shall also include capital stock of any other class of the Company which is not preferred as to dividends or assets over any other class of stock of the Company and which is not subject to redemption. 1.4 "Public Offering" shall mean any offering of Common Shares to the public, either on behalf of the Company or any of its security holders, pursuant to an effective registration statement under the Securities Act. 1.5 "Purchasers" shall mean the holders from time to time of the Warrants. 1.6 "Registrable Securities" shall mean (a) the Common Shares at any time issued or subject to issuance upon the exercise of the Warrants and any series of preferred stock, warrants, options or rights, the holders of which are granted registration rights by agreement with the Company and (b) any additional securities issued with respect to the above-described 2 securities upon any stock split, stock dividend, recapitalization, or similar event. Registrable Securities shall cease to be Registrable Securities when (x) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (y) all such securities held by a Purchaser shall be eligible to be distributed pursuant to Rule 144 under the Securities Act in a single three-month period by the holders thereof or (z) such securities shall have ceased to be outstanding. 1.7 "Registration Expenses" shall mean the expenses described in Section 5. 1.8 "Securities Act" shall mean the Securities Act of 1933, as amended. 2. Demand Registration. 2.1 Subject to Sections 2.4 and 2.5, if at any time after one year has elapsed from the date the Company first consummates a Public Offering pursuant to a registration statement on Form S-1 or Form SB-2, the Company shall receive a written request therefor from the record holder or holders of an aggregate of at least 51% of the Registrable Securities, the Company shall prepare and file a registration statement under the Securities Act covering such number of Registrable Securities as are the subject of such request and shall use its best efforts to cause such registration statement to become effective. Upon the receipt of a registration request meeting the requirements of this Section 2.1, the Company shall promptly give written notice to all other record holders of Registrable Securities that such registration is to be effected. The Company shall include in such registration statement such additional Registrable Securities as such other record holders request in writing within thirty (30) days after the date of the Company's written notice to them. If (a) the holders of a majority of the Registrable Securities for which registration has been requested pursuant to this Section 2.1 determine for any reason not to proceed with the registration at any time before the related registration statement has been declared effective by the Commission, (b) such registration statement, if theretofore filed with the Commission, is withdrawn and (c) the holders of the Registrable Securities subject to such registration statement agree to bear their own Registration Expenses incurred in connection therewith and to reimburse the Company for the Registration Expenses incurred by it in such connection or if such registration statement, if theretofore filed with the Commission, is withdrawn at the initiative of the Company, then the holders of the Registrable Securities shall not be deemed to have exercised their demand registration right pursuant to this Section 2.1. 2.2 At the request of the holders of a majority of the Registrable Securities to be registered, the method of disposition of all Registrable Securities included in such registration shall be an underwritten Public Offering. The managing underwriter of any such Public Offering shall be selected by the Company. If in the good faith judgment of the managing underwriter of such Public Offering, the inclusion of all of the Registrable Securities the registration of which has been requested would interfere with their successful marketing, the number of Registrable Securities to be included in the Public Offering shall be reduced, pro rata, among the requesting holders thereof in proportion to the number of Registrable Securities included in their respective requests for registration. Registrable Securities that are so excluded from such underwritten 2 3 Public Offering shall be withheld by the holders thereof for such period, not exceeding one hundred and twenty (120) days, as the managing underwriter reasonably determines is necessary to effect such Public Offering. 2.3 The Company shall be obligated to prepare, file and cause to be effective only one (1) registration statement pursuant to Section 2.1. 2.4 Notwithstanding the foregoing, the Company may delay initiating the preparation and filing of any registration statement requested pursuant to Section 2.1 for a period not to exceed one hundred eighty (180) days if, in the good faith judgment of the Company's Board of Directors, effecting the registration would adversely affect a proposed Public Offering by the Company or would require the premature disclosure of any financing, acquisition, disposition of assets or stock, merger or other comparable transaction or would require the Company to make public disclosure of information the public disclosure of which could have material adverse effect on the Company. 2.6 Notwithstanding anything to the contrary contained herein, at any time within thirty (30) days after receiving a demand for registration pursuant to Section 2.1, the Company may elect to effect an underwritten primary registration in lieu of the requested registration. If the Company so elects, the Company shall give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and shall afford such holders the rights contained in Article 3 with respect to "piggyback" registrations. In such event, the demand for registration pursuant to Section 2.1 shall be deemed to have been withdrawn. 3. Piggyback Registration. 3.1 From and after the date on which one year has elapsed from the date the Company first consummates a Public Offering pursuant to a registration statement on Form S-1 or Form SB-2, each time the Company shall determine to proceed with the actual preparation and filing of a registration statement under the Securities Act in connection with the proposed offer and sale for money of any of its securities by it or any of its security holders (other than a registration statement on Form S-8, Form S-4 or other limited purpose form), the Company will give written notice of its determination to all record holders of Registrable Securities. Upon the written request of a record holder of any Registrable Securities given within 30 days after the date of any such notice from the Company, the Company will, except as herein provided, cause all Registrable Securities the registration of which is requested to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Registrable Securities to be so registered; provided, however, that nothing herein shall prevent the Company from, at any time, abandoning or delaying any registration; and provided, further, that if the Company determines not to proceed with a registration after the registration statement has been filed with the Commission, and the Company's decision not to proceed is primarily based upon the anticipated Public Offering price of the securities to be sold by the Company, the Company shall promptly complete the registration for the benefit of those selling security holders who wish to proceed with a Public Offering of their Registrable Securities and who agree to bear all of the Registration Expenses in excess of $25,000 incurred by the Company as the result of such registration after the Company has decided not to proceed. In the 3 4 discretion of the holders of the Registrable Securities to be included in the registration (provided that such holders are the record holders of at least 51% of the Registrable Securities), such registration may count as a demand registration under Section 2.1 (if it otherwise meets the requirements of Section 2.1) for which the Company will pay all Registration Expenses. 3.2 If any registration pursuant to Section 3.1 is underwritten in whole or in part, the Company may require that the Registrable Securities included in the registration be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. If, in the good faith judgment of the managing underwriter of the Public Offering, the inclusion of all of the Registrable Securities originally covered by requests for registration would reduce the number of shares to be offered by the Company or interfere with the successful marketing of the shares offered by the Company, the number of Registrable Securities to be included in the Public Offering may be reduced in the following manner: first, securities held by officers and directors of the Company (other than Registrable Securities) shall be excluded from such underwritten public offering to the extent required by the managing underwriter, second, if a further reduction in the Public Offering is required, any securities, other than Registrable Securities, proposed to be sold in the Public Offering by persons other than the Company shall be excluded and third, if a further reduction in the Public Offering is required, the Registrable Securities requested to be included in the Public Offering shall be reduced, pro rata, among the requesting holders thereof in proportion to the number of Registrable Securities included in their respective requests for registration. The Registrable Securities which are thus excluded from the underwritten Public Offering shall be withheld from the market by the holders thereof for a period which the managing underwriter reasonably determines is necessary in order to effect the Public Offering. 4. Short Form Registration. In addition to the registration rights provided in Articles 2 and 3, if the Company qualifies for the use of Form S-3 or any similar registration form then in force, the Company shall on one occasion at its expense at the request of a majority of the holders of Registrable Securities then outstanding file a registration statement on such form covering Registrable Securities on behalf of such holder or holders. The Company shall give notice to all the holders of Registrable Securities who did not join in such request and afford them a reasonable opportunity to do so. 5. Registration Procedures. If and whenever the Company is required by the provisions of Article 2, Article 3 or Articles 4 to effect a registration of Registrable Securities under the Securities Act, the Company will use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended methods of disposition specified by the holders participating therein. Without limiting the foregoing, the Company in each such case will, as expeditiously as possible: 5.1 In the case of a demand registration pursuant to Section 2.1 or Article 4, prepare and file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations thereunder) and use its best efforts to cause such registration statement to become effective; provided, however, that as far in advance as practical before filing 4 5 such registration statement or any amendment thereto, the Company will furnish counsel for the requesting holders of Registrable Securities with copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits), and any such holder shall have the opportunity to object to any information pertaining solely to such holder that is contained therein and the Company will make the corrections reasonably requested by such holder with respect to such information prior to filing such registration statement or amendment. 5.2 Prepare and file with the Commission such amendments and supplements to such registration statement and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities included in such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (a) such time as all of the Registrable Securities included in such registration statement have been disposed of in accordance with the intended methods of disposition by the holder or holders thereof as set forth in such registration statement or (b) one hundred eighty (180) days after such registration statement becomes effective. 5.3 Promptly notify each requesting holder and the underwriter or underwriters, if any, of: (a) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (b) any written request by the Commission for amendments or supplements to such registration statement or prospectus; (c) any notification received by the Company from the Commission regarding the Commission's initiation of any proceeding with respect to, or of the issuance by the Commission of, any stop order suspending the effectiveness of such registration statement; and (d) the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. 5.4 Furnish to each holder of Registrable Securities included in such registration statement such number of conformed copies of such registration statement and of each amendment and supplement thereto, and such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such seller's Registrable Securities, and such other documents, as such holder may reasonably request to facilitate the disposition of its Registrable Securities. 5 6 5.5 Use its best efforts to register or qualify all Registrable Securities included in such registration statement under the securities or "blue sky" laws of such states as each holder of Registrable Securities shall reasonably request within twenty (20) days following the original filing of such registration statement and to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such states of the Registrable Securities owned by such holder, except that the Company shall not for any such purpose be required (a) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this Section 5.5 be obligated to be so qualified, (b) to consent to general service of process in any such jurisdiction or (c) to subject itself to taxation in any such jurisdiction by reason of such registration or qualification. 5.6 Use its best efforts to cause all Registrable Securities included in such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable each holder thereof to consummate the disposition of such Registrable Securities. 5.7 Notify each holder whose Registrable Securities are included in such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 5.8 Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission. 5.9 Use its best efforts to cause all Registrable Securities included in such registration statement to be listed, upon official notice of issuance, on any securities exchange or quotation system on which any of the securities of the same class as the Registrable Securities are then listed. 5.10 The Company may require each holder whose Registrable Securities are being registered to, and each such holder, as a condition to including Registrable Securities in such registration statement, shall, furnish the Company and the underwriters with such information and affidavits regarding such holder and the distribution of such Registrable Securities as the Company and the underwriters may from time to time reasonably request in writing in connection with such registration statement. At any time during the effectiveness of any registration statement covering Registrable Securities offered by a holder, if such holder becomes 6 7 aware of any change materially affecting the accuracy of the information contained in such registration statement or the prospectus (as then amended or supplemented) relating to such holder, it will immediately notify the Company of such change. 5.11 Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5.7, each holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder receives the copies of the supplemented or amended prospectus contemplated by Section 5.7 and, if so directed by the Company, shall deliver to the Company all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities. 6. Expenses. With respect to any registration requested pursuant to Article 2 (except as otherwise provided in such Article with respect to a registration voluntarily terminated at the request of the requesting holders of Registrable Securities), Article 3 (except as otherwise provided in such Article with respect to a registration continued by holders of Registrable Securities who wish to proceed with a Public Offering that is withdrawn by the Company) or Article 4, the Company shall bear all of the fees and expenses ("Registration Expenses") incident to the Company's performance of or compliance with its obligations under this Agreement in connection with such registration, or participation by the holders of Registrable Securities in any such registration, including, without limitation, all registration, filing, securities exchange listing and NASD fees, all registration, filing, qualification and other fees and expenses or complying with state securities or "blue sky" laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, and one counsel for the selling holders selected by them, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, premiums and other costs of any policies of insurance against liabilities arising out of the Public Offering of the Registrable Securities being registered obtained by the Company (it being understood that the Company shall have no obligation to obtain such insurance) and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities; but excluding underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities and any fees and disbursements of more than one counsel or any accountant to the holders of the Registrable Securities, which discounts, commissions, transfer taxes, fees and disbursements shall in any registration be payable by the holders of the Registrable Securities being registered, pro rata in proportion to the number of Registrable Securities being sold by them. 7. Indemnification. 7.1 The Company will, to the full extent permitted by law, indemnify and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of this Agreement, and its directors, officers and partners and each other person, if any, who controls such holder within the meaning of the Securities Act, from and against any and all losses, claims, damages, expenses or liabilities, joint or several (collectively, "Losses") to which such holder or any such director, officer, partner or controlling person may 7 8 become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and the Company will reimburse the holder and each such director, officer, partner and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending against any such Losses (or action or proceeding in respect thereof); provided, however, that the Company will not be liable in any such case to the extent that any such Losses arise out of or are based upon (a) an untrue statement or alleged untrue statement or omission or alleged omission made in conformity with written information furnished by such holder specifically for use in the preparation of the registration statement or (b) such holder's failure to send or give a copy of the final prospectus to the persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, partner or controlling person of such holder and shall survive the transfer of such securities by such holder. The Company shall also indemnify each other person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent provided above with respect to holders of Registrable Securities. 7.2 Each holder of Registrable Securities which are included in a registration pursuant to the provisions of this Agreement will, to the full extent permitted by law, indemnify and hold harmless the Company, its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act from and against any and all Losses to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by such holder specifically for use in the preparation of such registration statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person of the Company. The holder of Registrable Securities included in a registration statement shall also indemnify each other person who participates (including as an 8 9 underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent as provided above with respect to the Company. In no event shall the liability of any holder under this Section 7.2 exceed the net proceeds received by such holder from the sale of their Registrable Securities. 7.3 Promptly after receipt by a party indemnified pursuant to the provisions of Section 7.1 or Section 7.2 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2, promptly notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against any indemnified party, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if the defendants in any action include both the indemnified party and the indemnifying party and the indemnified party reasonably concludes that there is a conflict of interest that would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party shall have the right to select separate counsel to participate in the defense of such action on behalf of the indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of Section 7.1 or Section 7.2 for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof unless (a) the indemnified party shall have employed counsel in accordance with the proviso of the preceding sentence, (b) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (c) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the indemnified parties with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of additional counsel or counsels for the indemnified parties. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation without the consent of the indemnified party. No indemnifying party shall be subject to any liability for any settlement made without its consent. An indemnified party may at any time elect to participate in the defense of any claim or proceeding at its own expense. 7.4 If the indemnification provided for in this Article 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, 9 10 claim, damage, or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as it appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 8. Covenants Relating to Rule 144. If at any time the Company is required to filed reports in compliance with either Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") the Company will (a) file reports in compliance with the Exchange Act and (b) comply with all rules and regulations of the Commission applicable to the use of Rule 144. 9. Underwritten Offerings. If a distribution of Registrable Securities pursuant to a registration statement is to be underwritten, the holders whose Registrable Securities are to be distributed by such underwriters shall be parties to such underwriting agreement. No requesting holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any requesting holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to the Company and the managing underwriter, and each of the remaining requesting holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining requesting holder bears to the total number of Registrable Securities being registered by all such remaining requesting holders. 10. Stand-Off Agreement. Each holder of Registrable Securities agrees, so long as such holder holds at least 1% of the Company's outstanding voting equity securities, in connection with the Company's initial Public Offering, upon request of the Company or the underwriters managing such Public Offering, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Common Shares of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not exceeding 180 days) from the effective date of the registration statement relating to such initial Public Offering as may be requested by the underwriters; provided, however, that all other holders of at least 1% of the Company's outstanding voting equity securities and all of the officers and directors of the Company who own stock of the Company must also agree to not less onerous restrictions. 10 11 11. Amendment. The Company shall not amend this Agreement without the written consent of the holders of more than 50% of the Registrable Securities. 12. Termination. This Agreement, and all of the Company's obligations hereunder (other than its obligations pursuant to Article 7, which obligations shall survive such termination), shall terminate upon the earlier to occur of (a) the date on which there are no Registrable Securities outstanding or (b) December , 2004. 13. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned (but only with all related obligations) by a holder of Registrable Securities to a transferee or assignee of all, but not less than all, such securities provided the Company is within a reasonable time after such transfer furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned. IN WITNESS WHEREOF, the parties hereto have duly executed this Registration Rights Agreement as of the date and year first above-written. STOCKPOINT, INC. By: ----------------------------------------- By: ----------------------------------------- John Pappajohn By: ----------------------------------------- Gerald M. Kirke IOWA FARM BUREAU FEDERATION By: ----------------------------------------- By: ----------------------------------------- Derace Schaffer 13 12 By: ----------------------------------------- Matthew P. Kinley DOMINION SECURITIES INC. By: ----------------------------------------- Steve Michalicek By: ----------------------------------------- Michael J. Richards By: ----------------------------------------- Joseph Dunham EQUITY DYNAMICS, INC., as Agent By: ----------------------------------------- 12 EX-4.8 17 MARCH 2000 MASTER AGREEMENT 1 EXHIBIT 4.8 MASTER AGREEMENT DATED AS OF MARCH 29, 2000, AMONG STOCKPOINT, INC., AS THE COMPANY, AND ZEKE INVESTMENT PARTNERS MATTHEW P. KINLEY JOSEPH DUNHAM AS THE GUARANTORS, AND EQUITY DYNAMICS, INC., AS THE AGENT FOR THE GUARANTORS. 2
TABLE OF CONTENTS SECTION 1. CREDIT SUPPORT AGREEMENTS.........................................................................1 SECTION 2. AGENT.............................................................................................4 2.1. ACTIONS........................................................................................4 2.2. EXCULPATION....................................................................................4 2.3. SUCCESSOR......................................................................................5 SECTION 3. WARRANTS..........................................................................................5 3.1. ISSUANCE.......................................................................................5 3.2. REGISTRATION RIGHTS............................................................................5 SECTION 4. CLOSING...........................................................................................5 SECTION 5. REPRESENTATIONS AND WARRANTIES OF COMPANY.........................................................6 5.1. ORGANIZATION...................................................................................6 5.2. CORPORATE AUTHORIZATION; ENFORCEABILITY........................................................6 5.3. NO CONFLICT....................................................................................6 5.4. CAPITALIZATION.................................................................................7 5.5. FINANCIAL INFORMATION..........................................................................7 5.6. SECURITIES LAWS................................................................................8 5.7. TITLE TO ASSETS................................................................................8 5.8. REAL PROPERTY..................................................................................8 5.9. INTELLECTUAL PROPERTY RIGHTS...................................................................8 5.10. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS.............................................9 5.11. MATERIAL AGREEMENTS...........................................................................9 5.12. LITIGATION....................................................................................9 5.13. SOLVENCY......................................................................................9 5.14. ENVIRONMENTAL MATTERS.........................................................................9 5.15. TAX MATTERS..................................................................................10 5.16. ERISA........................................................................................10 5.17. DISCLOSURE...................................................................................10 SECTION 6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS.....................................................11 6.1. INVESTMENT INTENT.............................................................................11 6.2. DUE ORGANIZATION AND REQUISITE POWER..........................................................11 6.3. ACTION AND EXECUTION..........................................................................11
3 6.4. NO CONFLICT...................................................................................12 SECTION 7. PRIOR OR SIMULTANEOUS ACTIONS....................................................................12 SECTION 8. COVENANTS........................................................................................12 8.1. ACCESS TO RECORDS.............................................................................12 8.2. FINANCIAL REPORTING; DRAWS ON LINE OF CREDIT..................................................13 8.3. PAYMENT; PREPAYMENT...........................................................................13 8.4. PAYMENT OF OBLIGATIONS........................................................................14 8.5. INSURANCE.....................................................................................14 8.6. NOTICE OF DISPUTES, MATERIAL ADVERSE CHANGE...................................................14 8.7. CONDUCT OF BUSINESS...........................................................................14 8.8. DEBT..........................................................................................14 8.9. RESTRICTED PAYMENTS...........................................................................15 8.10. NEGATIVE PLEDGE..............................................................................15 8.11. TERMINATION..................................................................................15 SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS...........................................16 SECTION 10. INDEMNIFICATION.................................................................................16 SECTION 11. PURCHASE OF BANK'S RIGHTS AND INTERESTS; EVENTS OF DEFAULT......................................16 SECTION 12. FEES AND EXPENSES...............................................................................17 SECTION 13. CONFIDENTIALITY.................................................................................17 SECTION 14. ASSIGNMENT; PARTIES IN INTEREST.................................................................17 SECTION 15. ENTIRE AGREEMENT................................................................................18 SECTION 16. FURTHER ASSURANCES..............................................................................18 SECTION 17. NOTICES.........................................................................................18 SECTION 18. AMENDMENTS......................................................................................20
4 SECTION 19. COUNTERPARTS....................................................................................20 SECTION 20. HEADINGS, GENDER, TENSE.........................................................................20 SECTION 21. GOVERNING LAW, JURISDICTION.....................................................................20 SECTION 22. WAIVER OF JURY TRIAL............................................................................21
5 MASTER AGREEMENT dated as of March 29, 2000, among (a) STOCKPOINT, INC., a Delaware corporation (the "Company"), and (b)(i) ZEKE INVESTMENT PARTNERS ("Zeke") (ii) MATTHEW P. KINLEY, JOSEPH DUNHAM (together with Zeke, the "Guarantors"), and (c) EQUITY DYNAMICS, INC., an Iowa corporation, as agent (the "Agent") for the Guarantors. RECITALS WHEREAS, the Company requested that the Guarantors execute guarantees in favor of and/or arrange for the issuance of standby letters of credit or pledge certificates of deposit (collectively, the "Credit Support Agreements") naming Norwest Bank Iowa, National Association, or any successor or assign thereof approved by the Agent (the "Bank") as beneficiary or pledgee in connection with a line of credit with a maximum principal amount of $500,000 (the "Facility") to be made available by the Bank to the Company; WHEREAS, the Company has an existing $2,500,000 senior secured debt facility ("Previous Facility") executed on December 3, 1999; WHEREAS, the Company offered to issue warrants in the form attached hereto as Exhibit A ("Warrants") to purchase its common stock, $.01 par value (the "Common Stock") to the Guarantors if they would provide the Credit Support Agreements; WHEREAS, the Guarantors agreed to provide the Credit Support Agreements in accordance with terms and conditions set forth herein. ACCORDINGLY, the parties agree as follows: SECTION 1. CREDIT SUPPORT AGREEMENTS. (a) Upon the terms and subject to the conditions set forth in the this Agreement, the Warrants, and the registration rights agreement in the form attached hereto as Exhibit B (the "Registration Rights Agreement") (the "Documents"), the Guarantors shall, for the benefit of the Company, arrange for the issuance by one or more institutions acceptable to the Bank of standby letters of credit or, in the alternative, pledge such Guarantors' right, title and interest in and to certificates of deposit (each a "Guarantor Commitment") in the aggregate amount of $500,000 naming the Bank as beneficiary or pledgee, as the case may be, thereunder. The maximum Guarantor Commitment of each of the Guarantors shall be as follows: (i) Zeke - $350,000; (ii) Matthew P. Kinley - $100,000; Joseph Dunham - $50,000. Each Guarantor's Commitment as a proportion of the maximum amount of the loans (the "Loans") available under the Facility ($500,000.00) shall be its "Pro Rata Share." In addition, if necessary, John Pappajohn has executed a personal guaranty (the "Pappajohn Guaranty") of the Company's obligations to the Bank in an amount agreed to by Pappajohn and the Bank. (b) The obligation of the Guarantors to provide the Credit Support Agreements shall be subject to the following conditions precedent: 6 (i) the Company's execution and delivery of this Agreement and the Documents; (ii) the Company has executed and delivered to the Bank of (A) a security agreement, in form satisfactory to the Agent, which includes provision for security agreements in favor of the Bank by each subsidiary of the Company (the "Bank Security Agreement"); (B) a pledge agreement, in form satisfactory to the Agent (the "Pledge Agreement"); (C) a conditional assignment of intellectual property covering trademarks, in form satisfactory to the Agent (the "Bank Intellectual Property Assignment," and, together with Bank Security Agreement, Pledge Agreement and all documents executed in connection therewith, the "Bank Security Documents"); (D) and the Company will execute and deliver to the Bank the Credit Agreement dated March 29, 2000, between the Company and the Bank (the "Credit Agreement"); and (E) the Promissory Note dated March 29, 2000, executed by the Company in favor of the Bank (the "Promissory Note"). (iii) the Company's payment to the Agent of the Agent's costs and expenses incurred in connection herewith and the Documents, as provided in Section 12 below; (iv) the Bank's agreement with the Guarantors, satisfactory to the Guarantors, regarding the respective remedies of the Bank and the Guarantors with respect to the Facility; (v) the Company's delivery to the Bank of waivers by the Series C Debenture Holders to the transactions contemplated by the Agreement, in a form satisfactory to the Agent; (vi) the Company's delivery to the Bank of a confirmation, waiver and consent by Northern Trust to the first lien position by the Bank, in each case in a form satisfactory to the Agent; (vii) review and approval by the Agent of all outstanding liens on the Company's assets by CEBA, Kirkwood Community College, Linn County REC and Cisco Systems Capital; (viii)...a cash flow budget in form and content acceptable to the Agent, and attached hereto as Exhibit C (the "Budget"); (c) The Company has agreed to pay the Bank all sums due and owing in connection with the Facility. The Company realizes and understands that the reason it was able to obtain the Facility was due to the willingness of the Guarantors to provide the Credit Support Agreements in respect of the Company's obligations to the Bank. The Company agrees that at any time the Guarantors, individually, or collectively, deem themselves to be insecure they may acquire the position of the Bank in the Facility by paying the obligation of the Company to the Bank. The Company fully agrees that upon acquisition of the Bank's position or the Bank's exercise of its remedies against the Guarantor Commitments and/or Pappajohn Guaranty, the Guarantors shall be subrogated to all rights of the Bank under the Company's agreements with the Bank (including, without limitation, the Credit Agreement, the Promissory Note, and the Bank Security Documents; together, the "Bank Documents") whether or not the Bank may have canceled all or any portion of the Company's obligations to the Bank under the Facility. -2- 7 (d) As between the Guarantors, each of the Guarantors agrees that no Guarantor should bear a proportionately greater loss under the Credit Support Agreements than any other Guarantor. Therefore, each of the Guarantors shall bear any losses under the Credit Support Agreements in accordance with its Pro Rata Share. Each Guarantor promises each other Guarantor that it will pay, on demand, his or its Pro Rata Share of the Company's obligations to the Bank, in connection with such party's obligations under the Credit Support Agreements, either to the Bank, if the obligations under the Facility have not been satisfied, or to another Guarantor who has made payment to the Bank in satisfaction of the Company's obligations under the Facility. The demand for payment made by any Guarantor to any other Guarantor shall be made in writing to the Agent, accompanied by proof of the demanding party's payment under a Credit Support Agreement. Each Guarantor (an "Indemnifying Guarantor") hereby agrees to indemnify and hold harmless each other Guarantor from and against any and all losses, claims, damages or liabilities, joint or several, which such other party may suffer by reason of the failure of an Indemnifying Guarantor to pay his or its Pro Rata Share on demand. The Company promises to pay each Guarantor any and all sums which that Guarantor has paid to the Bank in satisfaction of all or any portion of the Company's obligations to the Bank when such obligations are due, plus all costs, including, without limitation, interest and reasonable attorney's fees, incurred in connection therewith. (e) In the event the indemnification referred to in the immediately preceding paragraph above is determined to be invalid or unenforceable for any reason whatsoever, each Guarantor agrees that the common law principle of contribution shall apply and that each Guarantor shall be obligated to contribute his or its Pro Rata Share towards satisfaction of any payment made or to be made under the Credit Support Agreements or made by any other Guarantor, if the payments by such other Guarantor exceeds such other Guarantor's Pro Rata Share of the Company's obligations to the Bank. (f) The Agent hereby deems that the Facility and Previous Facility shall be pari passu in all material respects. SECTION 2. AGENT. 2.1. ACTIONS (a) Each Guarantor hereby irrevocably appoints the Agent as its agent under and for purposes of this Agreement and the Documents. Each Guarantor authorizes the Agent to act on behalf of such Guarantor under this Agreement and each Document and, in the absence of written instructions from the Guarantors received from time to time by the Agent (with respect to which the Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are delegated to or required of the Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Guarantor hereby indemnifies and holds harmless (which indemnity shall survive any termination of this Agreement) the Agent, and the directors, officers, agents or employees of the Agent, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent in any way -3- 8 relating to or arising out of this Agreement and any Documents, including, without limitation, attorneys' fees, and as to which the Agent is not indemnified or reimbursed by the Company. The Agent shall not be required to take any action hereunder or under any Document, or to prosecute or defend any suit in respect of this Agreement or any Document, unless it is indemnified hereunder to the Agent's satisfaction. If any indemnity in favor of the Agent shall be or become, in the Agent's determination, inadequate, the Agent may demand additional indemnification from the Guarantors and cease to act as Agent hereunder until such additional indemnity is given. (b) Each Guarantor acknowledges that it has, independently and without reliance upon the Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the transactions contemplated hereby. Each Guarantor also acknowledges that it will, independently and without reliance upon the Agent, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. 2.2. EXCULPATION. Neither the Agent nor any of its directors, officers, employees or agents shall be liable to any Guarantor for any action taken or omitted to be taken by it under this Agreement or any Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor shall they be responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Document, nor for the creation, perfection or priority of any liens purported to be created by any of the Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Company of its obligations hereunder or under any Document. Any such inquiry which may be made by the Agent shall not obligate it to make any further inquiry or to take any action. The Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Agent believes to be genuine and to have been presented by a proper person. 2.3. SUCCESSOR. The Agent may resign as such at any time upon at least 30 days' prior notice to the Company and all Guarantors. If the Agent at any time shall resign, the Guarantors may appoint another Guarantor as a successor Agent which shall thereupon become the Agent hereunder. If no successor Agent shall have been so appointed by the Guarantors, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Guarantors, appoint a successor Agent, which shall be one of the Guarantors. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the, retiring Agent shall be discharged from its duties and obligations under this Agreement. -4- 9 After any retiring Agent's resignation hereunder as the Agent the provisions of this Section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement. SECTION 3. WARRANTS. 3.1. ISSUANCE. At the Closing (defined below in Section 4), the Company shall sell to the Guarantors, and the Guarantors shall purchase from the Company, Warrants to purchase an aggregate of 100,000 shares of the Common Stock (the "Warrant Shares") upon the terms set forth in the Warrants. Each Guarantor shall purchase a Warrant at the purchase price stated below to purchase the number of Warrant Shares set forth below:
Common Shares Guarantors Purchase Guarantor Exercisable Price - ------------------------------------------------------------------------------------------------------------------ Zeke 70,000 $700 Matthew P. Kinley 20,000 $200 Joseph Dunham 10,000 $100
3.2. REGISTRATION RIGHTS. At the Closing, the Company and the Guarantors shall enter into the Registration Rights Agreement. SECTION 4. CLOSING. The closing of the Transactions (the "Closing") shall take place at the offices of BELIN LAMSON McCORMICK ZUMBACH FLYNN, a Professional Corporation, The Financial Center, 666 Walnut Street, Suite 2000, Des Moines, Iowa 50309, simultaneously with the execution and delivery of this Agreement and the other Documents to be executed and delivered at Closing. SECTION 5. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company hereby represents and warrants to the Guarantors as follows: 5.1. ORGANIZATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate the assets used in its business, to carry on its business as presently-conducted, to enter into the Documents, to perform its obligations thereunder, and to -5- 10 consummate the transactions contemplated thereby. Attached as Schedule 5.1 are correct and complete copies of the Certificate of Incorporation and the Bylaws of the Company, as in effect on the date of the Closing (the "Certificate of Incorporation" and the "Bylaws," respectively). 5.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The Company has taken all corporate action necessary to authorize its execution and delivery of the Documents and the Bank Documents, its performance of its obligations thereunder, and its consummation of the transactions contemplated thereby. Each Document and each Bank Document has been executed and delivered by an officer of the Company in accordance with such authorization. Each Document and each Bank Document constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent transfer, and similar laws affecting creditors' rights generally, and the effect of general principles of equity. 5.3. NO CONFLICT. The execution and delivery by the Company of the Documents and the Bank Documents, its consummation of the transactions contemplated thereby, and its compliance with the provisions thereof, will not (i) violate or conflict with its Certificate of Incorporation or Bylaws, (ii) violate, conflict with, or give rise to any right of termination, cancellation, or acceleration under any material agreement, lease, security, license, permit, or instrument to which the Company is a party, or to which it or any of its assets is subject (except where same would not individually or in the aggregate have a Material Adverse Effect (as defined below)), (iii) result in the imposition of any Encumbrance on any asset of the Company, other than pursuant to the Bank Documents and the Documents, (iv) violate or conflict with any Laws, which violation would cause a Material Adverse Change (as defined below), or (v) require any consent, approval or other action of, notice to, or filing with any entity or person (governmental or private), except for those that have been obtained or made, or where the failure to obtain such consent or approval would not cause a Material Adverse Change. "Encumbrance" means any security interest, mortgage, lien, pledge, charge, easement, reservation, restriction, or similar right of any third party except for Encumbrances in favor of the Bank in connection with the Facility. "Laws" means all laws, rules, regulations, ordinances, orders, judgments, injunctions and decrees. "Material Adverse Change" means any material adverse change in the business, operations, properties, assets, or financial condition of the Company. "Material Adverse Effect" means a material adverse effect on the business, financial condition, assets, liabilities, property or operations of the Company, or a material impairment of the Company's ability to perform its obligations under the Documents. 5.4. CAPITALIZATION. (a) The authorized equity securities of the Company consist of 25,000,000 shares of capital stock, including 20,000,000 shares of common stock, $.01 par value, of which there are -6- 11 2,172,028 shares issued and outstanding, 5,000,000 shares of preferred stock, initially undesignated as to terms, of which the Company has designated the terms and preferences of 320,000 shares of Convertible Series A Voting Preferred Stock (of which there are 320,000 shares outstanding), 282,720 shares of Convertible Series B Voting Preferred Stock (of which there are 282,720 shares outstanding), and 1,179,540 shares of Convertible Series C Voting Preferred Stock (of which there are 773,254 shares outstanding). The persons set forth on Schedule 5.4 own the shares and common stock equivalents set forth opposite such persons' names. All of the outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. Except for the Documents and the common stock equivalents set forth on Schedule 5.4 there are no agreements of any sort relating to the issuance, sale, or transfer of any equity securities or other securities of the Company. None of the outstanding equity securities or other securities of the Company was issued in violation of the Securities Act or any other legal requirement. Except as set forth in paragraph (b) below, the Company does not own, nor has any contract to acquire, any equity securities or other securities of any person or any direct or indirect equity or ownership interest in any other business. The fully diluted common stock equivalents of the Company outstanding before issuance of the Warrants do not exceed 7.1 million shares. (b) The Company owns 100% of the capital stock of Neural, Inc. and Ethos Corporation (collectively, the "Subsidiaries", and the capital stock of the Subsidiaries being the "Subsidiary Stock"). The Subsidiary Stock is free and clear of all Encumbrances. 5.5. FINANCIAL INFORMATION. The Company has delivered to Agent: (a) audited consolidated balance sheets of the Company as at December 31 for each of the years 1996 through 1998, and the related audited consolidated statements of income, changes in stockholders' equity, and cash flow for each of the fiscal years then ended, including in each case the notes thereto and (b) an unaudited consolidated balance sheet of the Company as at September 30, 1999 (the "Interim Balance Sheet") and the related unaudited consolidated statements of income, changes in stockholders' equity, and cash flow for the nine months then ended. Such financial statements and notes fairly present the financial condition and the results of operations, changes in stockholders' equity, and cash flow of the Company as at the respective dates of and for the periods referred to in such financial statements, all in accordance with United States generally accepted accounting principles consistently applied ("GAAP"). No financial statements of any persons other than the Company and the Subsidiaries are required by GAAP to be included in the consolidated financial statements of the Company. 5.6. SECURITIES LAWS. Based upon the representation of each Guarantor contained in Section 6.1 below, the Transactions contemplated hereby are exempt from registration under the Securities Act. 5.7. TITLE TO ASSETS. The Company has good and marketable title to all of its assets, free and clear of all encumbrances except for Permitted Liens (defined below). Such assets are in good operating condition and -7- 12 repair (ordinary wear and tear excepted), and are suitable for their intended use in the business of the Company as conducted at the date hereof. "Permitted Liens" means (i) liens in favor of the Bank granted in connection with the Facility and in favor of the Agent granted in connection herewith, (ii) liens arising by operation of law in the ordinary course of business that, individually and in the aggregate, do not in any material respect interfere with the use or value of any of the assets subject thereto, (iii) liens for taxes not yet due and payable or that are being contested in good faith, (iv) liens created by the Documents, (v) purchase money liens to finance property of the Company acquired in the ordinary course of business, (vi) liens existing on the date hereof listed in Schedule 5.7 or incurred in connection with extension or renewal of indebtedness secured by such liens, (vii) liens consisting of deposits or pledges to secure the performance of trade contracts, bids, leases, public or statutory obligations and similar obligations incurred in the ordinary course of business, and (viii) any judgment, attachment or similar lien unless the judgment secured is not covered by insurance or not discharged or stayed or bonded pending appeal or vacated within 30 days of entry thereof. 5.8. REAL PROPERTY. The Company does not own, directly or indirectly, any fee title to real property. 5.9. INTELLECTUAL PROPERTY RIGHTS. The Company owns or is licensed to use, and has the right to bring infringement actions with respect to, all material patents, trademarks, copyrights, service marks, and applications and registrations therefor, and all trade names, customer lists, trade secrets, proprietary processes and formulae, inventions, know-how, other confidential and proprietary information, and other industrial and intellectual property rights necessary to permit the Company to carry on its business as presently conducted. Schedule 5.9 sets forth a list of all material patents, trademarks, copyrights, service marks, and applications and registrations therefor, and all trade names held or owned by the Company and all rights (except for know-how and similar other undocumented intellectual property) of the Company. All registered patents, copyrights, trademarks, and service marks listed on Schedule 5.9 are in full force and effect and are not subject to any taxes or maintenance fees which are delinquent. Except as set forth on Schedule 5.9, the Company (i) did not license or grant to anyone rights of any nature to use any intellectual property right that is material to its business, and (ii) to the Company's knowledge, does not market or sell any product or service that violates any intellectual property right of a third party. Except as set forth on such Schedule, there is no pending or, to the knowledge of the Company, threatened claim or litigation against the Company contesting the right to use any of its material intellectual property rights, asserting the misuse of any thereof, or asserting the infringement or other violation of any intellectual property rights of a third party. 5.10. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS. To the Company's knowledge after due inquiry, it is not in violation of any Law, which violation could reasonably be expected to have a Material Adverse Effect. -8- 13 5.11. MATERIAL AGREEMENTS. Schedule 5.11 sets forth each agreement or understanding which is material to the business of the Company. Except as set forth on Schedule 5.11, each agreement or understanding set forth on Schedule 5.11 is in full force and effect and, to the knowledge of the Company, constitutes a valid and binding obligation of all parties thereto. Except as set forth on Schedule 5.11, to the Company's knowledge, the Company has in all material respects performed the obligations required to be performed by it and is not in default or alleged to be in default in any material respect under any material agreement or understanding. Except as set forth on Schedule 5.11, to the Company's knowledge, there exists no event or condition which, after notice or lapse of time, or both, would constitute such a default in a material respect under such agreements. The Company is not aware of any material defaults by any other party to any such agreement or understanding. 5.12. LITIGATION. Except as set forth on Schedule 5.12 hereto, there are no (i) actions, suits, claims, investigations or other proceedings by or before any governmental authority or arbitrator pending or, to the knowledge of the Company, threatened against the Company which, if determined adversely to the Company, would have a Material Adverse Effect, or (ii) judgments, decrees, injunctions or orders of any governmental authority or arbitrator against the Company. 5.13. SOLVENCY. The Company is solvent, meaning that the fair salable value of the Company's assets is in excess of its liabilities. 5.14. ENVIRONMENTAL MATTERS. Except as otherwise stated in this Section 5.14, the Company is in compliance with all Laws relating to the protection of the environment (the "Environmental Laws"). The Company has not handled, stored or released, or exposed any person to, any hazardous substance, as defined in 42 U.S.C.A. Section 9601(14) or any other applicable Environmental Laws (a "Hazardous Substance"). To the Company's knowledge, the Company is not and will not be liable or responsible for clean-up costs, remedial work or damages in connection with the handling, storage, release, or exposure by the Company of any Hazardous Substance in excess of $25,000 in the aggregate. No claims for clean-up costs, remedial work or damages have been made by any person or entity in connection with the handling, storage, release, or exposure by the Company of any Hazardous Substance. 5.15. TAX MATTERS. (a) (i) The Company has filed or been included in all required returns, declarations of estimated tax, reports, and statements relating to any Taxes (defined below) payable by it (collectively, the "Returns"); (ii) all Returns were correct and complete in all material respects as of the time of filing; (iii) the Company has timely paid all Taxes required to be paid by it through the date hereof, except to the extent that Taxes are being contested in good faith; (iv) -9- 14 the Company has made provision on the Interim Balance Sheet in accordance with GAAP for all Taxes payable by it for all periods prior to the date of the Interim Balance Sheet for which no Returns have yet been filed; (v) the Company is not delinquent in the payment of any Taxes, except to the extent that Taxes are being contested in good faith; (vi) there are no pending tax audits of any Returns; and (vii) except with respect to Taxes which are being contested in good faith, no deficiency or addition to any Taxes or interest or penalty for any Taxes has been proposed, asserted or assessed in writing against the Company. (b) "Taxes" means, with respect to any person or entity, (i) all Federal, state, local, and foreign taxes, including, without limitation, all taxes on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings, or profits, and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, or windfall profits taxes, alternative or add-on minimum taxes, customs duties, or other taxes, fees, assessments or charges of any kind, together with any interest, penalties, additions to tax or additional amounts imposed by any taxing authority on such person or entity, and (ii) any liability for the payment of any amount of the type described in the preceding clause (i) as a result of being a "transferee" (within the meaning of Section 6901 of the Internal Revenue Code of 1986, as amended (the "Code"), or any other applicable Laws) of another person or entity. 5.16. ERISA. Any plan maintained or contributed to by the Company that is an "employee benefit plan," as defined in Section 3(3) or 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA") is being administered in compliance with the terms of such plan and applicable law in all material respects. 5.17. DISCLOSURE. None of the documents or materials relating to the Company referred to herein or on any Schedule, or furnished to the Guarantors by the Company in connection with this Agreement, contains any untrue statement of a material fact by the Company or, to the knowledge of the Company, by any other person or entity. Neither this Agreement (including the Schedules) nor any such document or material omits to state a material fact necessary in order to make the statements contained herein or therein not materially misleading. SECTION 6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS. Each Guarantor, severally and only with respect to itself, represents and warrants to the Company as of the date of this Agreement as follows: 6.1. INVESTMENT INTENT. (a) Each Guarantor is acquiring the Warrants, and it will acquire any Warrant Shares issuable upon exercise of the Warrants, for its own account, for investment and not with a view to the distribution thereof, nor with any present intention of distributing the same. -10- 15 (b) Each Guarantor understands that the Warrants have not been, and any Warrant Shares issuable upon exercise of the Warrants will not be, registered under the Securities Act, and that they must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from registration. (c) Each Guarantor understands that the exemption from registration afforded by Rule 144 of the Securities Act (the provisions of which are known to the Guarantors) depends on the satisfaction of various conditions and that, if applicable, Rule 144 may only afford the basis for sales under certain circumstances only in limited amounts. (d) Each Guarantor is an "accredited investor," as such term is defined in Rule 501 promulgated under the Securities Act. (e) Each Guarantor (i) has received copies of the financial statements of the Company described in Section 5.5 and (ii) believes that such Guarantor, either alone or with the assistance of such Guarantor's own professional advisor, has such knowledge and experience in financial and business matters that such Guarantor is capable of reading and interpreting the Company's financial statements and evaluating the merits and risks of the transactions contemplated by this Agreement. (f) In addition to the Company's financial statements referenced in paragraph (e) above, each Guarantor has been given access to full and complete information regarding the Company and has utilized such access to his, her or its satisfaction. 6.2. DUE ORGANIZATION AND REQUISITE POWER. Each Guarantor has all requisite power and authority, including, where applicable, corporate power and authority, necessary to perform its obligations to the Company and to the Bank as provided for in this Agreement. 6.3. ACTION AND EXECUTION. Each Guarantor has taken all action necessary for the authorization, execution, delivery and performance of this Agreement and the Credit Support Agreements. When executed, each of this Agreement and the Credit Support Agreements will be the legal, valid and binding obligation of each Guarantor enforceable in accordance with its terms. 6.4.1 NO CONFLICT. Neither the execution nor the delivery nor the performance of this Agreement or the Credit Support Agreements by any Guarantor will violate or otherwise contravene, where applicable, the Guarantor's articles or certificate of incorporation or bylaws or the terms of any agreement, the breach of which would invalidate this Agreement. -11- 16 SECTION 7. PRIOR OR SIMULTANEOUS ACTIONS. Prior to or at the Closing, concurrently with the execution and delivery of this Agreement, the following actions have been or are being taken: (a) Fees and Expenses. The fees and expenses of the Agent are being paid by the Company to the Agent as provided under Section 12 below. (b) Warrants. The Warrants are being executed and delivered by the Company. (c) Security Agreement. The Bank Security Agreement has been executed and delivered by the Company to the Bank. (d) Registration Rights Agreement. The Registration Rights Agreement is being executed and delivered by the Company to the Agent for the benefit of the Guarantors. (e) Intellectual Property Assignment. The Bank Intellectual Property Assignment have been executed and delivered by the Company to the Bank. (f) Required Consents. All consents, approvals and other actions of, and notices and filings with, all entities and persons as may be necessary or required with respect to the execution and delivery by the parties of the Documents, and the consummation by the parties of the transactions contemplated thereby, have been obtained or made. (g) Authorizing Actions of the Company. The Guarantors are receiving certified copies of all requisite corporate actions taken by the Company to authorize its execution and delivery of the Documents and its consummation of the transactions contemplated thereby, and such other corporate documents and other papers as the Guarantors may reasonably request. (h) Opinion of Counsel. The Guarantors are receiving an opinion dated the date hereof of counsel to the Company, in form reasonably satisfactory to the Agent. SECTION 8. COVENANTS. 8.1. ACCESS TO RECORDS. The Company shall afford to the Guarantors and their authorized employees, counsel, accountants and other representatives, upon reasonable notice and during ordinary business hours, (i) reasonable access to all books, records, and properties of the Company, as the same may relate to the Agreement and the Documents and (ii) the opportunity to interview any officer of the Company regarding its affairs as the same may relate to the Agreement and the Documents. 8.2. FINANCIAL REPORTING; DRAWS ON LINE OF CREDIT. (a) The Company shall deliver to each Guarantor the following: -12- 17 (i) within 45 days after the end of each fiscal quarter of the Company, (i) the balance sheet of the Company at the end of such quarter, and (ii) the statements of income and cash flows of the Company for such quarter; (ii) within 90 days after the end of each fiscal year of the Company, (i) the balance sheet of the Company at the end of such fiscal year, (ii) the statements of income and cash flows of the Company for such fiscal year, and (iii) an audit report of a nationally-recognized firm of independent certified public accountants on such balance sheets and statements; and (iii) All financial statements to be delivered under this Section shall be in accordance with the books and records of the Company and shall have been prepared in accordance with generally accepted accounting principles consistently applied. At any time at which the Company has any subsidiaries, all such financial statements shall be the consolidated financial statements of the Company and such subsidiaries. 8.3. PAYMENT; PREPAYMENT. (a) The Company shall pay all its obligations to the Bank under the Facility on or before June 30, 2001. (b) Notwithstanding paragraph (a) above, the net cash proceeds of any of the following shall be applied immediately and in full against Company's obligations to the Bank under the Facility (i) any sale, lease, transfer or other disposition of the Company's direct or indirect assets including any sale, lease, transfer or other disposition of the assets of any direct or indirect subsidiary of the Company (except equipment leases and pledges under purchase money obligations which in the aggregate do not exceed those dollar amounts set forth in Section 8.8(c) and trade sales, in each case in the ordinary course of business), (ii) any equity or debt issuance by the Company, including, without limitation, an initial public offering or private placement of debt or equity securities or, (iii) after default under the Bank Documents or Section 11 hereof, collection of any assets (including accounts receivable) of the Company. Further, the Company agrees to prepay its obligations to the Bank under the Facility upon any consolidation or merger of the Company with or into another entity, or a transfer of all or substantially all of the assets of the Company. 8.4. PAYMENT OF OBLIGATIONS. The Company shall pay or discharge or cause to be paid or discharged all material claims or demands, and all Taxes levied or imposed upon the Company or upon the income, profits or property of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such claim, demand, or Tax the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate provision has been made. -13- 18 8.5. INSURANCE. The Company shall maintain with financially sound and reputable insurers such insurance as may be required by law and such other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated and in the same or similar business. 8.6. NOTICE OF DISPUTES, MATERIAL ADVERSE CHANGE. The Company shall promptly notify the Agent of (i) the commencement or threat of any action, suit, proceeding, labor dispute or grievance, governmental investigation, or arbitration against or affecting the Company, which, if adversely determined, could reasonably be expected to result in a Material Adverse Change, (ii) any monetary or other material default under any indebtedness of the Company in excess of $100,000; and (iii) any other Material Adverse Change. 8.7. CONDUCT OF BUSINESS; BOARD OF DIRECTORS. (a) The Company shall (i) take all actions required to assure that the Company remains duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) take all actions required to assure that the Company maintains all requisite governmental authority, licenses, and permits necessary for the conduct its business, and (iii) conduct its business in compliance with all Laws except where noncompliance could not reasonably be expected to result in a Material Adverse Change. 8.8. DEBT. The Company will not directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to, any Debt (defined below), except for: (a) Debt of the Company to the Bank or hereunder; (b) Accounts payable to trade creditors for goods and services, and current operating liabilities incurred in the ordinary course of business; (c) Debt of the Company with respect to capital leases in an aggregate amount less than $750,000 in calendar 1999; $1,500,000 in calendar 2000 and $1,500,000 during the first six months of calendar 2001; or (d) Permitted Liens. "Debt" means all indebtedness (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or similar instruments, or (iii) evidenced by guaranties or similar contingent obligations. 8.9. RESTRICTED PAYMENTS. While any amount payable to the Bank, or the Guarantors or the Agent in connection herewith, including the Documents, is outstanding or the Company has the ability to borrow under the -14- 19 Facility, the Company shall not directly or indirectly pay or declare any dividend or authorize or make any distribution upon, or redeem, retire, repurchase or otherwise acquire, any shares of capital stock of the Company (except that the Company may adjust the conversion price of the Series C Preferred Stock pursuant to the accumulating dividend provisions set forth in the Series C designation). Furthermore, the Company shall not (i) invest more than $200,000 in any existing or $100,000 in any newly-created subsidiary or affiliate during any one year period or (ii) make any voluntary prepayments on Debt unrelated to the Facility. 8.10. NEGATIVE PLEDGE. The Company will not create, assume or suffer to exist any encumbrance on any asset now owned or hereafter acquired by it, except: (a) any lien on any asset securing Debt permitted under Section 8.8 above; (b) Permitted Liens; (c) liens securing the payment of taxes, assessments and governmental charges or levies, either not yet due and payable or which are being actually contested; and (d) any lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any lien permitted by any of the foregoing clauses of this Section; provided, however, that the principal amount of such Debt is not increased and is not secured by any additional assets. The Company shall at all times from and after the date hereof keep reserved, free from Encumbrances solely for the purpose of effecting the exercise of the Warrants, sufficient Warrant Shares to provide for the full exercise of the Warrants. 8.11. TERMINATION. The obligations of the Company hereunder shall terminate when the Guarantors are released from their obligations under the Credit Support Agreements and no amounts are owing in connection with the Facility or the Credit Support Agreements. SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. The representations, warranties and covenants contained in this Agreement shall survive the Closing indefinitely. SECTION 10. INDEMNIFICATION. (a) The Company shall indemnify, defend and hold the Agent and Guarantors harmless against all liability, loss or damage, together with all reasonable costs and expenses related thereto (including reasonable legal fees and expenses), relating to or arising from the transactions described herein and the untruth, inaccuracy or breach of any of the -15- 20 representations, warranties or agreements of the Company contained in this Agreement or the other Documents; provided however, that none of the Agent or the Guarantors will be indemnified for any costs or expenses that have resulted primarily from its own gross negligence or willful misconduct. (b) The Guarantors shall indemnify and hold the Company harmless against all liability, loss or damage, together with all reasonable costs and expenses related thereto (including reasonable legal fees and expenses), relating to or arising from the untruth, inaccuracy or breach of any of the representations, warranties or agreements of the Guarantors contained in this Agreement. SECTION 11. PURCHASE OF BANK'S RIGHTS AND INTERESTS; EVENTS OF DEFAULT. If one or more of the Guarantors purchases the Bank's rights and interests under the Bank Documents (collectively, the "Bank's Position"), violation by the Company of any representation, warranty or covenant in this Agreement shall be deemed to be an event of default under the Bank Documents, as will any one or more of the following events (each, an "Event of Default"): (a) if one of more judgments, decrees or orders for the payment of money in excess of $100,000 shall be rendered against the Company, any such judgments, decrees, or orders shall continue unsatisfied and in effect for a period of 30 consecutive days without being vacated, discharged, satisfied or stayed or bonded pending appeal; or (b) if the Company shall become insolvent, or is adjudicated insolvent or bankruptcy; or (c) if the Company admits in writing its inability to pay its debts; or (d) if the Company shall come under the authority of a custodian, receiver or trustee for it or for substantially all its property; or (e) if the Company makes an assignment for the benefit of creditors, or suffers proceedings under any law related to bankruptcy, insolvency, liquidation or the reorganization, readjustment or the release of debtors to be instituted against it and if contested by it not dismissed or stayed within 60 days; or (f) if proceedings under any law related to bankruptcy, insolvency, liquidation or the reorganization, readjustment or the release of debtors are instituted or commenced by the Company; or (g) if any order for relief is entered relating to any of the foregoing proceedings under clauses (d) through (f); or (h) the acquisition by any person (whether an individual, corporation, association or other entity), or two or more persons acting in concert, of beneficial ownership (within the meaning of Rule l3d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 30% or more of the outstanding voting securities of the Company; or -16- 21 (i) if there is a Material Adverse Effect, as determined in the reasonable discretion of the Agent; or (j) if the Company or any of its subsidiaries shall fail to make any material payment in respect of any indebtedness (including all amounts owed Northern Trust) or other material contract when due or within any applicable grace period; or any event or condition shall occur which results in the acceleration of the maturity of any indebtedness or material contract or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of any indebtedness or material contract or any Person acting on such holder's behalf to accelerate the maturity thereof or obligations thereunder. The Events of Default set forth in this Section 11 shall be applicable only upon a purchase of the Bank's Position by one or more of the Guarantors. SECTION 12. FEES AND EXPENSES. The Company, shall pay or reimburse the Agent for all direct expenses associated with this Agreement, the transactions contemplated hereby, and/or the enforcement of or collection under this Agreement, including in each case, without limitation, the reasonable fees and charges of BELIN LAMSON McCORMICK ZUMBACH FLYNN, a Professional Corporation, counsel to the Agent and all letter of credit fees or other fees related to the Guarantor Commitments. SECTION 13. CONFIDENTIALITY. Each Guarantor shall keep all confidential, non-public information on the business operations and affairs of the Company, which it receives as a consequence of this Agreement and the other Documents, strictly confidential and shall not disclose such information to any third party without the Company's prior consent. SECTION 14. ASSIGNMENT; PARTIES IN INTEREST. This Agreement and the rights and obligations of the parties hereunder shall be assignable by the Guarantors, but not the Company. This Agreement shall bind and inure to the benefit of the Company, the Guarantors, the Agent, and their respective successors and permitted assigns. SECTION 15. ENTIRE AGREEMENT. This Agreement and the other Documents contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect to such subject matter. SECTION 16. FURTHER ASSURANCES. The Company agrees to do such further acts and things and to execute and deliver to Agent such additional assignments, agreements, powers and instruments, as Agent may reasonably require to carry into effect the purposes of this Agreement or any of the Documents. -17- 22 SECTION 17. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company: Stockpoint, Inc. 2600 Crosspark Road Coralville, IA 52241-3212 with a copy to: Thomas Martin, Esq. Dorsey & Whitney LLP 220 South 6th Street Minneapolis, MN 55402 if to the Agent: Equity Dynamics, Inc. 2116 Financial Center 666 Walnut Street Des Moines, Iowa 50309 with a copy to: Belin Lamson McCormick Zumbach Flynn A Professional Corporation The Financial Center 666 Walnut Street Suite 2000 Des Moines, Iowa 50309 ATTN: Garth D. Adams, Esq. if to the Guarantors: Matthew Kinley c/o Equity Dynamics 2116 Financial Center 666 Walnut Street Des Moines, Iowa 50309 Joseph Dunham c/o Equity Dynamics -18- 23 2116 Financial Center 666 Walnut Street Des Moines, Iowa 50309 Zeke Investment Partners 569 Cantebury Lane Berwyn, PA 19312 or to such other address as the party to whom notice is to be given may have furnished to the other parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of telecopy transmission, upon receipt of electronic confirmation of transmission, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. SECTION 18. AMENDMENTS. The terms and provisions of this Agreement may only be modified or amended pursuant to an instrument signed by all parties. Notwithstanding the foregoing, the obligations of the Company under Sections 8.1 through 8.10 may also be waived, temporarily or permanently, but solely with respect to any Guarantor, pursuant to an instrument signed by such Guarantor. SECTION 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. SECTION 20. HEADINGS, GENDER, TENSE. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever from the context it appears appropriate, each term stated in either of the singular or the plural will include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender will include the masculine, the feminine and the neuter. Unless otherwise expressly stated in the Agreement, the words "herein," "hereof," "hereto," "hereunder" and others of similar inference refer to the Agreement as a whole and not to any particular section, subsection or clause contained in the Agreement. The term "including" shall not be deemed to be exclusive and shall be deemed to mean "including, without limitation." SECTION 21. GOVERNING LAW, JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF IOWA WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION -19- 24 OTHER THAN THE STATE OF IOWA TO BE APPLIED. THE PARTIES HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF IOWA AND OF ANY IOWA STATE COURT SITTING IN DES MOINES FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 22. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE GUARANTORS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. -20- 25 IN WITNESS WHEREOF the parties have executed and delivered this Master Agreement on the date first above written. STOCKPOINT, INC. By: ---------------------------------- ZEKE INVESTMENT PARTNERS By: /s/ Edward N. Antoian ---------------------------------- Ed Antoian By: /s/ Matthew P. Kinley ---------------------------------- Matthew P. Kinley By: ---------------------------------- Joseph Dunham EQUITY DYNAMICS, INC., as Agent By: /s/ Matthew P. Kinley ---------------------------------- -21- EX-4.9 18 MARCH 2000 FORM OF WARRANT 1 EXHIBIT 4.9 STOCKPOINT, INC. STOCK PURCHASE WARRANT To Purchase Common Stock of STOCKPOINT, INC. 2 THE ISSUANCE OF THIS WARRANT AND THE OFFER AND SALE OF THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAW AND THIS WARRANT AND ANY SUCH SHARES OF COMMON STOCK MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (IF SO REQUESTED) TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER. STOCKPOINT, INC. WARRANT NUMBER: Void after 5:00 p.m. Eastern Standard Time, on March 31, 2005. Warrant to Purchase ,000 Shares of Common Stock. WARRANT TO PURCHASE COMMON STOCK OF STOCKPOINT, INC. This is to Certify That, for United States Dollars ($ ) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ("Holder") is entitled to purchase, subject to the provisions of this Warrant, from Stockpoint, Inc., a Delaware corporation ("Company"), 000 fully paid, validly issued and nonassessable shares of Common Stock, $0.01 par value per share, of the Company ("Common Stock") at a price initially set at Ten Dollars and No Cents ($10.00) per share at any time or from time to time during the period from the date hereof to expiration, but not later than 5:00 p.m. Eastern Standard Time, on March 31, 2005. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price". (a) EXERCISE OF WARRANT. (1) This Warrant may be exercised in whole or in part at any time or from time to time on or after the date hereof and until 5:00 p.m. Eastern 3 Standard Time on March 31, 2005; provided, however, that if either such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day. This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form. As soon as practicable after each such exercise of this Warrant warrants, but not later than seven (7) days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificate for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable thereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise together with payment in full of the exercise price for the Warrant Shares to be purchased, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. (2) In lieu of delivering the Exercise Price in cash or check the Holder may elect to receive shares equal to the value of the Warrant or portion thereof being exercised ("Net Issue Exercise"). If the Holder wishes to elect the Net Issue Exercise, the Holder shall notify the Company of its election in writing at the time it delivers to the Company the Purchase Form. In the event the Holder shall elect Net Issue Exercise, the Holder shall receive the number of shares of Common Stock equal to the product of (a) the number of shares of Common Stock purchasable under the Warrant, or portion thereof being exercised, and (b) the current market value, as defined in paragraph (c) below, of one share of Common Stock minus the Exercise Price, divided by (c) the current market value, as defined in paragraph (c) below, of one share of Common Stock. (b) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of this Warrant. (c) FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to 2 4 the Holder an amount in cash equal to such fraction multiplied by the current market value of a share, determined as follows: (1) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the NASDAQ system, the current market value shall be the last reported sale price of the Common Stock on such exchange or system on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the mean of the last reported bid and asked prices for such day on such exchange or system; or (2) If the Common Stock is not so listed or admitted to unlisted trading privileges, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value of a share of Common Stock shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company. (d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. Subject to the restrictions noted at the beginning of this Warrant, this Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this Warrant to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be cancelled. This Warrant may be divided or combined with other warrants which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and 3 5 date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. (e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (f) ANTI-DILUTION AND ADJUSTMENT PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (1) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (2) In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (the "Subscription Price") (or having a conversion price per share) less than the Exercise Price on such record date the Exercise Price shall be adjusted so that the same shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of issuance by a fraction, the numerator of which shall be the sum of the number of shares outstanding on the record date mentioned above and the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered) would purchase at the Exercise Price in effect immediately prior to the date of such issuance, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding on the record date mentioned above and the number of additional shares of Common Stock offered for subscription or purchase (or into which the 4 6 convertible securities so offered are convertible). Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered (or securities convertible into Common Stock are not delivered) after the expiration of such rights or warrants the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into Common Stock) actually delivered. (3) In case the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (1) above) or subscription rights or warrants (excluding those referred to in Subsection (2) above), then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined in Section (c) above), less the fair market value (as determined by the Company's Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (4) (A). In case the Company shall issue shares of its Common Stock excluding shares issued (i) in any of the transactions described in Subsection (1) above, (ii) upon exercise of options granted to the Company's employees under a plan or plans adopted by the Company's Board of Directors and approved by its shareholders, if such shares would otherwise be included in this Subsection (4), (iii) upon exercise of options and warrants outstanding at March 31, 2000, and this Warrant, (iv) to shareholders of any corporation which merges into the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) in a bona fide public offering pursuant to a firm commitment underwriting, or (vi) on conversion or exchange of any securities for which full adjustment has already been made in accordance with Subsection 4(B) below but only if no adjustment is required pursuant to any other specific subsection of this Section (f) 5 7 (without regard to Subsection (9) below) with respect to the transaction giving rise to such rights for a consideration per share (the "Offering Price") less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal such Offering Price. Such adjustment shall be made successively whenever such an issuance is made. (B). In case the Company shall issue any securities convertible into or exchangeable for its Common Stock excluding securities issued in transactions described in Subsections (2) and (3) above for a consideration per share of Common Stock (the "Conversion Price") initially deliverable upon conversion or exchange of such securities determined as provided in Subsection (7) below less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal such Conversion Price Such adjustment shall be made successively whenever such an issuance is made. (C). In case the Company shall issue shares of its Common Stock excluding shares issued (i) in any of the transactions described in Subsection (1) above, (ii) upon exercise of options granted to the Company's employees under a plan or plans adopted by the Company's Board of Directors and approved by its shareholders, if such shares would otherwise be included in this Subsection (4), (iii) upon exercise of options and warrants outstanding at March 31 2000, and this Warrant, (iv) to shareholders of any corporation which merges into the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) in a bona fide public offering pursuant to a firm commitment underwriting, or (vi) on conversion or exchange of any securities for which full adjustment has already been made in accordance with Subsection 4(B) above or Subsection 4(D) below but only if no adjustment is required pursuant to any other specific subsection of this Section (f) (without regard to Subsection (9) below) with respect to the transaction giving rise to such rights for a consideration per share (the "Offering Price") less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of issuance by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares and the number of shares of Common Stock which the aggregate consideration received determined as provided in subsection (7) below for the issuance of such additional shares would purchase at the Exercise Price in effect immediately prior to the date of such issuance, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. 6 8 (D). In case the Company shall issue any securities convertible into or exchangeable for its Common Stock excluding securities issued in transactions described in Subsections (2) and (3) above for a consideration per share of Common Stock (the "Conversion Price") initially deliverable upon conversion or exchange of such securities determined as provided in Subsection (7) below less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of issuance by a fraction, the numerator of which shall be the sum of the number of shares outstanding immediately prior to the issuance of such securities and the number of shares of Common Stock which the aggregate consideration received determined as provided in subsection (7) below for such securities would purchase at the Exercise Price in effect immediately prior to the date of such issuance, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such securities and the maximum number of shares of Common Stock of the Company deliverable upon conversion of or in exchange for such securities at the initial conversion or exchange price or rate. Such adjustment shall be made successively whenever such an issuance is made. (5) In case the Company shall (i) issue shares of its Common Stock in a bona fide public offering pursuant to a firm commitment at a price per share ("Public Offering Price") less than 200% of the then current Exercise Price, the Exercise Price shall be adjusted immediately so that it shall equal the price determined by multiplying the Public Offering Price by a factor of 0.50, or (ii) issue or exchange shares of its Common Stock in connection with a Change of Control, that does not qualify as a "pooling of Interest" transaction, (defined as the acquisition by any person (whether an individual, corporation, association or other entity), or two or more persons acting in concert, of beneficial ownership (within the meaning of 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 50% or more of the outstanding voting securities of the Company) for a consideration per share ("Exchange Consideration") less than 200% of the then current Exercise Price, the Exercise Price shall be adjusted immediately so that it shall equal the price determined by multiplying the Exchange Consideration by a factor of 0.50. No more than one adjustment shall be made pursuant to this Subsection (5), which adjustment shall be made at the time of such issuance. (6) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially 7 9 issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (7) For purposes of any computation respecting consideration received pursuant to Subsections (4) and (5) above, the following shall apply: (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and (C) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (7). (8) INTENTIONALLY OMITTED. (9) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($0.05) in such price; provided, however, that any adjustments which by reason of this Subsection (9) are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section (f) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section (f) to the contrary notwithstanding, the Company shall be entitled, but shall not be required, to make such changes in the Exercise Price, in addition to those required by this Section (f), as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal Income tax liability to the holders 10 of Common Stock or securities convertible into Common Stock (including Warrants). (10) The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section (f), and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment. (11) In the event that at any time, as a result of an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (1) to (9), inclusive above. (12) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. (13) The provisions of Subsections (4)(A), (4)(B), and (5) above shall cease to have any effect immediately after the closing of the Company's first bona fide public offering after the date of this Warrant and thereafter no adjustments in the Exercise Price shall be made pursuant to such Subsections. The provisions of Subsections (4)(C) and (4)(D) shall not be effective as long as Subsections (4)(A) and (4)(B) remain effective. Immediately after the closing of the Company's first bona fide public offering the provisions of Subsections (4)(C) and (4)(D) shall become effective and adjustments in the Exercise Price shall be made pursuant to such Subsections. (g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section, the Company shall promptly and in no event later than 20 days after the effective date of adjustment cause to be mailed by certified mail to each Holder at his last address appearing in the Warrant Register and shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the 9 11 manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder or any holder of a Warrant executed and delivered pursuant to Section (a). (h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least fifteen days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (i) shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that 10 12 in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (1) of Section (f) hereof. (j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Company and the Holder have entered into a Registration Rights Agreement as of even date herewith providing for certain rights and obligations related to registration of the shares of Common Stock issuable upon exercise of this Warrant. (k) RESTRICTIVE LEGEND. Each Warrant Share, when issued, shall include a legend in substantially the following form: THE ISSUANCE OF THESE SHARES HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE SECURITIES LAW AND THESE SHARES MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (IF SO REQUESTED) TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER. (l) NO IMPAIRMENT. The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. Dated: March 31, 2000 STOCKPOINT, INC. Attest: By: - -------------------------------- ----------------------------------- Name: William McNally Name: William E. Staib Title: Secretary Title: President & CEO 11 13 PURCHASE FORM Dated -------------------- The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing shares of Common Stock and hereby makes payment of in payment of the actual exercise price thereof. In lieu of such payment of the actual exercise price, the undersigned may direct the Company to net issue such shares of Common Stock in accordance with Section (a)(2) of the within Warrant by writing "net issue" in the space after "payment of" in the preceding sentence. INSTRUCTIONS FOR REGISTRATION OF STOCK Name -------------------------------------------------------------------- (Please typewrite or print in block letters) Address ----------------------------------------------------------------- Signature ------------------------------------------------------ ASSIGNMENT FORM FOR VALUE RECEIVED, hereby sells, assigns and transfers unto Name --------------------------------------------------------------------- (Please typewrite or print in block letters) Address ------------------------------------------------------------------ the right to purchase Common Stock represented by this Warrant to the extent of shares as to which such right is exercisable and does hereby irrevocably constitute and appoint Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. 12 14 Date , -------------------- ------- Signature ------------------------------ 13 EX-4.10 19 MARCH 2000 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.10 EXHIBIT B REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is entered into as of March 30, 2000, by and among Stockpoint, Inc., a Delaware corporation (the "Company"), and the persons listed on the signature page hereof (the "Purchasers"). WHEREAS, the Purchasers (the "Purchasers") have purchased Stock Purchase Warrants (the "Warrants") for the purchase of Common Stock, $.01 par value per share, of the Company; WHEREAS, the Company and the Purchasers desire to provide for certain arrangements with respect to the registration under the Securities Act of 1933, as amended (the "Securities Act"), of shares of Common Stock of the Company, $.01 par value per share, to be issued upon exercise of the Warrants held by the Purchasers as provided in this Agreement: NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchasers hereby agree as follows: 1. Definitions. 1.1 "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.2 "Company" shall mean Stockpoint, Inc., a Delaware corporation. 1.3 "Common Shares" shall mean the shares of common stock, par value $.01 per share, authorized by the Company's Certificate of Incorporation and any additional shares of common stock which may be authorized in the future by the Company, and any stock into which such Common Shares may hereafter be changed, and shall also include capital stock of any other class of the Company which is not preferred as to dividends or assets over any other class of stock of the Company and which is not subject to redemption. 1.4 "Public Offering" shall mean any offering of Common Shares to the public, either on behalf of the Company or any of its security holders, pursuant to an effective registration statement under the Securities Act. 1.5 "Purchasers" shall mean the holders from time to time of the Warrants. 1.6 "Registrable Securities" shall mean (a) the Common Shares at any time issued or subject to issuance upon the exercise of the Warrants and any series of preferred stock, warrants, options or rights, the holders of which are granted registration rights by agreement with the Company and (b) any additional securities issued with respect to the above-described 2 securities upon any stock split, stock dividend, recapitalization, or similar event. Registrable Securities shall cease to be Registrable Securities when (x) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (y) all such securities held by a Purchaser shall be eligible to be distributed pursuant to Rule 144 under the Securities Act in a single three-month period by the holders thereof or (z) such securities shall have ceased to be outstanding. 1.7 "Registration Expenses" shall mean the expenses described in Section 5. 1.8 "Securities Act" shall mean the Securities Act of 1933, as amended. 2. Demand Registration. 2.1 Subject to Sections 2.4 and 2.5, if at any time after one year has elapsed from the date the Company first consummates a Public Offering pursuant to a registration statement on Form S-1 or Form SB-2, the Company shall receive a written request therefor from the record holder or holders of an aggregate of at least 51% of the Registrable Securities, the Company shall prepare and file a registration statement under the Securities Act covering such number of Registrable Securities as are the subject of such request and shall use its best efforts to cause such registration statement to become effective. Upon the receipt of a registration request meeting the requirements of this Section 2.1, the Company shall promptly give written notice to all other record holders of Registrable Securities that such registration is to be effected. The Company shall include in such registration statement such additional Registrable Securities as such other record holders request in writing within thirty (30) days after the date of the Company's written notice to them. If (a) the holders of a majority of the Registrable Securities for which registration has been requested pursuant to this Section 2.1 determine for any reason not to proceed with the registration at any time before the related registration statement has been declared effective by the Commission, (b) such registration statement, if theretofore filed with the Commission, is withdrawn and (c) the holders of the Registrable Securities subject to such registration statement agree to bear their own Registration Expenses incurred in connection therewith and to reimburse the Company for the Registration Expenses incurred by it in such connection or if such registration statement, if theretofore filed with the Commission, is withdrawn at the initiative of the Company, then the holders of the Registrable Securities shall not be deemed to have exercised their demand registration right pursuant to this Section 2.1. 2.2 At the request of the holders of a majority of the Registrable Securities to be registered, the method of disposition of all Registrable Securities included in such registration shall be an underwritten Public Offering. The managing underwriter of any such Public Offering shall be selected by the Company. If in the good faith judgment of the managing underwriter of such Public Offering, the inclusion of all of the Registrable Securities the registration of which has been requested would interfere with their successful marketing, the number of Registrable Securities to be included in the Public Offering shall be reduced, pro rata, among the requesting holders thereof in proportion to the number of Registrable Securities included in their respective requests for registration. Registrable Securities that are so excluded from such underwritten 2 3 Public Offering shall be withheld by the holders thereof for such period, not exceeding one hundred and twenty (120) days, as the managing underwriter reasonably determines is necessary to effect such Public Offering. 2.3 The Company shall be obligated to prepare, file and cause to be effective only one (1) registration statement pursuant to Section 2.1. 2.4 Notwithstanding the foregoing, the Company may delay initiating the preparation and filing of any registration statement requested pursuant to Section 2.1 for a period not to exceed one hundred eighty (180) days if, in the good faith judgment of the Company's Board of Directors, effecting the registration would adversely affect a proposed Public Offering by the Company or would require the premature disclosure of any financing, acquisition, disposition of assets or stock, merger or other comparable transaction or would require the Company to make public disclosure of information the public disclosure of which could have material adverse effect on the Company. 2.6 Notwithstanding anything to the contrary contained herein, at any time within thirty (30) days after receiving a demand for registration pursuant to Section 2.1, the Company may elect to effect an underwritten primary registration in lieu of the requested registration. If the Company so elects, the Company shall give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and shall afford such holders the rights contained in Article 3 with respect to "piggyback" registrations. In such event, the demand for registration pursuant to Section 2.1 shall be deemed to have been withdrawn. 3. Piggyback Registration. 3.1 From and after the date on which one year has elapsed from the date the Company first consummates a Public Offering pursuant to a registration statement on Form S-1 or Form SB-2, each time the Company shall determine to proceed with the actual preparation and filing of a registration statement under the Securities Act in connection with the proposed offer and sale for money of any of its securities by it or any of its security holders (other than a registration statement on Form S-8, Form S-4 or other limited purpose form), the Company will give written notice of its determination to all record holders of Registrable Securities. Upon the written request of a record holder of any Registrable Securities given within 30 days after the date of any such notice from the Company, the Company will, except as herein provided, cause all Registrable Securities the registration of which is requested to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Registrable Securities to be so registered; provided, however, that nothing herein shall prevent the Company from, at any time, abandoning or delaying any registration; and provided, further, that if the Company determines not to proceed with a registration after the registration statement has been filed with the Commission, and the Company's decision not to proceed is primarily based upon the anticipated Public Offering price of the securities to be sold by the Company, the Company shall promptly complete the registration for the benefit of those selling security holders who wish to proceed with a Public Offering of their Registrable Securities and who agree to bear all of the Registration Expenses in excess of $25,000 incurred by the Company as the result of such registration after the Company has decided not to proceed. In the 3 4 discretion of the holders of the Registrable Securities to be included in the registration (provided that such holders are the record holders of at least 51% of the Registrable Securities), such registration may count as a demand registration under Section 2.1 (if it otherwise meets the requirements of Section 2.1) for which the Company will pay all Registration Expenses. 3.2 If any registration pursuant to Section 3.1 is underwritten in whole or in part, the Company may require that the Registrable Securities included in the registration be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. If, in the good faith judgment of the managing underwriter of the Public Offering, the inclusion of all of the Registrable Securities originally covered by requests for registration would reduce the number of shares to be offered by the Company or interfere with the successful marketing of the shares offered by the Company, the number of Registrable Securities to be included in the Public Offering may be reduced in the following manner: first, securities held by officers and directors of the Company (other than Registrable Securities) shall be excluded from such underwritten public offering to the extent required by the managing underwriter, second, if a further reduction in the Public Offering is required, any securities, other than Registrable Securities, proposed to be sold in the Public Offering by persons other than the Company shall be excluded and third, if a further reduction in the Public Offering is required, the Registrable Securities requested to be included in the Public Offering shall be reduced, pro rata, among the requesting holders thereof in proportion to the number of Registrable Securities included in their respective requests for registration. The Registrable Securities which are thus excluded from the underwritten Public Offering shall be withheld from the market by the holders thereof for a period which the managing underwriter reasonably determines is necessary in order to effect the Public Offering. 4. Short Form Registration. In addition to the registration rights provided in Articles 2 and 3, if the Company qualifies for the use of Form S-3 or any similar registration form then in force, the Company shall on one occasion at its expense at the request of a majority of the holders of Registrable Securities then outstanding file a registration statement on such form covering Registrable Securities on behalf of such holder or holders. The Company shall give notice to all the holders of Registrable Securities who did not join in such request and afford them a reasonable opportunity to do so. 5. Registration Procedures. If and whenever the Company is required by the provisions of Article 2, Article 3 or Articles 4 to effect a registration of Registrable Securities under the Securities Act, the Company will use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended methods of disposition specified by the holders participating therein. Without limiting the foregoing, the Company in each such case will, as expeditiously as possible: 5.1 In the case of a demand registration pursuant to Section 2.1 or Article 4, prepare and file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations thereunder) and use its best efforts to cause such registration statement to become effective; provided, however, that as far in advance as practical before filing 4 5 such registration statement or any amendment thereto, the Company will furnish counsel for the requesting holders of Registrable Securities with copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits), and any such holder shall have the opportunity to object to any information pertaining solely to such holder that is contained therein and the Company will make the corrections reasonably requested by such holder with respect to such information prior to filing such registration statement or amendment. 5.2 Prepare and file with the Commission such amendments and supplements to such registration statement and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities included in such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (a) such time as all of the Registrable Securities included in such registration statement have been disposed of in accordance with the intended methods of disposition by the holder or holders thereof as set forth in such registration statement or (b) one hundred eighty (180) days after such registration statement becomes effective. 5.3 Promptly notify each requesting holder and the underwriter or underwriters, if any, of: (a) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (b) any written request by the Commission for amendments or supplements to such registration statement or prospectus; (c) any notification received by the Company from the Commission regarding the Commission's initiation of any proceeding with respect to, or of the issuance by the Commission of, any stop order suspending the effectiveness of such registration statement; and (d) the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. 5.4 Furnish to each holder of Registrable Securities included in such registration statement such number of conformed copies of such registration statement and of each amendment and supplement thereto, and such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such seller's Registrable Securities, and such other documents, as such holder may reasonably request to facilitate the disposition of its Registrable Securities. 5 6 5.5 Use its best efforts to register or qualify all Registrable Securities included in such registration statement under the securities or "blue sky" laws of such states as each holder of Registrable Securities shall reasonably request within twenty (20) days following the original filing of such registration statement and to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such states of the Registrable Securities owned by such holder, except that the Company shall not for any such purpose be required (a) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this Section 5.5 be obligated to be so qualified, (b) to consent to general service of process in any such jurisdiction or (c) to subject itself to taxation in any such jurisdiction by reason of such registration or qualification. 5.6 Use its best efforts to cause all Registrable Securities included in such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable each holder thereof to consummate the disposition of such Registrable Securities. 5.7 Notify each holder whose Registrable Securities are included in such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 5.8 Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission. 5.9 Use its best efforts to cause all Registrable Securities included in such registration statement to be listed, upon official notice of issuance, on any securities exchange or quotation system on which any of the securities of the same class as the Registrable Securities are then listed. 5.10 The Company may require each holder whose Registrable Securities are being registered to, and each such holder, as a condition to including Registrable Securities in such registration statement, shall, furnish the Company and the underwriters with such information and affidavits regarding such holder and the distribution of such Registrable Securities as the Company and the underwriters may from time to time reasonably request in writing in connection with such registration statement. At any time during the effectiveness of any registration statement covering Registrable Securities offered by a holder, if such holder becomes 6 7 aware of any change materially affecting the accuracy of the information contained in such registration statement or the prospectus (as then amended or supplemented) relating to such holder, it will immediately notify the Company of such change. 5.11 Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5.7, each holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder receives the copies of the supplemented or amended prospectus contemplated by Section 5.7 and, if so directed by the Company, shall deliver to the Company all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities. 6. Expenses. With respect to any registration requested pursuant to Article 2 (except as otherwise provided in such Article with respect to a registration voluntarily terminated at the request of the requesting holders of Registrable Securities), Article 3 (except as otherwise provided in such Article with respect to a registration continued by holders of Registrable Securities who wish to proceed with a Public Offering that is withdrawn by the Company) or Article 4, the Company shall bear all of the fees and expenses ("Registration Expenses") incident to the Company's performance of or compliance with its obligations under this Agreement in connection with such registration, or participation by the holders of Registrable Securities in any such registration, including, without limitation, all registration, filing, securities exchange listing and NASD fees, all registration, filing, qualification and other fees and expenses or complying with state securities or "blue sky" laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, and one counsel for the selling holders selected by them, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, premiums and other costs of any policies of insurance against liabilities arising out of the Public Offering of the Registrable Securities being registered obtained by the Company (it being understood that the Company shall have no obligation to obtain such insurance) and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities; but excluding underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities and any fees and disbursements of more than one counsel or any accountant to the holders of the Registrable Securities, which discounts, commissions, transfer taxes, fees and disbursements shall in any registration be payable by the holders of the Registrable Securities being registered, pro rata in proportion to the number of Registrable Securities being sold by them. 7. Indemnification. 7.1 The Company will, to the full extent permitted by law, indemnify and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of this Agreement, and its directors, officers and partners and each other person, if any, who controls such holder within the meaning of the Securities Act, from and against any and all losses, claims, damages, expenses or liabilities, joint or several (collectively, "Losses") to which such holder or any such director, officer, partner or controlling person may 7 8 become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and the Company will reimburse the holder and each such director, officer, partner and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending against any such Losses (or action or proceeding in respect thereof); provided, however, that the Company will not be liable in any such case to the extent that any such Losses arise out of or are based upon (a) an untrue statement or alleged untrue statement or omission or alleged omission made in conformity with written information furnished by such holder specifically for use in the preparation of the registration statement or (b) such holder's failure to send or give a copy of the final prospectus to the persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, partner or controlling person of such holder and shall survive the transfer of such securities by such holder. The Company shall also indemnify each other person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent provided above with respect to holders of Registrable Securities. 7.2 Each holder of Registrable Securities which are included in a registration pursuant to the provisions of this Agreement will, to the full extent permitted by law, indemnify and hold harmless the Company, its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act from and against any and all Losses to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by such holder specifically for use in the preparation of such registration statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person of the Company. The holder of Registrable Securities included in a registration statement shall also indemnify each other person who participates (including as an 8 9 underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent as provided above with respect to the Company. In no event shall the liability of any holder under this Section 7.2 exceed the net proceeds received by such holder from the sale of their Registrable Securities. 7.3 Promptly after receipt by a party indemnified pursuant to the provisions of Section 7.1 or Section 7.2 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2, promptly notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against any indemnified party, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if the defendants in any action include both the indemnified party and the indemnifying party and the indemnified party reasonably concludes that there is a conflict of interest that would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party shall have the right to select separate counsel to participate in the defense of such action on behalf of the indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of Section 7.1 or Section 7.2 for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof unless (a) the indemnified party shall have employed counsel in accordance with the proviso of the preceding sentence, (b) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (c) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the indemnified parties with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of additional counsel or counsels for the indemnified parties. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation without the consent of the indemnified party. No indemnifying party shall be subject to any liability for any settlement made without its consent. An indemnified party may at any time elect to participate in the defense of any claim or proceeding at its own expense. 7.4 If the indemnification provided for in this Article 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, 9 10 claim, damage, or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as it appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 8. Covenants Relating to Rule 144. If at any time the Company is required to filed reports in compliance with either Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") the Company will (a) file reports in compliance with the Exchange Act and (b) comply with all rules and regulations of the Commission applicable to the use of Rule 144. 9. Underwritten Offerings. If a distribution of Registrable Securities pursuant to a registration statement is to be underwritten, the holders whose Registrable Securities are to be distributed by such underwriters shall be parties to such underwriting agreement. No requesting holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any requesting holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to the Company and the managing underwriter, and each of the remaining requesting holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining requesting holder bears to the total number of Registrable Securities being registered by all such remaining requesting holders. 10. Stand-Off Agreement. Each holder of Registrable Securities agrees, so long as such holder holds at least 1% of the Company's outstanding voting equity securities, in connection with the Company's initial Public Offering, upon request of the Company or the underwriters managing such Public Offering, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Common Shares of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not exceeding 180 days) from the effective date of the registration statement relating to such initial Public Offering as may be requested by the underwriters; provided, however, that all other holders of at least 1% of the Company's outstanding voting equity securities and all of the officers and directors of the Company who own stock of the Company must also agree to not less onerous restrictions. 10 11 11. Amendment. The Company shall not amend this Agreement without the written consent of the holders of more than 50% of the Registrable Securities. 12. Termination. This Agreement, and all of the Company's obligations hereunder (other than its obligations pursuant to Article 7, which obligations shall survive such termination), shall terminate upon the earlier to occur of (a) the date on which there are no Registrable Securities outstanding or (b) March 30, 2005. 13. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned (but only with all related obligations) by a holder of Registrable Securities to a transferee or assignee of all, but not less than all, such securities provided the Company is within a reasonable time after such transfer furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned. IN WITNESS WHEREOF, the parties hereto have duly executed this Registration Rights Agreement as of the date and year first above-written. STOCKPOINT, INC. By: ----------------------------------------- ZEKE INVESTMENT PARTNERS By: ----------------------------------------- Ed Antoian 11 12 By: ----------------------------------------- Matthew P. Kinley By: ----------------------------------------- Joseph Dunham EQUITY DYNAMICS, INC., as Agent By: ----------------------------------------- 12 EX-4.11 20 FORM OF LOCK-UP AGREEMENT 1 Exhibit 4.11 Roth Capital Partners Incorporated Individual Lock-Up 24 Corporate Plaza, Suite 200 Newport Beach, California 92660 Ladies and Gentlemen: In connection with a proposed initial public offering (the "Offering") by Stockpoint, Inc. (the "Company") of shares of the Company's common stock (the "Common Stock"), the Company has filed a registration statement on Form S-1 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). To induce you to enter into an underwriting agreement for the Offering (the "Underwriting Agreement"), I agree that for the 180 day period following the day on which the Registration Statement becomes effective under the Securities Act (the "Lock Up Period"), I will not, without the prior written consent of Roth Capital Partners Incorporated, directly or indirectly: o issue, o offer, o sell (including any short sale), o grant any option for the sale of, o acquire any option to dispose of, o assign, o transfer, o pledge or o otherwise encumber or dispose of any shares of Common Stock, or securities convertible into, exercisable or exchangeable for or evidencing any right to purchase or subscribe for any shares of Common Stock or any beneficial interest therein (collectively, "Convertible Securities"), that, as of the date the Registration Statement was filed with the U.S. Securities and Exchange Commission or becomes effective, I own of record or beneficially. I also agree that if I offer or sell any shares of Common Stock or Convertible Securities (including securities I acquire after the Offering commences) during the Lock Up Period (with the prior written consent of Roth Capital Partners Incorporated) or during the 180 days following the end of Lock Up Period, I will offer and sell these securities through Roth Capital Partners Incorporated. I understand that, notwithstanding the above, I may transfer my Common Stock or Convertible Securities to: o my spouse, o my parents, o my siblings, o my children or other lineal descendants, o any trust for the benefit of the above persons, o any of my distributees, legatees or devisees who acquire my Common Stock or Convertible Securities by will or operation of law upon my death, or 2 o any other recipient of a bona fide gift or a charitable contribution of Common Stock or Convertible Securities by me, but only if my transferees agree in writing to be bound by the terms of this letter to the same extent as me. Notwithstanding the above, if the Underwriting Agreement is not executed on or before July 1, 2000, this agreement shall terminate and be of no effect. Very truly yours, ____________________________________________ Dated: __________________, 2000 Accepted as of the date set forth immediately above: ROTH CAPITAL PARTNERS INCORPORATED By____________________________________ Name:_________________________________ Title:________________________________ -2- 3 Roth Capital Partners Incorporated Entity Lock-Up 24 Corporate Plaza, Suite 200 Newport Beach, California 92660 Ladies and Gentlemen: In connection with a proposed initial public offering (the "Offering") by Stockpoint, Inc. (the "Company") of shares of the Company's common stock (the "Common Stock"), the Company has filed a registration statement on Form S-1 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). To induce you to enter into an underwriting agreement for the Offering (the "Underwriting Agreement"), the undersigned agrees that for the 180 day period following the day on which the Registration Statement becomes effective under the Securities Act (the "Lock Up Period"), the undersigned will not, without the prior written consent of Roth Capital Partners Incorporated, directly or indirectly: o issue, o offer, o sell (including any short sale), o grant any option for the sale of, o acquire any option to dispose of, o assign, o transfer, o pledge or o otherwise encumber or dispose of any shares of Common Stock, or securities convertible into, exercisable or exchangeable for or evidencing any right to purchase or subscribe for any shares of Common Stock or any beneficial interest therein (collectively, "Convertible Securities"), that, as of the date the Registration Statement was filed with the U.S. Securities and Exchange Commission or becomes effective, the undersigned owns of record or beneficially. [continued on next page] 4 The undersigned also agrees that if the undersigned offers or sells any shares of Common Stock or Convertible Securities (including securities the undersigned acquires after the Offering commences) during the Lock Up Period (with the prior written consent of Roth Capital Partners Incorporated) or during the 180 days following the end of Lock Up Period, the undersigned will offer and sell these securities through Roth Capital Partners Incorporated. Very truly yours, By__________________________________________ Name:_______________________________________ Title:______________________________________ Dated: _______________, 2000 Accepted as of the date set forth above: ROTH CAPITAL PARTNERS INCORPORATED By___________________________________ Name:________________________________ Title:_______________________________ -2- EX-10.1 21 1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN 1 EXHIBIT 10.1 STOCKPOINT, INC. 1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN SECTION 1. PURPOSE OF PLAN. The purpose of this Stockpoint, Inc., 1995 Long-Term Incentive and Stock Option Plan is to aid in maintaining and developing personnel capable of contributing to the future success of the Company, to offer such personnel additional incentives to put forth maximum efforts for the success of the business, and to afford them an opportunity to acquire a proprietary interest in the Company through stock options and other long-term incentive awards as provided herein. Options granted under this Plan may be either Incentive Stock Options or options that do not qualify as Incentive Stock Options. Awards granted under this Plan may be SARs, restricted stock or performance awards as hereinafter described. SECTION 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "Award" shall mean an SAR, restricted stock award or performance award granted pursuant to the Plan. (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended. (d) "Committee" shall mean a committee of two or more Directors appointed by the Board of Directors of the Company, none of whom shall be officers or employees of the Company and all of whom shall be "disinterested persons" with respect to the Plan within the meaning of Rule 16b-3 under the Exchange Act and any successor rule. (e) "Common Stock" shall mean the Common Stock, $.01 par value, of the Company. (f) "Company" shall mean Stockpoint, Inc., a Delaware corporation. (g) "Director" shall mean a member of the Board. (h) "Employee" shall mean any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. 2 (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (j) "Fair Market Value" of the Common Stock shall be as determined by the Committee in its discretion; provided, however, that where there is a public market for the Common Stock, the fair market value per share of the Common Stock shall be the closing price of the Common Stock in the over-the-counter market on the date of grant, as reported in The Wall Street Journal (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotation ("NASDAQ") System) or, in the event the Common Stock is traded on the NASDAQ National Market System or listed on a stock exchange, the fair market value per share of Common Stock shall be the closing price on such system or exchange on the date of grant of the Option, as reported in The Wall Street Journal. If on the date of grant of any option or award under the Plan the Common Stock is not traded on an established securities market, the Committee shall determine Fiar Market Value in good faith and in connection therewith shall take such action as it deems necessary or advisable. (k) "Incentive Stock Option" shall mean any Option meeting the requirements of Section 422 of the Code. (l) "Option" shall mean a stock option granted pursuant to the Plan. (m) "Optioned Stock" shall mean the Common Stock subject to an Option. (n) "Parent" shall mean a "parent corporation," whether now or hereafter existing, as defined in Section 425(e) of the Code. (o) "Plan" shall mean this 1995 Long-Term Incentive and Stock Option Plan. (p) "SAR" shall mean a stock appreciation right granted pursuant to the Plan. (q) "Shares" shall mean the shares of Common Stock subject to Options or Awards under the Plan in accordance with Section 3 below, as adjusted in accordance with Section 16 below. (r) "Subsidiary" shall mean a "subsidiary corporation," whether now or hereafter existing, as defined in Section 425(f) of the Code. SECTION 3. STOCK SUBJECT TO PLAN. Subject to adjustment as provided in Section 16 hereof, the number of Shares on which Options may be exercised or other Awards issued under this Plan shall be 2,000,000 shares of the Company's authorized Common 3 Stock plus a number of shares equal to one and one-half percent of the number of shares of Common Stock outstanding as of the December 31 immediately preceding the year in which such Options may be granted. The Shares may be either authorized, but unissued, shares of Common Stock or shares of Common Stock which have been reacquired by the Company. If an Option or Award under the Plan expires, or for any reason is terminated or unexercised with respect to any Shares, or if Shares issued under an Option are reacquired by the Company pursuant to this Plan, such Shares shall again be available for Options or Awards thereafter granted during the term of the Plan. SECTION 4. ADMINISTRATION OF PLAN. (a) The Plan shall be administered by the Committee. (b) The Committee shall have plenary authority in its discretion, but subject to the express provisions of the Plan, to: (i) determine the purchase price of the Common Stock covered by each Option or Award, (ii) determine the Employees to whom and the time or times at which Options and Awards shall be granted and the number of Shares to be subject to each, (iii) determine, pursuant to Section 8(c) hereof, the form of payment to be made upon the exercise of an SAR or in connection with performance awards, either cash, Common Stock of the Company or a combination thereof, (iv) determine the terms of exercise of each Option and Award, (v) accelerate the time at which all or any part of an Option or Award may be exercised, (vi) amend or modify the terms of any Option or Award with the consent of the optionee, (vii) interpret the Plan, (viii) prescribe, amend and rescind rules and regulations relating to the Plan, (ix) determine the terms and provisions of each Option and Award agreement under the Plan (which agreements need not be identical), including the designation of those Options intended to be Incentive Stock Options, (x) delegate such of its authority granted herein as it deems is in the best interests of the Company, and (xi) make all other determinations necessary or advisable for the administration of the Plan, subject to the exclusive authority of the Board under Section 17 herein to amend or terminate the Plan. The Committee's determinations on the foregoing matters, unless otherwise disapproved by the Board, shall be final and conclusive; provided, however, that the Committee's determinations with respect to the matters set forth in clauses (ii) and (iii) above, unless delegated as provided in clause (x) above, shall be final and conclusive without any right of disapproval by the Board. (c) The Committee shall select one of its members as its chair and shall hold its meetings at such times and places as it may determine. A majority of Committee members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if made by a majority vote at a meeting duly called and held. The grant of an Option or Award shall be effective only if a written agreement shall have been duly executed and 4 delivered by and on behalf of the Company following such grant. The Committee may appoint a secretary and may make such rules and regulations for the conduct of its business as the Committee shall deem advisable. All decisions, determinations and interpretations of the Committee shall be final and binding on all optionees and grantees. SECTION 5. ELIGIBILITY AND GRANT. (a) Eligibility. Incentive Stock Options may only be granted under this Plan to any full or part-time Employee. Full or part-time Employees, officers, consultants, Directors (excluding Directors who are not Employees) or independent contractors of the Company or one of its Subsidiaries shall be eligible to receive Options which do not qualify as Incentive Stock Options and Awards. In determining the persons to whom Options and Awards shall be granted and the number of Shares subject to each, the Committee may take into account the nature of services rendered by the respective Employees or consultants, their present and potential contributions to the success of the Company and such other factors as the Committee in its discretion shall deem relevant. (b) Grant of Additional Options or Awards. A person who has been granted an Option or Award under this Plan may be granted additional Options or Awards under the Plan if the Committee shall so determine; provided, however, that for Incentive Stock Options, to the extent that the aggregate Fair Market Value (determined at the time the Incentive Stock Option is granted) of the Common Stock with respect to which all Incentive Stock Options are exercisable for the first time by an Employee during any calendar year (under all plans described in Section 422(d) of the Code of such Employee's employer corporation and its parent and subsidiary corporations) exceeds $100,000, such Options shall be treated as Options that do not qualify as Incentive Stock Options. Nothing in the Plan or in any agreement thereunder shall confer on any Employee any right to continue in the employ of the Company or any of its Subsidiaries or affect, in any way, the right of the Company or any of its Subsidiaries to terminate such Employee's employment at any time. SECTION 6. PRICE. The exercise price for all Incentive Stock Options granted under the Plan shall be determined by the Committee but shall not be less than 100% of the Fair Market Value of the Common Stock at the date of grant of such Option. The exercise price for Options granted under the Plan that do not qualify as Incentive Stock Options and, if applicable, the price for all Awards shall be determined by the Committee. SECTION 7. TERM. Each Option and Award and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the Option or Award agreement. The Committee shall be under no duty to provide terms 5 of like duration for Options or Awards granted under the Plan, but the term of an Option may not extend more than ten years from the date of grant of such Option. SECTION 8. EXERCISE OF OPTION OR AWARD. (a) Exercisability. The Committee shall have full and complete authority to determine whether an Option or Award will be exercisable in full at any time or from time to time during the term thereof, or to provide for the exercise thereof in such installments, upon the occurrence of such events (such as termination of employment for any reason) and at such times during the term of the Option or Award as the Committee may determine and specify in the Option or Award agreement. (b) No Violation of State or Federal Laws. The exercise of any Option or Award granted hereunder shall only be effective at such time that the sale of Common Stock pursuant to such exercise will not violate any state or federal securities or other laws. To the extent required in order to comply with Rule 16b-3 of the Exchange Act in the case of an Option or Award granted to a person considered by the Company as one of its officers or directors for purposes of Section 16 of the Exchange Act, the terms of the Option or Award will require that the Shares subject thereto are not disposed of by such officer or director for a period of at least six months from the date of grant. (c) Method of Exercise. An optionee or grantee electing to exercise an Option or Award shall give written notice to the Company of such election and of the number of Shares subject to such exercise. The Company will verify the appropriateness of the election and determine the amounts of compensation and related withholding tax. The exercise amount and applicable taxes must be tendered by the optionee or grantee prior to the issuance of Shares pursuant to the exercise. Payment shall be made to the Company in cash (including bank check, certified check, personal check, or money order), or, at the discretion of the Committee and as specified by the Committee, (i) by delivering certificates for the Common Stock already owned by the optionee or grantee having a Fair Market Value as of the date of exercise equal to the full purchase price of the Shares as to which the Option or Award is exercised, (ii) by delivering written authorization for the Company to retain from the total number of Shares as to which the Option or Award is exercised that number of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the total number of Shares as to which the Option or Award is exercised, (iii) by delivering the optionee's or grantee's promissory note, which shall provide for interest at a rate not less than the minimum rate required to avoid the imputation of income, original issue discount or a below-market-rate loan pursuant to Sections 483, 1274 or 7872 of the Code or any successor provisions thereto, (iv) by delivery (including by facsimile) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell a sufficient portion of the Shares and deliver the sale proceeds directly to the Company to pay for the exercise price, (v) any combination of the 6 foregoing methods of payment or (vi) such other consideration and method of payment for the issuance of Shares as may be permitted under applicable laws. The optionee's or grantee's promissory note shall be a full recourse liability of the optionee and may, at the discretion of the Committee, be secured by a pledge of the Shares being purchased. Until such person has been issued the Shares subject to such exercise, he or she shall possess no rights as a stockholder with respect to such Shares. SECTION 9. STOCK OPTION RIGHTS. (a) Grant. At the time of grant of an Option or Award under the Plan (or at any other time), the Committee, in its discretion, may grant an SAR evidenced by an agreement in such form as the Committee shall from time to time approve. Any such SAR may be subject to restrictions on the exercise thereof as may be set forth in the agreement representing such SAR, which agreement shall comply with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan. (b) Exercise. An SAR shall be exercised by the delivery to the Company of a written notice which shall state that the holder thereof elects to exercise his or her SAR as to the number of Shares specified in the notice and which shall further state what portion, if any, of the SAR exercise amount (hereinafter defined) the holder thereof requests is to be paid in cash and what portion, if any, is to be paid in Shares. The Committee promptly shall cause to be paid to such holder the SAR exercise amount either in cash, in Shares, or any combination of cash and Shares as the Committee may determine. Such determination may be either in accordance with the request made by the holder of the SAR or in the sole and absolute discretion of the Committee. The SAR exercise amount is the excess of the Fair Market Value of one Share on the date of exercise over the per Share exercise price in respect of which the SAR was granted, multiplied by the number of Shares as to which the SAR is exercised. For purposes hereof, the Fair Market Value of the Shares shall be determined as provided in Section 6 herein. SECTION 10. RESTRICTED STOCK AWARDS. Awards of Shares subject to forfeiture and transfer restrictions may be granted by the Committee. Any restricted stock award shall be evidenced by an agreement in such form as the Committee shall from time to time approve, which agreement shall comply with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan: (a) Grant of Restricted Stock Awards. Each restricted stock award made under the Plan shall be for such number of Shares as shall be determined by the Committee and set forth in the agreement containing the terms of such restricted stock award. Such agreement shall set forth a period of time during which the grantee must 7 remain in the continuous employment of the Company or its Subsidiaries in order for the forfeiture and transfer restrictions to lapse. If the Committee so determines, the restrictions may lapse during such restricted period in installments with respect to specified portions of the Shares covered by the restricted stock award. The agreement may also, in the discretion of the Committee, set forth performance or other conditions that will subject the Shares to forfeiture and transfer restrictions. The Committee may, at its discretion, waive all or any part of the restrictions applicable to any or all outstanding restricted stock awards, provided that, in the case of restricted stock awards made to a person considered by the Company as an officer or director for purposes of Section 16 of the Exchange Act, the terms of such restricted stock agreement will provide that the Shares so awarded may not be disposed of for a period of at least six months from the date the award was made. (b) Delivery of Shares and Restrictions. At the time of a restricted stock award, a certificate representing the number of Shares awarded thereunder shall be registered in the name of the grantee. Such certificate shall be held by the Company or any custodian appointed by the Company for the account of the grantee subject to the terms and conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon as the Committee, in its discretion, may determine. The grantee shall have all rights of a stockholder with respect to the Shares, including the right to receive dividends and the right to vote such Shares, subject to the following restrictions: (i) the grantee shall not be entitled to delivery of the stock certificate until the expiration of the restricted period and the fulfillment of any other restrictive conditions set forth in the restricted stock agreement with respect to such Shares; (ii) none of the Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until after the fulfillment of any such other restrictive conditions; and (iii) except as otherwise determined by the Committee, all of the Shares shall be forfeited and all rights of the grantee to such Shares shall terminate, without further obligation on the part of the Company, unless the grantee remains in the continuous employment of the Company or its Subsidiaries for the entire restricted period in relation to which such Shares were granted and unless any other restrictive conditions relating to the restricted stock award are met. Any Shares, any other securities of the Company and any other property (except for cash dividends) distributed with respect to the Shares subject to restricted stock awards shall be subject to the same restrictions, terms and conditions as such restricted Shares. (c) Termination of Restrictions. At the end of the restricted period and provided that any other restrictive conditions of the restricted stock award are met, or at such earlier time as otherwise determined by the Committee, all restrictions set forth in the agreement relating to the restricted stock award or in the Plan shall lapse as to the restricted Shares subject thereto. Upon payment by the grantee to the Company of any withholding tax required to be paid, a stock certificate for the appropriate number of 8 Shares, free of the restrictions and the restricted stock legend, shall be delivered to the grantee or his or her beneficiary or estate, as the case may be. (d) 83(b) Election. Within 30 days after the grantee is granted a restricted stock Award, the Company, if the grantee so elects, will prepare and file, and the grantee will sign, an effective election with the Internal Revenue Service under Section 83(b) of the Code relative to the Shares granted to the grantee. SECTION 11. PERFORMANCE AWARDS. The Committee is further authorized to grant performance awards. Subject to the terms of this Plan and any applicable Award agreement, a performance award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, restricted stock), other securities, other Awards, or other property and (ii) shall confer on the holder thereof rights valued as determined by the Committee, in its discretion, and payable to, or exercisable by, the holder of the performance awards, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee, in its discretion, shall establish. Subject to the terms of this Plan and any applicable Award agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any performance award granted, and the amount of any payment or transfer to be made by the grantee and by the Company under any performance award shall be determined by the Committee. SECTION 12. INCOME TAX WITHHOLDING AND TAX BONUSES. (a) Withholding of Taxes. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state or local payroll, withholding, income or other taxes, which are the sole and absolute responsibility of an optionee or grantee under the Plan, are withheld or collected from such optionee or grantee prior to his or her receipt of Shares pursuant to the exercise of an Option or the satisfaction of the conditions of any other Award. In order to assist an optionee or grantee in paying all federal and state taxes to be withheld or collected upon exercise of an Option or Award which does not qualify as an Incentive Stock Option hereunder, the Committee, in its absolute discretion and subject to such additional terms and conditions as it may adopt, shall permit the optionee or grantee to satisfy such tax obligation by electing to (i) have the Company withhold a portion of the Shares otherwise to be delivered upon exercise of such Option or Award with a Fair Market Value equal to such taxes or (ii) deliver to the Company Common Stock other than the Shares issuable upon exercise of such Option or Award with a Fair Market Value equal to such taxes. This election must be made on or before the date that the amount of tax to be withheld is determined. (b) Tax Bonus. The Committee shall have the authority, at the time of grant of an Option or Award under the Plan or at any time thereafter, to approve tax bonuses 9 to designated optionees or grantees to be paid upon their exercise of Options or Awards granted hereunder (or upon grant of a restricted stock award and filing of an 83(b) election pursuant to Section 10(d) of the Plan). The amount of any such payments shall be determined by the Committee, but shall not exceed 100% of the excess of the Fair Market Value of the Shares received upon exercise of an Option or Award over the price paid therefor. The Committee shall have full authority in its absolute discretion to determine the amount of any such tax bonus and the terms and conditions affecting the vesting and payment thereof. SECTION 13. ADDITIONAL RESTRICTIONS. The Committee shall have full and complete authority to determine whether all or any part of the Shares acquired upon exercise of any of the Options or Awards granted under the Plan shall be subject to restrictions on the transferability thereof or any other restrictions affecting in any manner the optionee's or grantee's rights with respect thereto, but any such restriction shall be contained in the agreement relating to any such Option or Award. SECTION 14. TEN PERCENT STOCKHOLDER RULE. Notwithstanding any other provision in the Plan, if at the time an Option is otherwise to be granted pursuant to the Plan to an optionee who owns, directly or indirectly (within the meaning of Section 424(d) of the Code), Common Stock of the Company possessing more than 10% of the total combined voting power of all classes of stock of the Company or its Parent or Subsidiary, if any, then any Incentive Stock Option to be granted to such optionee pursuant to the Plan shall satisfy the requirements of Section 422(c)(5) of the Code, and the exercise price of such Option shall be not less than 110% of the Fair Market Value of the Common Stock, and such Option by its terms shall not be exercisable after the expiration of five years from the date such Option is granted. SECTION 15. NON-TRANSFERABILITY. No Option or Award granted under the Plan shall be transferable by an optionee or grantee, otherwise than by will or the laws of descent or distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. Except as otherwise provided in an Option or Award agreement, during the lifetime of an optionee or grantee, the Option or Award shall be exercisable only by such optionee or grantee. SECTION 16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION OR MERGER. (a) In the event that the number of outstanding shares of Common Stock is changed by a stock dividend, stock split, reverse stock split, combination, reclassification or similar change in the capital structure of the Company without consideration, the number of Shares available under this Plan and the number of Shares subject to outstanding Options and Awards and the exercise price per share of such 10 Options and Awards shall be proportionately adjusted, subject to any required action by the Board or stockholders of the Company and compliance with applicable securities laws; provided however, that no certificate or scrip representing fractional shares shall be issued upon exercise of any Option or Award and any resulting fractions of a share shall be ignored. Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. (b) In the event of a dissolution or liquidation of the Company, a merger in which the Company is not the surviving corporation, a transaction or series of related transactions in which 51% of the then outstanding voting stock is sold or otherwise transferred (including (i) a public announcement that any person has acquired or has the right to acquire beneficial ownership of 51% or more of the then outstanding shares of Common Stock (for this purpose, the terms "person" and "beneficial ownership" shall have the meanings provided in Section 13(d) of the Exchange Act or related rules promulgated by the Securities Exchange Commission) and (ii) the commencement of or public announcement of an intention to make a tender or exchange offer for 51% or more of the then outstanding shares of the Common Stock) or the sale of substantially all of the assets of the Company, any and all outstanding Options and Awards shall, notwithstanding any contrary terms of the written agreement governing any such Option or Award, accelerate and become exercisable in full at least ten days prior to (and shall expire on) the consummation of such dissolution, liquidation, merger or sale of stock or sale of assets on such conditions as the Board shall determine unless the successor corporation assumes the outstanding Options and Awards or substitutes substantially equivalent options and awards as determined by the Board. The acceleration of the outstanding Options and Awards shall be conditioned on the actual occurrence of such a dissolution, liquidation, merger or sale of stock or assets. SECTION 17. AMENDMENT OR DISCONTINUANCE OF PLAN. The Board of Directors may amend or discontinue the Plan at any time. Subject to the provisions of Section 16, no amendment of the Plan shall without stockholder approval: (i) increase the number of Shares authorized under the Plan as provided in Section 3 herein, (ii) decrease the minimum price provided in Section 6 herein, (iii) extend the maximum term under Section 7, or (iv) modify the eligibility requirements for participation in the Plan. In addition, to the extent necessary and desirable to comply with Rule 16b-3 (or any other applicable law or regulation), the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. The Committee, or the Company's Chief Executive Officer as authorized by the Committee, may grant, each year, Options and Awards for the number of Shares authorized by Section 3 herein without further amendment to the Plan increasing the number of Shares authorized for distribution. The Board shall not alter or impair any Option or Award theretofore granted under the Plan without the consent of the holder of the Option or Award. 11 SECTION 18. TIME OF GRANTING. Nothing contained in the Plan or in any resolution adopted or to be adopted by the Board or by the stockholders of the Company, and no action taken by the Committee, the Chief Executive Officer or the Board (other than the execution and delivery of an Option or Award agreement), shall constitute the granting of an Option or Award hereunder. SECTION 19. EFFECTIVE DATE AND TERMINATION OF PLAN. (a) The Plan shall be effective upon approval by the affirmative vote or written consent of the holders of a majority of the voting power of the outstanding shares of capital stock of the Company. (b) Unless the Plan shall have been discontinued as provided in Section 17 hereof, the Plan shall terminate on November 30, 2005. No Option or Award may be granted after such termination, but termination of the Plan shall not, without the consent of the optionee or grantee, alter or impair any rights or obligations under any Option or Award theretofore granted. EX-10.2 22 1995 NONEMPLYEE DIRECTOR STOCK OPTION PLAN 1 EXHIBIT 10.2 STOCKPOINT, INC. 1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN SECTION 1. PURPOSE OF THE PLAN. The purpose of this Stockpoint, Inc.., 1995 Nonemployee Director Stock Option Plan is to promote the interests of the Company by enhancing its ability to attract and retain the services of experienced and knowledgeable independent directors and by providing additional incentive for these directors to increase their interest in the Company's long-term success and progress. None of the options granted hereunder shall be "incentive stock options" within the meaning of Section 422 of the Code (as hereinafter defined). SECTION 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean a committee of two or more persons appointed by the Board of Directors of the Company. (d) "Common Stock" shall mean the Common Stock, $.01 par value, of the Company. (e) "Company" shall mean Stockpoint, Inc., a Delaware corporation. (f) "Continuous Status as a Director" shall mean the absence of any interruption or termination of service as a Director. (g) "Director" shall mean a member of the Board. (h) "Employee" shall mean any person, including officers and Directors, employed by the Company or any parent or Subsidiary of the Company. The payment of a Director's fee by the Company shall not be sufficient in and of itself to constitute "employment" by the Company. (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (j) "Fair Market Value" the Fair Market Value of a Share shall be determined by the Committee in its discretion; provided however, that where there is a public market for the Common Stock, the fair market value per Share -1- 2 shall be the closing price of the Common Stock in the over-the-counter market on the date of grant, as reported in The Wall Street Journal (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotation ("NASDAQ") System or, in the event the Common Stock is traded on the NASDAQ National Market System or listed on a stock exchange, the fair market value per Share shall be the closing price on such system or exchange on the date of grant of the Option, as reported in The Wall Street Journal. (k) "Option" shall mean a stock option granted pursuant to the Plan. (l) "Optioned Stock" shall mean the Common Stock subject to an Option. (m) "Optionee" shall mean an Outside Director who receives an Option. (n) "Outside Director" shall mean a Director who is not an Employee. (o) "Parent" shall mean a "parent corporation," whether now or hereafter existing, as defined in Section 425(e) of the Code. (p) "Plan" shall mean this 1995 Nonemployee Director Stock Option Plan. (q) "Shares" shall mean the shares of Common Stock subject to Options under the Plan in accordance with Section 3 below, as adjusted in accordance with Section 10 below. (r) "Subsidiary" shall mean a "subsidiary corporation," whether now or hereafter existing, as defined in Section 425(f) of the Code. SECTION 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 below, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 75,000 shares of Common Stock. The Shares may be authorized, but unissued, shares of Common Stock or shares of Common Stock which have been reacquired by the Company. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. If Shares which were acquired upon exercise of an Option are subsequently repurchased by the Company, such Shares shall not in any event be returned to the Plan and shall not become available for future grant under the Plan. SECTION 4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN. -2- 3 (a) Administrator. Except as otherwise required herein, the Plan shall be administered by the Committee. (b) Procedure for Grants. The provisions set forth in this Section 4(b) shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. All grants of Options hereunder shall be automatic and nondiscretionary and shall be made strictly in accordance with the following provisions: (i) No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number of Shares to be covered by Options granted to Outside Directors. (ii) Each Outside Director shall be automatically granted an Option (an "Initial Grant") to purchase 5,000 Shares upon the date on which such person first becomes a Director, whether through election by the stockholders of the Company or appointment by the Board of Directors to fill a vacancy. Options granted under this Section 4(b)(iii) shall become exercisable in three equal annual installments with the first one-third installment vesting on the first anniversary of the date of the Initial Grant and the two remaining one-third installments vesting on the second and third anniversary of the Initial Grant, respectively. (iii) Each Outside Director shall automatically receive, on the date of each Annual Meeting of Stockholders, beginning with the Annual Meeting of Stockholders held in 1996, an Option to purchase 5,000 Shares of the Company's Common Stock, such Option to become exercisable one year subsequent to the date of grant; provided however, that such Option shall only be granted to Outside Directors who have served since the date of the last Annual Meeting of Stockholders and will continue to serve after the date of grant of such Option. (iv) The terms of an Option granted hereunder shall be as follows: (A) The term of the Option shall be ten years. (B) The exercise price per Share shall be 100% of the Fair Market Value of a Share on the date of grant of the Option. (C) To the extent necessary to comply with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3"), no Option will be exercisable until a date more than six months subsequent to the date of the grant of that Option. -3- 4 (c) Powers of the Committee. Subject to the provisions and restrictions of the Plan, the Committee shall have the authority, in its discretion, to: (i) determine, upon review of relevant information and in accordance with the Plan, the Fair Market Value of the Common Stock; (ii) determine the exercise price per share of Options to be granted, which exercise price shall be determined in accordance with Section 7(a) of the Plan; (iii) interpret the Plan; (iv) prescribe, amend and rescind rules and regulations relating to the Plan; (v) authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted hereunder; and (vi) make all other determinations deemed necessary or advisable for the administration of the Plan. (d) Effect of Committee's Decision. All decisions, determinations and interpretations of the Committee shall be final and binding on all Optionees and any other holders of any Options granted under the Plan. SECTION 5. ELIGIBILITY. Options may be granted only to Outside Directors. All Options shall be automatically granted in accordance with the terms set forth in Section 4(b) hereof. The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate his or her directorship at any time. SECTION 6. TERM OF PLAN. The Plan shall become effective upon its approval by the stockholders of the Company as described in Section 16 of the Plan. The Plan shall continue in effect for a term of ten years unless sooner terminated under Section 12 of the Plan. SECTION 7. EXERCISE PRICE AND CONSIDERATION. (a) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be 100% of the Fair Market Value per Share on the date of grant of the Option. (b) Form of Consideration. Subject to compliance with applicable provisions of Section 16(b) of the Exchange Act or other applicable law, the consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Committee and may consist entirely of (i) cash, (ii) check, (iii) other shares of Common Stock which (X) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender, and (Y) have a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (iv) authorization for the Company to retain from the total number of Shares as to which the Option is exercised that number of Shares having a Fair Market Value on the date of -4- 5 exercise equal to the exercise price for the total number of Shares as to which the Option is exercised, (v) delivery (including by facsimile) to the Company or its designated agent of a properly executed irrevocable option exercise notice together with irrevocable instructions to a broker-dealer to sell a sufficient portion of the Shares and deliver the sale proceeds directly to the Company to pay for the exercise price, (vi) by delivering an irrevocable subscription agreement for the Shares which irrevocably obligates the option holder to take and pay for the Shares not more than twelve months after the date of delivery of the subscription agreement, (vii) any combination of the foregoing methods of payment or (viii) such other consideration and method of payment for the issuance of Shares as may be permitted under applicable laws. In making any determination as to the type of consideration to accept, the Committee shall consider whether acceptance of such consideration may reasonably be expected to benefit the Company. SECTION 8. EXERCISE OF OPTION. (a) Procedure for Exercise: Rights as a Stockholder. Any Option granted hereunder shall be exercisable at such times as are set forth in Section 4(b) hereof. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 7(c) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Status as a Director. If an Outside Director ceases to serve as a Director, such Outside Director may exercise his/her Option to the extent that he/she was entitled to exercise such Option at the date of such termination. To the extent that such Outside Director was not entitled to exercise an Option at the date of such termination, or if such Outside Director does not exercise such Option (which he/she was entitled to exercise) within the term of such Option, the Option shall terminate. -5- 6 (c) Disability of Optionee. Notwithstanding the provisions of Section 8(b) above, in the event an Optionee is unable to continue service as a Director with the Company as a result of such Optionee's total and permanent disability (as defined in Section 22(e)(3) of the Code), such Optionee may exercise his/her Option to the extent entitled to exercise such Option at the date of such termination. To the extent that such Optionee was not entitled to exercise the Option at the date of such termination, or if such Optionee does not exercise such Option (which he/she was entitled to exercise) within the term of such Option, the Option shall terminate. (d) Death of Optionee. Notwithstanding the provisions of Section 8(b) above, if an Optionee dies during the term of an Option: (i) if the Optionee was at the time of death serving as a Director of the Company and had been in Continuous Status as a Director since the date of grant of the Option, then the Option may be exercised by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that would have accrued had the Optionee continued living and remained in Continuous Status as a Director for six months after the date of death; or (ii) if the Optionee's death occurred within 30 days after the termination of the Optionee's Continuous Status as a Director, then the Option may be exercised by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination of Continuous Status as a Director. SECTION 9. NON-TRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. An Option may be exercised, during the lifetime of the Optionee, only by the Optionee. SECTION 10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION OR MERGER. (a) In the event that the number of outstanding shares of Common Stock is changed by a stock dividend, stock split, reverse stock split, combination, reclassification or similar change in the capital structure of the Company without consideration, the number of Shares available under this Plan and the number of Shares subject to outstanding Options and the exercise price per Share of such Options shall be proportionately adjusted, subject to any required action by the Board or stockholders of -6- 7 the Company and compliance with applicable securities laws; provided however, that no certificate or scrip representing fractional shares shall be issued upon exercise of any Option and any resulting fractions of a share shall be ignored. Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. (b) In the event of a dissolution or liquidation of the Company, a merger in which the Company is not the surviving corporation, a transaction or series of related transactions in which 51% of the then outstanding voting stock is sold or otherwise transferred (including (i) a public announcement that any person has acquired or has the right to acquire beneficial ownership of 51% or more of the then outstanding shares of Common Stock (for this purpose, the terms "person" and "beneficial ownership" shall have the meanings provided in Section 13(d) of the Exchange Act or related rules promulgated by the Securities Exchange Commission) and (ii) the commencement of or public announcement of an intention to make a tender or exchange offer for 51% or more of the then outstanding shares of the Common Stock) or the sale of substantially all of the assets of the Company, any and all outstanding Options shall, notwithstanding any contrary terms of the written agreement governing any such Option, accelerate and become exercisable in full at least ten days prior to (and shall expire on) the consummation of such dissolution, liquidation, merger or sale of stock or sale of assets on such conditions as the Board shall determine unless the successor corporation assumes the outstanding Options or substitutes substantially equivalent options as determined by the Board. The acceleration of the outstanding Options shall be conditioned on the actual occurrence of such a dissolution, liquidation, merger or sale of stock or assets. SECTION 11. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all purposes, be the date determined in accordance with Section 4(b) hereof. Notice of the determination shall be given to each Outside Director to whom an Option is so granted within a reasonable time after the date of such grant. SECTION 12. AMENDMENT AND TERMINATION OF THE PLAN. (a) Amendment and Termination. The Board may at any time amend, alter, suspend, or discontinue the Plan, but no amendment, alteration, suspension, or discontinuance shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 (or any other applicable law or regulation), the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan shall not affect Options already granted and such Options shall -7- 8 remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. SECTION 13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the requirements of any stock exchange upon which the Common Stock may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. SECTION 14. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of the Shares available for issuance pursuant to this Plan as shall be sufficient to satisfy the requirements of the Plan. SECTION 15. OPTION AGREEMENT. Options shall be evidenced by written option agreements in such form as the Board shall approve. SECTION 16. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the affirmative vote or written consent of the holders of a majority of the voting power of the outstanding shares of capital stock of the Company. -8- EX-10.3 23 EMPLOYMENT AGREEMENT BETWEEN REGISTRANT & STAIB 1 EXHIBIT 10.3 EMPLOYMENT AGREEMENT THIS AGREEMENT is entered into on December 20, 1999 (the "Effective Time"), by and between William E. Staib, an individual resident of the State of Iowa ("Executive"), and Stockpoint, Inc., a Delaware corporation ("Company"). WHEREAS, Executive has heretofore been employed as the Chief Executive Officer of the Company; and WHEREAS, the Company desires to continue to have the benefit of the Executive's services as a corporate officer of the Company; WHEREAS, certain guarantors of borrowings of the Company have required, as a condition to their guarantees, that the Company execute an employment agreement with Executive and WHEREAS, the proceeds from such borrowings are necessary for the Company's operations and will benefit the Company and the Executive. NOW, THEREFORE, in consideration of the premises, the respective undertakings of the Company and Executive set forth below, the Company and Executive agree as follows: 1. Employment. The Company hereby agrees to employ Executive, and Executive accepts such employment and agrees to perform services for the Company, upon the other terms and conditions set forth in this Agreement. 2. Term. The term of this agreement is one year and renews annually, unless either party provides written notification 90 days prior to the renewal. See section 8 below for Termination definitions and remedies. 3. Positions, Duties and Reporting. 3.01 Service with Company. During the term of this Agreement, Executive agrees to perform such reasonable employment duties consistent with the role of Chief Executive Officer as the Company shall assign to him/her from time to time. 3.02 Performance of Duties. Executive agrees to serve the Company faithfully and to the best of his/her ability and to devote his/her full time, attention, and efforts to the business and affairs of the Company during the term of this Agreement. Executive represents to the Company that he/she is under no contractual commitments inconsistent with his/her obligations set forth in this Agreement, and that during the term of this Agreement, he/she will not render or perform services for any other corporation, firm, entity or person which are inconsistent with the provisions of this Agreement. 3.03 Reporting. This position will report to the Board of Directors of the Company. 4. Compensation. 4.01 Base Salary. As base compensation for all services to be rendered by Executive under this Agreement during the first year of the term of this Agreement, the Company shall pay to Executive a base salary at a rate of $130,000 per year, which salary shall be paid on a twice-monthly basis in accordance with the Company's normal payroll procedures and policies. The salary payable to Executive during each subsequent year during the term of this Agreement shall be established by the Company and Executive, but in no event shall the salary for any subsequent year be less than the base salary in effect for the prior year. Upon the completion of an initial public offering of the Company's common stock or another strategic transaction that satisfies the Company's present obligations to the Northern Trust Company in full, the base salary payable to the Executive will be increased to at least $180,000 per year. 4.02 Participation in Benefit Plans. During the term of this Agreement, Executive shall be entitled to receive such medical and hospitalization insurance and other fringe benefits as are being provided 2 to the Company's other executive level employees from time to time to the extent that Executive's age, position or other factors qualify him/her for such fringe benefits. 4.03 Expenses. The Company will pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by him/her in the performance of his/her duties under this Agreement, subject to the presentment of appropriate vouchers in accordance with the Company's normal policies for expense verification. 4.04 Incentive for completion of an initial public offering. Upon the completion of an initial public offering of the Company's common stock, the Company will also pay Executive an IPO cash bonus of $60,000, which is due and payable, immediately upon the close. 4.05 Annual Incentive Compensation. The Company shall formulate and deliver to Executive by January 31, 2000 with respect to the remainder of fiscal 2000, and by January 1 with respect to each succeeding fiscal year during the term of this Agreement, and the Company and Executive shall use their best efforts to negotiate and agree to, an annual incentive compensation plan for Executive. 4.06 Vesting of Stock Options. On September 15, 1999, the Company issued to the Executive an additional option ("September 1999 Option") grant to purchase up to 200,000 shares of Company Common Stock at a price of $7.20 per share pursuant to the Company's 1995 Stock Incentive Plan (the "Plan"). Such option shall become exercisable with respect to 20% of the shares immediately upon execution of this Agreement and the balance shall vest monthly at a rate of 1/60 of the total September 1999 Option grant over the balance of the term. Such option shall expire 10 years from the date of the grant and shall contain such other provisions as are contained in the form of stock option agreement used by Company under the Plan. In the event that this Agreement is terminated as a result of the "Constructive Termination" (as defined in Section 8.01(2)) or without "Cause" (as defined in Section 8.01(1)) of the Executive, the September 1999 Option will vest with respect to 40% of the shares subject thereto immediately. In addition, the Company will permit the Executive to exercise all of his/her vested options for a period of 12 months, commencing from the date of termination. Vesting of all options granted to Executive will be accelerated with respect to 100% of the shares subject thereto in the event of a "Change in Control" of the Company. For such purposes, a "Change in Control" shall mean any of the following: (i) A sale of all or substantially all of the assets of the Company; (ii) The acquisition of more than 50% of the then outstanding Company Common Stock by any person or group of persons acting in concert; (iii) Any change that results in the Continuing Directors constituting less than a majority of the Board of Directors; (iv) A reorganization or, a merger of Company with another company after which the holders of common stock of the Company immediately prior to the merger or reorganization hold less than 50% of the voting power of the resulting corporations, or any other transaction in which the Company (other than as the parent corporation) is consolidated for federal income tax purposes or is eligible to be consolidated for federal income tax purposes with another corporation; or (v) In the event that the Company Common Stock is traded on an established securities market: a public announcement that any person has acquired beneficial ownership of more than 25% of the then outstanding Company Common Stock and for this purpose the terms "person" and "beneficial ownership" shall have the meanings provided in Section 13(d) of the Securities and Exchange Act of 1934 or related rules promulgated by the Securities and Exchange Commission or; the commencement of or public announcement of an intention to make a tender offer for more than 50% of the then outstanding Company Common Stock. 3 For purposes of this Section 4.06, "Continuing Directors" shall include only those directors of the Company on the date hereof and those directors, as of a date 30 days prior to an event that would otherwise be considered a "Change in Control," who were nominated by Continuing Directors and duly elected by shareholders at an annual meeting thereof or nominated and elected by directors who were "Continuing Directors." 5. Confidential Information. Except as permitted or directed by the Company's Board of Directors, during the term of this Agreement or at any time thereafter, Executive shall not divulge, furnish or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret knowledge or information of the Company which Executive has acquired or become acquainted with or will acquire or become acquainted with during the period of his/her employment by the Company, whether developed by himself/herself or by others, concerning any trade secrets, confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, any confidential or secret development or research work of the Company, or any other confidential information or secret aspects of the business of the Company. Executive expressly acknowledges that, in addition to the Company's proprietary software and technical know-how, the Company's customer lists and the form (including, without limitation, payment terms) of the Company's relationships with its customers is not publicly known and that the disclosure or use of such information for any purpose other than for the benefit of the Company could cause substantial damage the Company and would place the Company at a competitive disadvantage. Executive acknowledges that the above-described knowledge or information constitutes a unique and valuable asset of the Company and that any disclosure or other use of such knowledge or information other than the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. The foregoing obligations of confidentiality shall not apply to any knowledge or information which is now published, which subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement by Executive, or which was known to the Executive prior to the term of his/her employment with the Company. Executive agrees to notify any person or entity with which Executive is employed or for which Executive provides services of the requirements of this Section 5 and to notify the Company of the identity of any such person or entity with which Executive is employed during the One year after termination of this Agreement. 6. Employee Solicitation. During employment, and for a period of nine months thereafter, Executive shall not (i) directly or indirectly solicit any employee of the Company or any of Company's affiliates to leave the employ of any such entity or in any way interfere adversely with the relationship between any such employee and any such entity, (ii) directly or indirectly solicit any employee of the Company or any affiliates to work for, render services or provide advice to or supply confidential business information or trade secrets of any such entity to any third person, firm or corporation, or (iii) directly or indirectly solicit any existing customers and potential customers that have an unexpired written proposals under consideration. For purposes of the foregoing, solicitation shall not include solicitation of employees, vendors or customers (i) who first solicit employment or a relationship from Executive, or (ii) who are solicited (A) by advertising in periodicals of general circulation or by general circulation Internet advertising, or (B) by a search or consulting firm on behalf of Executive or Executive's affiliates, so long as Executive or such affiliates did not direct or encourage such firm to solicit such employee, vendor or customer of the Company. If any restriction set forth in this paragraph is held to be unreasonable, then Executive and the Company agree, and hereby submit, to the reduction and limitation of such prohibition to such area or period as shall be deemed reasonable. 7. Patent and Related Matter. 7.01 Disclosure and Assignment. Executive will promptly disclose in writing to the Company complete information concerning each and every invention, discovery, improvement, work of authorship, device, design, apparatus, practice, process, method or product whether patentable or not, made, developed, authored, perfected, devised, conceived or first reduced to practice by Executive, either solely or in collaboration with others, during the term of this Agreement, whether or not during regular working hours, relating to the Business of the Company (hereinafter referred to as "Developments"). Executive, to the extent that he/she has the legal right to do so, hereby acknowledges that any and all of said Developments are the property of the Company and hereby assigns and agrees to assign to the Company any and all of Executive's right, title and interest in and to any and all of such Developments. 4 7.02 Limitation on Section 7.01. The provisions of section 7.01 shall not apply to any Development meeting the following conditions: (a) such Development was developed entirely on Executive's own time; and (b) such Development was made without the use of any Company equipment, supplies, facility or trade secret information, excluding Executives laptop; and (c) such Development does not relate (I) directly to the Business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; and (d) such Development does not result from any work performed by Executive for the Company. 7.03 Assistance of Executive. Upon request and without further compensation therefor, but at no expense to Executive, and whether during the term of this Agreement or thereafter, Executive will do all lawful acts, including, but not limited to, the execution of papers and lawful oaths and the giving of testimony, that in the opinion of the Company, its successors and assigns, may be necessary or desirable in obtaining, sustaining, reissuing, extending and enforcing United States and foreign patents and/or registrations including, but not limited to, design patents, on any and all of such Developments (other than those described in 7.02), and for perfecting affirming and recording the Company's complete ownership and title thereto, and to cooperate otherwise in all proceedings and matters relating thereto. 7.04 Obligations, Restrictions and Limitations. Executive understands that the Company may enter into agreements or arrangements with agencies of the United States Government, and that the Company may be subject to laws and regulations which impose obligations, restrictions and limitations on it with respect to inventions and patents which may be acquired by it or which may be conceived, authored or developed by employees, consultants or other agents rendering services to it. Executive agrees that he/she shall be bound by all such obligations, restrictions and limitations applicable to any such invention or work of authorship conceived, authored or developed by him/her during the term of this Agreement and shall take any and all further action which may be required to discharge such obligations and to comply with such obligations and to comply with such restrictions and limitations. 8. Termination 8.01 Grounds for Termination. This Agreement may be terminated: (a) by the Company, if Executive dies, or (b) by the Executive, if Executive becomes disabled (as defined below), or (c) by the Company, if the Executive has engaged in conduct constituting cause for his/her termination and the Company notifies Executive in writing of such election, or (d) by the Company without cause upon notice to the Executive in writing of such election, provided that such termination may only occur by unanimous decision of the Board of Directors if there are then three or fewer Directors or by a majority decision of the Board of Directors if there are then four or more Directors. (e) by the Executive, if the Executive is constructively terminated, as defined in paragraph 8.01(2) herein and the Executive has notified the Company of his/her election to terminate for Constructive Termination, or (f) by the Executive upon notice to the Company in writing of such election. If this Agreement is terminated pursuant to subsection (a), (b), (c), (e) or (f) of this section 8.01, such termination shall be effective immediately. If this Agreement is terminated pursuant to subsection (d) 5 of this section 8.01, such termination shall be effective thirty (30) days after delivery of the notice of termination. (1) "Cause" Defined. "Cause" means: (a) The Employee has breached the provisions of Section 5, 6 or 7 of this Agreement in any material respect, (b) The Executive has engaged in willful and material misconduct, including willful and material failure to perform the Employee's duties as an officer or employee of the Company and has failed to cure such default within 30 days after receipt of written notice of default from the Company, (c) The Executive has committed fraud, misappropriation or embezzlement in connection with the Company's business, or (d) Executive has been convicted or has pleaded nolo contendere to criminal misconduct that is detrimental to the Company's reputation or that calls into question, in the judgement of the Board, Executive's integrity in fulfilling his/her duties under this Agreement. In the event the Company terminates Executive's employment for "cause" pursuant to subsection 8.01 and Executive objects in writing to the Board's determination that there was proper "cause" for such termination within (30) days after Executive is notified of such termination, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If Executive fails to object to any such determination of "cause" in writing within such thirty (30) day period, he/she shall be deemed to have waived his/her right to object to that determination. If such arbitration determines that there was not proper "cause" for termination, such termination shall be deemed to be a termination pursuant to subsection 8.01(d). (2) "Constructive Termination" defined. Constructive Termination means termination by Executive after written notice to the Company that Executive deems such termination by Executive as a result of Constructive Termination, and only after: (a) A material breach by the Company of a material obligation of the Company under this Agreement after the Executive has given the Company written notice of the breach and the Company has not remedied the breach within 30 days; (b) A failure of the Company to pay when due to the Executive any annual base salary, annual bonus or other earned bonus or awards referred to in this Agreement; (c) The relocation of the Executive's principal place of employment to a location not within a 30 mile radius of such place of employment on the Effective Date; (d) A material reduction by the Company of the Executive's duties or responsibilities; (e) The failure of the Company to obtain an agreement reasonably satisfactory to the Executive from any successor to assume and agree to perform this Agreement , or, if the business for which the Executive's services are principally performed is sold or transferred, the failure of the Company to obtain such an agreement from the purchaser or transferee of such business; or (f) The Company becomes insolvent or bankrupt where executive can no longer perform his/her duties as outlined above. 6 In the event the Executive terminates Executive's employment for "Constructive Termination" pursuant to subsection 8.01 and the Company objects in writing to the Executive's determination that there was Constructive Termination within (30) days after Executive has notified the Company of the same, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If the Company fails to object to any such determination of "Constructive Termination" in writing within such thirty (30) day period, it shall be deemed to have waived its right to object to that determination. If such arbitration determines that there was not proper "Constructive Termination", such termination shall be deemed to be a termination pursuant to subsection 8.01(c). 8.02 "Disability" Defined. For purposes of this Agreement, the term "disabled" means any mental or physical condition which renders Executive unable to perform the essential functions of his/her positions, with or without reasonable accommodation, for a period of more than ninety (90) days during any consecutive one hundred twenty (120) day period. 8.03 Surrender of Records and Property. Upon termination of his/her employment with the Company, Executive shall deliver promptly to the Company all records, manual, book, blank forms, document, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof, which are the property of the Company or which relate in any way to the business, products, practices or techniques of the Company, and all other property, trade secrets and confidential information of the Company, including, but not limited to, all documents which in whole or case are in his/her possession or under his/her control. 8.04 Wage and Benefit Continuation. If Executive's employment by the Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the Company shall continue to pay to Executive his/her base salary and shall continue to provide health insurance benefits for Executive for a period 9 months after termination. In the event of a "Change in Control" as defined in Section 4.07, if Executive's employment is terminated by "Constructive Termination" as defined in Section 8.01(2)or without "Cause" as defined in as defined in Section 8.01(1) within 12 months after the effective date of a "Change in Control," the severance compensation package defined in this Section will be doubled to 18 months. Notwithstanding anything else in this Section 8.04, Executive shall not be entitled under this Section 8.04 or any other provision of this Agreement to receive any cash compensation pursuant to this Agreement which constitutes an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, or any successor provision or regulations promulgated. If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or 8.01 (f), Executive's right to base salary and benefits shall immediately terminate except as may otherwise be required by applicable law. If Executive's employment is terminated by the Company pursuant to subsection 8.01(a), 8.01(b), 8.01(d) or 8.01(e), Executive shall also be entitled to receive any bonus payment that as of the time of termination would have been payable to him/her pursuant to any incentive plan then in effect. 9. Indemnification and Directors & Officers Insurance 9.01 Indemnification. The Company will provide Executive indemnification, exculpation and expense advancement, to the fullest extent of the law, including, without limitation, entering into an indemnification agreement with Executive in at least as beneficial a form to Executive as the Company has entered into with any other officer or director of the Company. 9.02 Directors and Officers Insurance. The Company will provide, at its expense, Directors and Officers (D&O) insurance in an amount deemed appropriate by its Board of Directors and Officers. If the Company shall show any employee as a named insured under such policy, the Executive shall be a named insured under such policy. 10. Settlement of Disputes. 10.01 Arbitration. Except as provided in section 10.02 any claims or disputes of any nature between the Company and Executive arising from or related to the performance, breach, termination, 7 expiration, application, or meaning of this Agreement or any related matter relating to Executive's employment and the termination of that employment by the Company shall be resolved exclusively by arbitration in Minneapolis, MN, in accordance with the then applicable rules of the American Arbitration Association. Any such arbitration shall be conducted by an arbitrator with said Rules, who has at least ten (10) years experience as an attorney in executive compensation and employment law. The fees of the arbitrator (s) and other cost, including attorney fees, incurred by Executive and the Company in connection with such arbitration shall be paid by the party who is unsuccessful in such arbitration, as determined by the arbitrator. The decision if the arbitrator(s) shall be final and binding upon both parties. Judgement of the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. In the event of submission of any dispute to arbitration, each party shall, not later than thirty (30) days prior to the date set forth hearing, provide to the other party and to the arbitrator(s) a copy of all exhibits upon which the party intends to rely at the hearing and a list of all persons each party intends to call at the hearing. 10.02 Resolution of Certain Claims- Injunctive Relief. Section 10.01 shall have no application to claims by the Company asserting a violation of section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise, the terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the Company in a lawsuit subject to the terms of section 10.03. Executive agrees that, in addition to, but not to the exclusion of any other available remedy, the Company shall have the right to enforce the provisions of sections 5, 6, 7 and 8.03 by applying for and obtaining temporary and permanent restraining orders injunctions from a court of competent jurisdiction without the necessity of filing a bond therefor and without the necessity of proving actual damages, and the Company shall be entitled to recover from the Employee its reasonable attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and 8.03. 10.03 Venue. Any action at law, suit in equity, or judicial proceeding arising directly or indirectly, or otherwise in connection with, out of, related to or from this Agreement or any provisions hereof shall be litigated only in the courts of the State of Iowa. Executive waives any right the Executive may have to transfer or change the venue of any litigation brought against Executive by the Company. 10.04 Severability. To the extent any provisions of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provisions and if this Agreement shall be unaffected and shall continue in full force and effect. In furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provisions of this Agreement be in excess of that which is valid and enforceable under applicable law, then such provisions shall be construed to cover only that duration, extent or activities which may validly and enforceably be covered. Executive acknowledges the uncertainty of the law in respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. 11 Miscellaneous. 11.01 Governing Law. This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of Iowa. 11.02 Prior Agreements. Except as set forth in Section 1, this Agreement contains the entire agreement of the parties relating to the employment of Executive by the Company and the ancillary matters discussed herein and supersedes all prior agreements and undertakings with respect to such matters, and the parties hereto made no arrangements, representations or warranties relating to such employment or ancillary matters which are not set forth herein. 11.03 Withholding Taxes. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes shall be required pursuant to any law governmental regulation, or ruling or any other amount owed to the Company. 11.04 Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the both Executive and Company. 11.05 No Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to specific 8 term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 11.06 Assignment. This Agreement shall not be assignable, in whole or in part, by either party without the written consent of the other party, except that the Company may, without the consent of the Executive, assign its rights and obligations under this Agreement to any corporation, firm or other business entity with or into which the Company may merge or consolidate, or to which the Company may sell or transfer all or substantially all of its assets, or of which 50% or more of the equity investment and of the voting control is owned, directly or indirectly, by, or is under common ownership with, the Company; provided, however, that no such assignment will relieve Company of any of its obligations hereunder. After any such assignee shall thereafter be deemed to be the Company for the purposes of all provisions of this Agreement including section 9. . 11.07 Counterparts. This Agreement may be simultaneously executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but the same instrument. 11.08 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have given when personally delivered or three days after being mailed, if mailed, by first class mail, return receipt requested, or when receipt is acknowledged, if sent by facsimile, telecopy or other electronic transmission device. Notices, demands and communications to Company and the Executive will, unless another address is specified in writing , be sent to the address indicated below: Notices to Company: Notice to Executive: ------------------- -------------------- Stockpoint, Inc. William Staib 2600 Crosspark Road 1916 Brown Deer Road Coralville, Iowa 52241 Coralville, IA 52241 Attn: President 11.09 Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. 11.10 Effect of Termination. It is expressly understood that neither the Company nor the Executive shall have any continuing obligation under this agreement upon termination hereof, except in respect of the matters referenced in Sections 5, 6, 7 and 8.03. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of date set forth herein. Stockpoint, Inc. By: /s/ Scott Porter --------------------- Its CFO --------------------- EXECUTIVE /s/ William E. Staib ------------------------ William E. Staib EX-10.4 24 EMPLOYMENT AGREEMENT BETWEEN REGISTRANT & YAMAUCHI 1 EXHIBIT 10.4 EMPLOYMENT AGREEMENT THIS AGREEMENT is entered into on December 20, 1999 (the "Effective Time"), by and between Timothy S. Yamauchi, an individual resident of the State of California ("Executive"), and Stockpoint, Inc., a Delaware corporation ("Company"). WHEREAS, Executive has heretofore been employed as the Chief Operating Officer of the Company; and WHEREAS, the Company desires to continue to have the benefit of the Executives services as a corporate officer of the Company; WHEREAS, certain guarantors of borrowings of the Company have required, as a condition to their guarantees, that the Company execute an employment agreement with Executive and WHEREAS, the proceeds from such borrowings are necessary for the Company's operations and will benefit the Company and the Executive. NOW, THEREFORE, in consideration of the premises, the respective undertakings of the Company and Executive set forth below, the Company and Executive agree as follows: 1. Employment. The Company hereby agrees to employ Executive, and Executive accepts such employment and agrees to perform services for the Company, upon the other terms and conditions set forth in this Agreement. 2. Term. The term of this agreement is one year and renews annually, unless either party provides written notification 90 days prior to the renewal. See section 8 below for Termination definitions and remedies. 3. Positions, Duties and Reporting. 3.01 Service with Company. During the term of this Agreement, Executive agrees to perform such reasonable employment duties consistent with the role of Chief Operating Officer, as the Company shall assign to him from time to time. These duties shall include but not limited to, management and oversight of the following functions/departments: Sales, Marketing, Infrastructure, Quality Assurance, Client Services, CFS Development and New Product Development. 3.02 Performance of Duties. Executive agrees to serve the Company faithfully and to the best of his ability and to devote his full time, attention, and efforts to the business and affairs of the Company during the term of this Agreement. Executive represents to the Company that he is under no contractual commitments inconsistent with his obligations set forth in this Agreement, and that during the term of this Agreement, he will not render or perform services for any other corporation, firm, entity or person which are inconsistent with the provisions of this Agreement. 3.03 Reporting. This position will report to the Chief Executive Officer of the Company. 4. Compensation. 4.01 Base Salary. As base compensation for all services to be rendered by Executive under this Agreement during the first year of the term of this Agreement, the Company shall pay to Executive a base salary at a rate of $150,000 per year, which salary shall be paid on a twice-monthly basis in accordance with the Company's normal payroll procedures and policies. The salary payable to Executive during each subsequent year during the term of this Agreement shall be established by the Company and Executive, but in no event shall the salary for any subsequent year be less than the base salary in effect for the prior year. 4.02 Participation in Benefit Plans. During the term of this Agreement, Executive shall be entitled to receive such medical and hospitalization insurance and other fringe benefits as are being provided 2 to the Company's other executive level employees from time to time to the extent that Executive's age, position or other factors qualify him/her for such fringe benefits. 4.03 Expenses. The Company will pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by him in the performance of his duties under this Agreement, subject to the presentment of appropriate vouchers in accordance with the Company's normal policies for expense verification. 4.04 Incentive for 1st Half of 1999. The Company agrees to pay Executive, an incentive bonus for the first half of 1999 performance of $17,800 upon the signing of this document. In consideration for performance in the second half of 1999, the Company has granted an additional stock options as described in Section 4.07. 4.05 Incentive for completion of an initial public offering. Upon the completion of an initial public offering of the Company's common stock, the Company will also pay Executive an IPO cash bonus of $45,000, which is due and payable, immediately upon the close. 4.06 Annual Incentive Compensation. The Company shall formulate and deliver to Executive by January 31, 2000 with respect to the remainder of fiscal 2000, and by January 1 with respect to each succeeding fiscal year during the term of this Agreement, and the Company and Executive shall use their best efforts to negotiate and agree to, an annual incentive compensation plan for Executive. 4.07 Vesting of Stock Options. On September 15, 1999, the Company issued to the Executive an additional option ("September 1999 Option") grant to purchase up to 60,000 shares of Company Common Stock at a price of $7.20 per share pursuant to the Company's 1995 Stock Incentive Plan (the "Plan"). Such option shall become exercisable with respect to 20% of the shares immediately upon execution of this Agreement and the balance shall vest monthly at a rate of 1/60 of the total September 1999 Option grant over the balance of the term. Such option shall expire 10 years from the date of the grant and shall contain such other provisions as are contained in the form of stock option agreement used by Company under the Plan. In the event that this Agreement is terminated as a result of the "Constructive Termination" (as defined in Section 8.01(2)) or without "Cause" (as defined in Section 8.01(1)) of the Executive, the September 1999 Option will vest with respect to 40% of the shares subject thereto immediately. In addition, the Company will permit the Executive to exercise all of his/her vested options for a period of 12 months, commencing from the date of termination. Vesting of all options granted to Executive will be accelerated with respect to 100% of the shares subject thereto in the event of a "Change in Control" of the Company. For such purposes, a "Change in Control" shall mean any of the following: (i) A sale of all or substantially all of the assets of the Company; (ii) The acquisition of more than 50% of the then outstanding Company Common Stock by any person or group of persons acting in concert; (iii) Any change that results in the Continuing Directors constituting less than a majority of the Board of Directors; (iv) A reorganization or, a merger of Company with another company after which the holders of common stock of the Company immediately prior to the merger or reorganization hold less than 50% of the voting power of the resulting corporations, or any other transaction in which the Company (other than as the parent corporation) is consolidated for federal income tax purposes or is eligible to be consolidated for federal income tax purposes with another corporation; or 3 (v) In the event that the Company Common Stock is traded on an established securities market: a public announcement that any person has acquired beneficial ownership of more than 25% of the then outstanding Company Common Stock and for this purpose the terms "person" and "beneficial ownership" shall have the meanings provided in Section 13(d) of the Securities and Exchange Act of 1934 or related rules promulgated by the Securities and Exchange Commission or; the commencement of or public announcement of an intention to make a tender offer for more than 50% of the then outstanding Company Common Stock. For purposes of this Section 4.07, "Continuing Directors" shall include only those directors of the Company on the date hereof and those directors, as of a date 30 days prior to an event that would otherwise be considered a "Change in Control," who were nominated by Continuing Directors and duly elected by shareholders at an annual meeting thereof or nominated and elected by directors who were "Continuing Directors." 5. Confidential Information. Except as permitted or directed by the Company's Board of Directors, during the term of this Agreement or at any time thereafter, Executive shall not divulge, furnish or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret knowledge or information of the Company which Executive has acquired or become acquainted with or will acquire or become acquainted with during the period of his employment by the Company, whether developed by himself or by others, concerning any trade secrets, confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, any confidential or secret development or research work of the Company, or any other confidential information or secret aspects of the business of the Company. Executive expressly acknowledges that, in addition to the Company's proprietary software and technical know-how, the Company's customer lists and the form (including, without limitation, payment terms) of the Company's relationships with its customers is not publicly known and that the disclosure or use of such information for any purpose other than for the benefit of the Company could cause substantial damage the Company and would place the Company at a competitive disadvantage. Executive acknowledges that the above-described knowledge or information constitutes a unique and valuable asset of the Company and that any disclosure or other use of such knowledge or information other than the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. The foregoing obligations of confidentiality shall not apply to any knowledge or information which is now published, which subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement by Executive, or which was known to the Executive prior to the term of his employment with the Company. Executive agrees to notify any person or entity with which Executive is employed or for which Executive provides services of the requirements of this Section 5 and to notify the Company of the identity of any such person or entity with which Executive is employed during the One year after termination of this Agreement. 6. Employee Solicitation. During employment, and for a period of nine months thereafter, Executive shall not (i) directly or indirectly solicit any employee of the Company or any of Company's affiliates to leave the employ of any such entity or in any way interfere adversely with the relationship between any such employee and any such entity, (ii) directly or indirectly solicit any employee of the Company or any affiliates to work for, render services or provide advice to or supply confidential business information or trade secrets of any such entity to any third person, firm or corporation, or (iii) directly or indirectly solicit any existing customers and potential customers that have an unexpired written proposals under consideration. For purposes of the foregoing, solicitation shall not include solicitation of employees, vendors or customers (i) who first solicit employment or a relationship from Executive, or (ii) who are solicited (A) by advertising in periodicals of general circulation or by general circulation Internet advertising, or (B) by a search or consulting firm on behalf of Executive or Executive's affiliates, so long as Executive or such affiliates did not direct or encourage such firm to solicit such employee, vendor or customer of the Company. If any restriction set forth in this paragraph is held to be unreasonable, then Executive and the Company agree, and hereby submit, to the reduction and limitation of such prohibition to such area or period as shall be deemed reasonable. 7. Patent and Related Matter. 7.01 Disclosure and Assignment. Executive will promptly disclose in writing to the Company complete information concerning each and every invention, discovery, improvement, work of authorship, device, design, apparatus, practice, process, method or product whether patentable or not, made, 4 developed, authored, perfected, devised, conceived or first reduced to practice by Executive, either solely or in collaboration with others, during the term of this Agreement, whether or not during regular working hours, relating to the Business of the Company (hereinafter referred to as "Developments"). Executive, to the extent that he has the legal right to do so, hereby acknowledges that any and all of said Developments are the property of the Company and hereby assigns and agrees to assign to the Company any and all of Executive's right, title and interest in and to any and all of such Developments. 7.02 Limitation on Section 7.01. The provisions of section 7.01 shall not apply to any Development meeting the following conditions: (a) such Development was developed entirely on Executive's own time; and (b) such Development was made without the use of any Company equipment, supplies, facility or trade secret information, excluding Executives laptop; and (c) such Development does not relate (I) directly to the Business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; and (d) such Development does not result from any work performed by Executive for the Company. 7.03 Assistance of Executive. Upon request and without further compensation therefor, but at no expense to Executive, and whether during the term of this Agreement or thereafter, Executive will do all lawful acts, including, but not limited to, the execution of papers and lawful oaths and the giving of testimony, that in the opinion of the Company, its successors and assigns, may be necessary or desirable in obtaining, sustaining, reissuing, extending and enforcing United States and foreign patents and/or registrations including, but not limited to, design patents, on any and all of such Developments (other than those described in 7.02), and for perfecting affirming and recording the Company's complete ownership and title thereto, and to cooperate otherwise in all proceedings and matters relating thereto. 7.04 Obligations, Restrictions and Limitations. Executive understands that the Company may enter into agreements or arrangements with agencies of the United States Government, and that the Company may be subject to laws and regulations which impose obligations, restrictions and limitations on it with respect to inventions and patents which may be acquired by it or which may be conceived, authored or developed by employees, consultants or other agents rendering services to it. Executive agrees that he shall be bound by all such obligations, restrictions and limitations applicable to any such invention or work of authorship conceived, authored or developed by him during the term of this Agreement and shall take any and all further action which may be required to discharge such obligations and to comply with such obligations and to comply with such restrictions and limitations. 8. Termination 8.01 Grounds for Termination. This Agreement may be terminated: (a) by the Company, if Executive dies, or (b) by the Executive, if Executive becomes disabled (as defined below), or (c) by the Company, if the Executive has engaged in conduct constituting cause for his termination and the Company notifies Executive in writing of such election, or (d) by the Company without cause upon notice to the Executive in writing of such election, provided that such termination may only occur by unanimous decision of the Board of Directors if there are then three or fewer Directors or by a majority decision of the Board of Directors if there are then four or more Directors. 5 (e) by the Executive, if the Executive is constructively terminated, as defined in paragraph 8.01(2) herein and the Executive has notified the Company of his election to terminate for Constructive Termination, or (f) by the Executive upon notice to the Company in writing of such election. If this Agreement is terminated pursuant to subsection (a), (b), (c), (e) or (f) of this section 8.01, such termination shall be effective immediately. If this Agreement is terminated pursuant to subsection (d) of this section 8.01, such termination shall be effective thirty (30) days after delivery of the notice of termination. (1) "Cause" Defined. "Cause" means: (a) The Employee has breached the provisions of Section 5, 6 or 7 of this Agreement in any material respect, (b) The Executive has engaged in willful and material misconduct, including willful and material failure to perform the Employee's duties as an officer or employee of the Company and has failed to cure such default within 30 days after receipt of written notice of default from the Company, (c) The Executive has committed fraud, misappropriation or embezzlement in connection with the Company's business, or (d) Executive has been convicted or has pleaded nolo contendere to criminal misconduct that is detrimental to the Company's reputation or that calls into question, in the judgement of the Board, Executive's integrity in fulfilling his duties under this Agreement. In the event the Company terminates Executive's employment for "cause" pursuant to subsection 8.01 and Executive objects in writing to the Board's determination that there was proper "cause" for such termination within (30) days after Executive is notified of such termination, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If Executive fails to object to any such determination of "cause" in writing within such thirty (30) day period, he shall be deemed to have waived his right to object to that determination. If such arbitration determines that there was not proper "cause" for termination, such termination shall be deemed to be a termination pursuant to subsection 8.01(d). (2) "Constructive Termination" defined. Constructive Termination means termination by Executive after written notice to the Company that Executive deems such termination by Executive as a result of Constructive Termination, and only after: (a) A material breach by the Company of a material obligation of the Company under this Agreement after the Executive has given the Company written notice of the breach and the Company has not remedied the breach within 30 days; (b) A failure of the Company to pay when due to the Executive any annual base salary, annual bonus or other earned bonus or awards referred to in this Agreement; (c) The relocation of the Executive's principal place of employment to a location not within a 30 mile radius of such place of employment on the Effective Date; (d) A material reduction by the Company of the Executive's duties or responsibilities; 6 (e) The failure of the Company to obtain an agreement reasonably satisfactory to the Executive from any successor to assume and agree to perform this Agreement , or, if the business for which the Executive's services are principally performed is sold or transferred, the failure of the Company to obtain such an agreement from the purchaser or transferee of such business; or (f) The Company becomes insolvent or bankrupt where executive can no longer perform his duties as outlined above. In the event the Executive terminates Executive's employment for "Constructive Termination" pursuant to subsection 8.01 and the Company objects in writing to the Executive's determination that there was Constructive Termination within (30) days after Executive has notified the Company of the same, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If the Company fails to object to any such determination of "Constructive Termination" in writing within such thirty (30) day period, it shall be deemed to have waived its right to object to that determination. If such arbitration determines that there was not proper "Constructive Termination", such termination shall be deemed to be a termination pursuant to subsection 8.01(c). 8.02 "Disability" Defined. For purposes of this Agreement, the term "disabled" means any mental or physical condition which renders Executive unable to perform the essential functions of his positions, with or without reasonable accommodation, for a period of more than ninety (90) days during any consecutive one hundred twenty (120) day period. 8.03 Surrender of Records and Property. Upon termination of his employment with the Company, Executive shall deliver promptly to the Company all records, manual, book, blank forms, document, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof, which are the property of the Company or which relate in any way to the business, products, practices or techniques of the Company, and all other property, trade secrets and confidential information of the Company, including, but not limited to, all documents which in whole or case are in his possession or under his control. 8.04 Wage and Benefit Continuation. If Executive's employment by the Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the Company shall continue to pay to Executive his base salary and shall continue to provide health insurance benefits for Executive for a period 9 months after termination. In the event of a "Change in Control" as defined in Section 4.07, if Executive's employment is terminated by "Constructive Termination" as defined in Section 8.01(2) or without "Cause" as defined in as defined in Section 8.01(1) within 12 months after the effective date of a "Change in Control," the severance compensation package defined in this Section will be doubled to 18 months. Notwithstanding anything else in this Section 8.04, Executive shall not be entitled under this Section 8.04 or any other provision of this Agreement to receive any cash compensation pursuant to this Agreement which constitutes an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, or any successor provision or regulations promulgated. If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or 8.01 (f), Executive's right to base salary and benefits shall immediately terminate except as may otherwise be required by applicable law. If Executive's employment is terminated by the Company pursuant to subsection 8.01(a), 8.01(b), 8.01(d) or 8.01(e), Executive shall also be entitled to receive any pro rata bonus payment that as of the time of termination would have been payable to him/her pursuant to any incentive plan then in effect. 9. Indemnification and Directors & Officers Insurance 9.01 Indemnification. The Company will provide Executive indemnification, exculpation and expense advancement, to the fullest extent of the law, including, without limitation, entering into an indemnification agreement with Executive in at least as beneficial a form to Executive as the Company has entered into with any other officer or director of the Company. 7 9.02 Directors and Officers Insurance. The Company will provide, at its expense, Directors and Officers (D&O) insurance in an amount deemed appropriate by its Board of Directors and Officers. If the Company shall show any employee as a named insured under such policy, then the Executive shall be a named insured under such policy. 10. Settlement of Disputes. 10.01 Arbitration. Except as provided in section 10.02 any claims or disputes of any nature between the Company and Executive arising from or related to the performance, breach, termination, expiration, application, or meaning of this Agreement or any related matter relating to Executive's employment and the termination of that employment by the Company shall be resolved exclusively by arbitration in Denver, CO, in accordance with the then applicable rules of the American Arbitration Association. Any such arbitration shall be conducted by an arbitrator with said Rules, who has at least ten (10) years experience as an attorney in executive compensation and employment law. The fees of the arbitrator (s) and other cost, including attorney fees, incurred by Executive and the Company in connection with such arbitration shall be paid by the party who is unsuccessful in such arbitration, as determined by the arbitrator. The decision if the arbitrator(s) shall be final and binding upon both parties. Judgement of the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. In the event of submission of any dispute to arbitration, each party shall, not later than thirty (30) days prior to the date set forth hearing, provide to the other party and to the arbitrator(s) a copy of all exhibits upon which the party intends to rely at the hearing and a list of all persons each party intends to call at the hearing. 10.02 Resolution of Certain Claims- Injunctive Relief. Section 10.01 shall have no application to claims by the Company asserting a violation of section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise, the terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the Company in a lawsuit subject to the terms of section 10.03. Executive agrees that, in addition to, but not to the exclusion of any other available remedy, the Company shall have the right to enforce the provisions of sections 5, 6, 7 and 8.03 by applying for and obtaining temporary and permanent restraining orders injunctions from a court of competent jurisdiction without the necessity of filing a bond therefor and without the necessity of proving actual damages, and the Company shall be entitled to recover from the Employee its reasonable attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and 8.03. 10.03 Venue. Any action at law, suit in equity, or judicial proceeding arising directly or indirectly, or otherwise in connection with, out of, related to or from this Agreement or any provisions hereof shall be litigated only in the courts of the State of California. Executive waives any right the Executive may have to transfer or change the venue of any litigation brought against Executive by the Company. 10.04 Severability. To the extent any provisions of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provisions and if this Agreement shall be unaffected and shall continue in full force and effect. In furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provisions of this Agreement be in excess of that which is valid and enforceable under applicable law, then such provisions shall be construed to cover only that duration, extent or activities which may validly and enforceably be covered. Executive acknowledges the uncertainty of the law in respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. 11 Miscellaneous. 11.01 Governing Law. This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of California. 11.02 Prior Agreements. Except as set forth in Section 1, this Agreement contains the entire agreement of the parties relating to the employment of Executive by the Company and the ancillary matters discussed herein and supersedes all prior agreements and undertakings with respect to such matters, and the parties hereto made no arrangements, representations or warranties relating to such employment or ancillary matters which are not set forth herein. 8 11.03 Withholding Taxes. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes shall be required pursuant to any law governmental regulation, or ruling or any other amount owed to the Company. 11.04 Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the both Executive and Company. 11.05 No Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 11.06 Assignment. This Agreement shall not be assignable, in whole or in part, by either party without the written consent of the other party, except that the Company may, without the consent of the Executive, assign its rights and obligations under this Agreement to any corporation, firm or other business entity with or into which the Company may merge or consolidate, or to which the Company may sell or transfer all or substantially all of its assets, or of which 50% or more of the equity investment and of the voting control is owned, directly or indirectly, by, or is under common ownership with, the Company; provided, however, that no such assignment will relieve Company of any of its obligations hereunder. After any such assignee shall thereafter be deemed to be the Company for the purposes of all provisions of this Agreement including section 9. 11.07 Legal Fees. The company agrees to provide Executive a legal fee allowance of $3,000 for the preparation of this employment agreement. 11.08 Counterparts. This Agreement may be simultaneously executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but the same instrument. 11.09 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have given when personally delivered or three days after being mailed, if mailed, by first class mail, return receipt requested, or when receipt is acknowledged, if sent by facsimile, telecopy or other electronic transmission device. Notices, demands and communications to Company and the Executive will, unless another address is specified in writing , be sent to the address indicated below: Notices to Company: Notice to Executive: ------------------- -------------------- Stockpoint, Inc. 2600 Crosspark Road ---------------- Coralville, Iowa 52241 ---------------- Attn: President ---------------- 11.10 Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. 11.11 Effect of Termination. It is expressly understood that neither the Company nor the Executive shall have any continuing obligation under this agreement upon termination hereof, except in respect of the matters referenced in Sections 5, 6, 7 and 8.03. 9 IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of date set forth herein. Stockpoint, Inc. By: /s/ William E. Staib ----------------------- Its CEO ----------------------- EXECUTIVE /s/ Timothy S. Yamauchi -------------------------- Timothy S. Yamauchi EX-10.5 25 EMPLOYMENT AGREEMENT BETWEEN REGISTRANT & LUAN COX 1 EXHIBIT 10.5 EMPLOYMENT AGREEMENT THIS AGREEMENT is entered into on December 20, 1999 (the "Effective Time"), by and between Luan Cox, an individual resident of the State of California ("Executive"), and Stockpoint, Inc., a Delaware corporation ("Company"). WHEREAS, Executive has heretofore been employed as the Executive Vice President of Sales of the Company; and WHEREAS, the Company desires to continue to have the benefit of the Executives services as a corporate officer of the Company; WHEREAS, certain guarantors of borrowings of the Company have required, as a condition to their guarantees, that the Company execute an employment agreement with Executive and WHEREAS, the proceeds from such borrowings are necessary for the Company's operations and will benefit the Company and the Executive. NOW, THEREFORE, in consideration of the premises, the respective undertakings of the Company and Executive set forth below, the Company and Executive agree as follows: 1. Employment. The Company hereby agrees to employ Executive, and Executive accepts such employment and agrees to perform services for the Company, upon the other terms and conditions set forth in this Agreement. 2. Term. The term of this agreement is one year and renews annually, unless either party provides written notification 90 days prior to the renewal. See section 8 below for Termination definitions and remedies. 3. Positions, Duties and Reporting. 3.01 Service with Company. During the term of this Agreement, Executive agrees to perform such reasonable employment duties consistent with the role of Executive Vice President of Sales, as the Company shall assign to him/her from time to time. These duties shall include: overseeing and directing domestic and global expansion of the sales efforts; developing sales systems and processes; and implementing sales strategies for the Company. 3.02 Performance of Duties. Executive agrees to serve the Company faithfully and to the best of his/her ability and to devote his/her full time, attention, and efforts to the business and affairs of the Company during the term of this Agreement. Executive represents to the Company that he/she is under no contractual commitments inconsistent with his/her obligations set forth in this Agreement, and that during the term of this Agreement, he/she will not render or perform services for any other corporation, firm, entity or person which are inconsistent with the provisions of this Agreement. 3.03 Reporting. This position will report to the Chief Operating Officer of the Company. 4. Compensation. 4.01 Base Salary. As base compensation for all services to be rendered by Executive under this Agreement during the first year of the term of this Agreement, the Company shall pay to Executive a base salary at a rate of $150,000 per year, which salary shall be paid on a twice-monthly basis in accordance with the Company's normal payroll procedures and policies. The salary payable to Executive during each subsequent year during the term of this Agreement shall be established by the Company and Executive, but in no event shall the salary for any subsequent year be less than the base salary in effect for the prior year. 4.02 Participation in Benefit Plans. During the term of this Agreement, Executive shall be entitled to receive such medical and hospitalization insurance and other fringe benefits as are being provided 2 to the Company's other executive level employees from time to time to the extent that Executive's age, position or other factors qualify him/her for such fringe benefits. 4.03 Expenses. The Company will pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by him/her in the performance of his/her duties under this Agreement, subject to the presentment of appropriate vouchers in accordance with the Company's normal policies for expense verification. 4.04 Sales Commission Plan. Prior to December 31, 1999, Executive shall be paid commission based on Executive's existing commission plan. The Executive's existing commission plan, payable upon receipt of invoice payment, is as follows: 2% of all sales revenue generated by Company; 7% of personal sales up to monthly quota and 10% of personal sales exceeding monthly quota; Executive's Personal Monthly Quota equals $75,000 of annualized revenue. Although the Executive and the Company have not finalized terms of the year 2000 sales commission plan, both parties agree that the Executive's year 2000 commission plan will be set such that the sum of base salary and the expected sales commissions will be equal $500,000 during the year 2000 if the Company achieves its year 2000 sales goals. Sales closed is defined, for purposes of this agreement, as a License Agreement which has been executed. 4.05 Incentive for completion of an initial public offering. Upon the completion of an initial public offering of the Company's common stock, the Company will also pay Executive an IPO cash bonus of $30,000, which is due and payable, immediately upon the close. 4.06 Vesting of Stock Options. On September 15, 1999, the Company issued to the Executive an additional option ("September 1999 Option") to purchase up to 130,000 shares of Company Common Stock at a price of $7.20 per share pursuant to the Company's 1995 Stock Incentive Plan (the "Plan"). Such option shall become exercisable with respect to 20% of the shares immediately upon execution of this Agreement and the balance shall vest monthly at a rate of 1/60 of the total September 1999 Option grant over the balance of the term. Such option shall expire 10 years from the date of the grant and shall contain such other provisions as are contained in the form of stock option agreement used by Company under the Plan. In the event that this Agreement is terminated as a result of the "Constructive Termination" (as defined in Section 8.01(2)) or without "Cause" (as defined in Section 8.01(1)) of the Executive, the September 1999 Option will vest with respect to 40% of the shares subject thereto. In addition, the Company will permit the Executive to exercise all of his/her vested options for a period of 12 months, commencing from the date of termination. Vesting of all options granted to Executive will be accelerated with respect to 100% of the shares subject thereto in the event of a "Change in Control" of the Company. For such purposes, a "Change in Control" shall mean any of the following: (i) A sale of all or substantially all of the assets of the Company; (ii) The acquisition of more than 50% of the then outstanding Company Common Stock by any person or group of persons acting in concert; (iii) Any change that results in the Continuing Directors constituting less than a majority of the Board of Directors; (iv) A reorganization or, a merger of Company with another company after which the holders of common stock of the Company immediately prior to the merger or reorganization hold less than 50% of the voting power of the resulting corporations, or any other transaction in which the Company (other than as the parent corporation) is consolidated for federal income tax 3 purposes or is eligible to be consolidated for federal income tax purposes with another corporation; or (v) In the event that the Company Common Stock is traded on an established securities market: a public announcement that any person has acquired beneficial ownership of more than 25% of the then outstanding Company Common Stock and for this purpose the terms "person" and "beneficial ownership" shall have the meanings provided in Section 13(d) of the Securities and Exchange Act of 1934 or related rules promulgated by the Securities and Exchange Commission or; the commencement of or public announcement of an intention to make a tender offer for more than 50% of the then outstanding Company Common Stock. For purposes of this Section 4.06, "Continuing Directors" shall include only those directors of the Company on the date hereof and those directors, as of a date 30 days prior to an event that would otherwise be considered a "Change in Control," who were nominated by Continuing Directors and duly elected by shareholders at an annual meeting thereof or nominated and elected by directors who were "Continuing Directors." 5. Confidential Information. Except as permitted or directed by the Company's Board of Directors, during the term of this Agreement or at any time thereafter, Executive shall not divulge, furnish or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret knowledge or information of the Company which Executive has acquired or become acquainted with or will acquire or become acquainted with during the period of his/her employment by the Company, whether developed by himself/herself or by others, concerning any trade secrets, confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, any confidential or secret development or research work of the Company, or any other confidential information or secret aspects of the business of the Company. Executive expressly acknowledges that, in addition to the Company's proprietary software and technical know-how, the Company's customer lists and the form (including, without limitation, payment terms) of the Company's relationships with its customers is not publicly known and that the disclosure or use of such information for any purpose other than for the benefit of the Company could cause substantial damage the Company and would place the Company at a competitive disadvantage. Executive acknowledges that the above-described knowledge or information constitutes a unique and valuable asset of the Company and that any disclosure or other use of such knowledge or information other than the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. The foregoing obligations of confidentiality shall not apply to any knowledge or information which is now published, which subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement by Executive, or which was known to the Executive prior to the term of his/her employment with the Company. Executive agrees to notify any person or entity with which Executive is employed or for which Executive provides services of the requirements of this Section 5 and to notify the Company of the identity of any such person or entity with which Executive is employed during the One year after termination of this Agreement. 6. Employee Solicitation. During employment, and for a period of nine months thereafter, Executive shall not (i) directly or indirectly solicit any employee of the Company or any of Company's affiliates to leave the employ of any such entity or in any way interfere adversely with the relationship between any such employee and any such entity, (ii) directly or indirectly solicit any employee of the Company or any affiliates to work for, render services or provide advice to or supply confidential business information or trade secrets of any such entity to any third person, firm or corporation, or (iii) directly or indirectly solicit any existing customers and potential customers that have an unexpired written proposals under consideration. For purposes of the foregoing, solicitation shall not include solicitation of employees, vendors or customers (i) who first solicit employment or a relationship from Executive, or (ii) who are solicited (A) by advertising in periodicals of general circulation or by general circulation Internet advertising, or (B) by a search or consulting firm on behalf of Executive or Executive's affiliates, so long as Executive or such affiliates did not direct or encourage such firm to solicit such employee, vendor or customer of the Company. If any restriction set forth in this paragraph is held to be unreasonable, then Executive and the Company agree, and hereby submit, to the reduction and limitation of such prohibition to such area or period as shall be deemed reasonable. 4 7. Patent and Related Matter. 7.01 Disclosure and Assignment. Executive will promptly disclose in writing to the Company complete information concerning each and every invention, discovery, improvement, work of authorship, device, design, apparatus, practice, process, method or product whether patentable or not, made, developed, authored, perfected, devised, conceived or first reduced to practice by Executive, either solely or in collaboration with others, during the term of this Agreement, whether or not during regular working hours, relating to the Business of the Company (hereinafter referred to as "Developments"). Executive, to the extent that he/she has the legal right to do so, hereby acknowledges that any and all of said Developments are the property of the Company and hereby assigns and agrees to assign to the Company any and all of Executive's right, title and interest in and to any and all of such Developments. 7.02 Limitation on Section 7.01. The provisions of section 7.01 shall not apply to any Development meeting the following conditions: (a) such Development was developed entirely on Executive's own time; and (b) such Development was made without the use of any Company equipment, supplies, facility or trade secret information, excluding Executives laptop; and (c) such Development does not relate (I) directly to the Business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; and (d) such Development does not result from any work performed by Executive for the Company. 7.03 Assistance of Executive. Upon request and without further compensation therefor, but at no expense to Executive, and whether during the term of this Agreement or thereafter, Executive will do all lawful acts, including, but not limited to, the execution of papers and lawful oaths and the giving of testimony, that in the opinion of the Company, its successors and assigns, may be necessary or desirable in obtaining, sustaining, reissuing, extending and enforcing United States and foreign patents and/or registrations including, but not limited to, design patents, on any and all of such Developments (other than those described in 7.02), and for perfecting affirming and recording the Company's complete ownership and title thereto, and to cooperate otherwise in all proceedings and matters relating thereto. 7.04 Obligations, Restrictions and Limitations. Executive understands that the Company may enter into agreements or arrangements with agencies of the United States Government, and that the Company may be subject to laws and regulations which impose obligations, restrictions and limitations on it with respect to inventions and patents which may be acquired by it or which may be conceived, authored or developed by employees, consultants or other agents rendering services to it. Executive agrees that he/she shall be bound by all such obligations, restrictions and limitations applicable to any such invention or work of authorship conceived, authored or developed by him/her during the term of this Agreement and shall take any and all further action which may be required to discharge such obligations and to comply with such obligations and to comply with such restrictions and limitations. 8. Termination 8.01 Grounds for Termination. This Agreement may be terminated: (a) by the Company, if Executive dies, or (b) by the Executive, if Executive becomes disabled (as defined below), or (c) by the Company, if the Executive has engaged in conduct constituting cause for his/her termination and the Company notifies Executive in writing of such election, or 5 (d) by the Company without cause upon notice to the Executive in writing of such election, provided that such termination may only occur by unanimous decision of the Board of Directors if there are then three or fewer Directors or by a majority decision of the Board of Directors if there are then four or more Directors. (e) by the Executive, if the Executive is constructively terminated, as defined in paragraph 8.01(2) herein and the Executive has notified the Company of his/her election to terminate for Constructive Termination, or (f) by the Executive upon notice to the Company in writing of such election. If this Agreement is terminated pursuant to subsection (a), (b), (c), (e) or (f) of this section 8.01, such termination shall be effective immediately. If this Agreement is terminated pursuant to subsection (d) of this section 8.01, such termination shall be effective thirty (30) days after delivery of the notice of termination. (1) "Cause" Defined. "Cause" means: (a) The Employee has breached the provisions of Section 5, 6 or 7 of this Agreement in any material respect, (b) The Executive has engaged in willful and material misconduct, including willful and material failure to perform the Employee's duties as an officer or employee of the Company and has failed to cure such default within 30 days after receipt of written notice of default from the Company, (c) The Executive has committed fraud, misappropriation or embezzlement in connection with the Company's business, or (d) Executive has been convicted or has pleaded nolo contendere to criminal misconduct that is detrimental to the Company's reputation or that calls into question, in the judgement of the Board, Executive's integrity in fulfilling his/her duties under this Agreement. In the event the Company terminates Executive's employment for "cause" pursuant to subsection 8.01 and Executive objects in writing to the Board's determination that there was proper "cause" for such termination within (30) days after Executive is notified of such termination, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If Executive fails to object to any such determination of "cause" in writing within such thirty (30) day period, he/she shall be deemed to have waived his/her right to object to that determination. If such arbitration determines that there was not proper "cause" for termination, such termination shall be deemed to be a termination pursuant to subsection 8.01(d). (2) "Constructive Termination" defined. Constructive Termination means termination by Executive after written notice to the Company that Executive deems such termination by Executive as a result of Constructive Termination, and only after: (a) A material breach by the Company of a material obligation of the Company under this Agreement after the Executive has given the Company written notice of the breach and the Company has not remedied the breach within 30 days; (b) A failure of the Company to pay when due to the Executive any annual base salary, annual bonus or other earned bonus or awards or commissions referred to in this Agreement; 6 (c) The relocation of the Executive's principal place of employment to a location not within a 30 mile radius of such place of employment on the Effective Date; (d) A material reduction by the Company of the Executive's duties or responsibilities; (e) The failure of the Company to obtain an agreement reasonably satisfactory to the Executive from any successor to assume and agree to perform this Agreement , or, if the business for which the Executive's services are principally performed is sold or transferred, the failure of the Company to obtain such an agreement from the purchaser or transferee of such business; or (f) The Company becomes insolvent or bankrupt where executive can no longer perform his/her duties as outlined above. In the event the Executive terminates Executive's employment for "Constructive Termination" pursuant to subsection 8.01 and the Company objects in writing to the Executive's determination that there was Constructive Termination within (30) days after Executive has notified the Company of the same, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If the Company fails to object to any such determination of "Constructive Termination" in writing within such thirty (30) day period, it shall be deemed to have waived its right to object to that determination. If such arbitration determines that there was not proper "Constructive Termination", such termination shall be deemed to be a termination pursuant to subsection 8.01(c). 8.02 "Disability" Defined. For purposes of this Agreement, the term "disabled" means any mental or physical condition which renders Executive unable to perform the essential functions of his/her positions, with or without reasonable accommodation, for a period of more than ninety (90) days during any consecutive one hundred twenty (120) day period. 8.03 Surrender of Records and Property. Upon termination of his/her employment with the Company, Executive shall deliver promptly to the Company all records, manual, book, blank forms, document, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof, which are the property of the Company or which relate in any way to the business, products, practices or techniques of the Company, and all other property, trade secrets and confidential information of the Company, including, but not limited to, all documents which in whole or case are in his/her possession or under his/her control. 8.04 Wage and Benefit Continuation. If Executive's employment by the Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the Company shall continue to pay to Executive a total compensation of $450,000 payable in equal twice-monthly installments over a 9 month period after termination and shall continue to provide health insurance benefits for Executive for a period 9 months after termination. Notwithstanding anything else in this Section 8.04, Executive shall not be entitled under this Section 8.04 or any other provision of this Agreement to receive any cash compensation pursuant to this Agreement which constitutes an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, or any successor provision or regulations promulgated. If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or 8.01 (f), Executive's right to base salary and benefits shall immediately terminate except as may otherwise be required by applicable law. 9. Indemnification and Directors & Officers Insurance 9.01 Indemnification. The Company will provide Executive indemnification, exculpation and expense advancement, to the fullest extent of the law, including, without limitation, entering into an indemnification agreement with Executive in at least as beneficial a form to Executive as the Company has entered into with any other officer or director of the Company. 7 9.02 Directors and Officers Insurance. The Company will provide, at its expense, Directors and Officers (D&O) insurance in an amount deemed appropriate by its Board of Directors and Officers. If the Company shall show any employee as a named insured under such policy, the Executive shall be a named insured under such policy. 10. Settlement of Disputes. 10.01 Arbitration. Except as provided in section 10.02 any claims or disputes of any nature between the Company and Executive arising from or related to the performance, breach, termination, expiration, application, or meaning of this Agreement or any related matter relating to Executive's employment and the termination of that employment by the Company shall be resolved exclusively by arbitration in Denver, CO, in accordance with the then applicable rules of the American Arbitration Association. Any such arbitration shall be conducted by an arbitrator with said Rules, who has at least ten (10) years experience as an attorney in executive compensation and employment law. The fees of the arbitrator (s) and other cost, including attorney fees, incurred by Executive and the Company in connection with such arbitration shall be paid by the party who is unsuccessful in such arbitration, as determined by the arbitrator. The decision if the arbitrator(s) shall be final and binding upon both parties. Judgement of the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. In the event of submission of any dispute to arbitration, each party shall, not later than thirty (30) days prior to the date set forth hearing, provide to the other party and to the arbitrator(s) a copy of all exhibits upon which the party intends to rely at the hearing and a list of all persons each party intends to call at the hearing. 10.02 Resolution of Certain Claims- Injunctive Relief. Section 10.01 shall have no application to claims by the Company asserting a violation of section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise, the terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the Company in a lawsuit subject to the terms of section 10.03. Executive agrees that, in addition to, but not to the exclusion of any other available remedy, the Company shall have the right to enforce the provisions of sections 5, 6, 7 and 8.03 by applying for and obtaining temporary and permanent restraining orders injunctions from a court of competent jurisdiction without the necessity of filing a bond therefor and without the necessity of proving actual damages, and the Company shall be entitled to recover from the Employee its reasonable attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and 8.03. 10.03 Venue. Any action at law, suit in equity, or judicial proceeding arising directly or indirectly, or otherwise in connection with, out of, related to or from this Agreement or any provisions hereof shall be litigated only in the courts of the State of California. Executive waives any right the Executive may have to transfer or change the venue of any litigation brought against Executive by the Company. 10.04 Severability. To the extent any provisions of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provisions and if this Agreement shall be unaffected and shall continue in full force and effect. In furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provisions of this Agreement be in excess of that which is valid and enforceable under applicable law, then such provisions shall be construed to cover only that duration, extent or activities which may validly and enforceably be covered. Executive acknowledges the uncertainty of the law in respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. 11 Miscellaneous. 11.01 Governing Law. This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of California. 11.02 Prior Agreements. Except as set forth in Section 1, this Agreement contains the entire agreement of the parties relating to the employment of Executive by the Company and the ancillary matters discussed herein and supersedes all prior agreements and undertakings with respect to such matters, and the parties hereto made no arrangements, representations or warranties relating to such employment or ancillary matters which are not set forth herein. 8 11.03 Withholding Taxes. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes shall be required pursuant to any law governmental regulation, or ruling or any other amount owed to the Company. 11.04 Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the both Executive and Company. 11.05 No Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 11.06 Assignment. This Agreement shall not be assignable, in whole or in part, by either party without the written consent of the other party, except that the Company may, without the consent of the Executive, assign its rights and obligations under this Agreement to any corporation, firm or other business entity with or into which the Company may merge or consolidate, or to which the Company may sell or transfer all or substantially all of its assets, or of which 50% or more of the equity investment and of the voting control is owned, directly or indirectly, by, or is under common ownership with, the Company; provided, however, that no such assignment will relieve Company of any of its obligations hereunder. After any such assignee shall thereafter be deemed to be the Company for the purposes of all provisions of this Agreement including section 9. 11.07 Counterparts. This Agreement may be simultaneously executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but the same instrument. 11.08 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have given when personally delivered or three days after being mailed, if mailed, by first class mail, return receipt requested, or when receipt is acknowledged, if sent by facsimile, telecopy or other electronic transmission device. Notices, demands and communications to Company and the Executive will, unless another address is specified in writing , be sent to the address indicated below: Notices to Company: Notice to Executive: Stockpoint, Inc. ________________ 2600 Crosspark Road ________________ Coralville, Iowa 52241 ________________ Attn: President 11.09 Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. 11.10 Effect of Termination. It is expressly understood that neither the Company nor the Executive shall have any continuing obligation under this agreement upon termination hereof, except in respect of the matters referenced in Sections 5, 6, 7 and 8.03. 9 IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of date set forth herein. Stockpoint, Inc. By: /s/ William E. Staib --------------------------- Its CEO --------------------------- EXECUTIVE /s/ Luan Cox ----------------------------- Luan Cox EX-10.6 26 EMPLOYMENT AGREEMENT BETWEEN REGISTRANT/DOMINQUEZ 1 EXHIBIT 10.6 EMPLOYMENT AGREEMENT THIS AGREEMENT is entered into on December 20, 1999 (the "Effective Time"), by and between L. Christopher Dominguez, an individual resident of the State of California ("Executive"), and Stockpoint, Inc., a Delaware corporation ("Company"). WHEREAS, Executive has heretofore been employed as the Executive Vice President of the Company; and WHEREAS, the Company desires to continue to have the benefit of the Executive's services as a corporate officer of the Company; WHEREAS, certain guarantors of borrowings of the Company have required, as a condition to their guarantees, that the Company execute an employment agreement with Executive and WHEREAS, the proceeds from such borrowings are necessary for the Company's operations and will benefit the Company and the Executive. NOW, THEREFORE, in consideration of the premises, the respective undertakings of the Company and Executive set forth below, the Company and Executive agree as follows: 1. Employment. The Company hereby agrees to employ Executive, and Executive accepts such employment and agrees to perform services for the Company, upon the other terms and conditions set forth in this Agreement. 2. Term. The term of this agreement is one year and renews annually, unless either party provides written notification 90 days prior to the renewal. See section 8 below for Termination definitions and remedies. 3. Positions, Duties and Reporting. 3.01 Service with Company. During the term of this Agreement, Executive agrees to perform such reasonable employment duties consistent with the role of Executive Vice President as the Company shall assign to him/her from time to time. 3.02 Performance of Duties. Executive agrees to serve the Company faithfully and to the best of his/her ability and to devote his/her full time, attention, and efforts to the business and affairs of the Company during the term of this Agreement. Executive represents to the Company that he/she is under no contractual commitments inconsistent with his/her obligations set forth in this Agreement, and that during the term of this Agreement, he/she will not render or perform services for any other corporation, firm, entity or person which are inconsistent with the provisions of this Agreement. 3.03 Reporting. This position will report to the Chief Executive Officer of the Company. 4. Compensation. 4.01 Base Salary. As base compensation for all services to be rendered by Executive under this Agreement during the first year of the term of this Agreement, the Company shall pay to Executive a base salary at a rate of $150,000 per year, which salary shall be paid on a twice-monthly basis in accordance with the Company's normal payroll procedures and policies. The salary payable to Executive during each subsequent year during the term of this Agreement shall be established by the Company and Executive, but in no event shall the salary for any subsequent year be less than the base salary in effect for the prior year. 4.02 Participation in Benefit Plans. During the term of this Agreement, Executive shall be entitled to receive such medical and hospitalization insurance and other fringe benefits as are being provided to the Company's other executive level employees from time to time to the extent that Executive's age, position or other factors qualify him/her for such fringe benefits. 2 4.03 Expenses. The Company will pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by him/her in the performance of his/her duties under this Agreement, subject to the presentment of appropriate vouchers in accordance with the Company's normal policies for expense verification. 4.04 Incentive for completion of an initial public offering. Upon the completion of an initial public offering of the Company's common stock, the Company will also pay Executive an IPO cash bonus of $30,000, which is due and payable, immediately upon the close. 4.05 Annual Incentive Compensation. The Company shall formulate and deliver to Executive by January 31, 2000 with respect to the remainder of fiscal 2000, and by January 1 with respect to each succeeding fiscal year during the term of this Agreement, and the Company and Executive shall use their best efforts to negotiate and agree to, an annual incentive compensation plan for Executive. 4.06 Vesting of Stock Options. On September 15, 1999, the Company issued to the Executive an additional option ("September 1999 Option") grant to purchase up to 40,000 shares of Company Common Stock at a price of $7.20 per share pursuant to the Company's 1995 Stock Incentive Plan (the "Plan"). Such option shall become exercisable with respect to 20% of the shares immediately upon execution of this Agreement and the balance shall vest monthly at a rate of 1/60 of the total September 1999 Option grant over the balance of the term. Such option shall expire 10 years from the date of the grant and shall contain such other provisions as are contained in the form of stock option agreement used by Company under the Plan. In the event that this Agreement is terminated as a result of the "Constructive Termination" (as defined in Section 8.01(2)) or without "Cause" (as defined in Section 8.01(1)) of the Executive, the September 1999 Option will vest with respect to 40% of the shares subject thereto immediately. In addition, the Company will permit the Executive to exercise all of his/her vested options for a period of 12 months, commencing from the date of termination. Vesting of all options granted to Executive will be accelerated with respect to 100% of the shares subject thereto in the event of a "Change in Control" of the Company. For such purposes, a "Change in Control" shall mean any of the following: (i) A sale of all or substantially all of the assets of the Company; (ii) The acquisition of more than 50% of the then outstanding Company Common Stock by any person or group of persons acting in concert; (iii) Any change that results in the Continuing Directors constituting less than a majority of the Board of Directors; (iv) A reorganization or, a merger of Company with another company after which the holders of common stock of the Company immediately prior to the merger or reorganization hold less than 50% of the voting power of the resulting corporations, or any other transaction in which the Company (other than as the parent corporation) is consolidated for federal income tax purposes or is eligible to be consolidated for federal income tax purposes with another corporation; or (v) In the event that the Company Common Stock is traded on an established securities market: a public announcement that any person has acquired beneficial ownership of more than 25% of the then outstanding Company Common Stock and for this purpose the terms "person" and "beneficial ownership" shall have the meanings provided in Section 13(d) of the Securities and Exchange Act of 1934 or related rules promulgated by the Securities and Exchange Commission or; the commencement of or public announcement of an intention to make a tender offer for more than 50% of the then outstanding Company Common Stock. 3 For purposes of this Section 4.06, "Continuing Directors" shall include only those directors of the Company on the date hereof and those directors, as of a date 30 days prior to an event that would otherwise be considered a "Change in Control," who were nominated by Continuing Directors and duly elected by shareholders at an annual meeting thereof or nominated and elected by directors who were "Continuing Directors." On March 6, 1997, as part of its acquisition of Ethos Corporation ("the Acquisition"), the Company issued to the Executive an option to purchase 15,000 shares of Company Common Stock ("March 1997 Option") at a price of $1.50 per share pursuant to the Company's 1995 Stock Incentive Plan. The Company reaffirms that as per agreement at the time of the Acquisition, the March 1997 Option shall become accelerated with respect to 100% of the shares subject thereto of the effective date of a registration statement filed by the Company for the underwritten public offering of its common stock. 5. Confidential Information. Except as permitted or directed by the Company's Board of Directors, during the term of this Agreement or at any time thereafter, Executive shall not divulge, furnish or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret knowledge or information of the Company which Executive has acquired or become acquainted with or will acquire or become acquainted with during the period of his/her employment by the Company, whether developed by himself/herself or by others, concerning any trade secrets, confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, any confidential or secret development or research work of the Company, or any other confidential information or secret aspects of the business of the Company. Executive expressly acknowledges that, in addition to the Company's proprietary software and technical know-how, the Company's customer lists and the form (including, without limitation, payment terms) of the Company's relationships with its customers is not publicly known and that the disclosure or use of such information for any purpose other than for the benefit of the Company could cause substantial damage the Company and would place the Company at a competitive disadvantage. Executive acknowledges that the above-described knowledge or information constitutes a unique and valuable asset of the Company and that any disclosure or other use of such knowledge or information other than the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. The foregoing obligations of confidentiality shall not apply to any knowledge or information which is now published, which subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement by Executive, or which was known to the Executive prior to the term of his/her employment with the Company. Executive agrees to notify any person or entity with which Executive is employed or for which Executive provides services of the requirements of this Section 5 and to notify the Company of the identity of any such person or entity with which Executive is employed during the One year after termination of this Agreement. 6. Employee Solicitation. During employment, and for a period of nine months thereafter, Executive shall not (i) directly or indirectly solicit any employee of the Company or any of Company's affiliates to leave the employ of any such entity or in any way interfere adversely with the relationship between any such employee and any such entity, (ii) directly or indirectly solicit any employee of the Company or any affiliates to work for, render services or provide advice to or supply confidential business information or trade secrets of any such entity to any third person, firm or corporation, or (iii) directly or indirectly solicit any existing customers and potential customers that have an unexpired written proposals under consideration. For purposes of the foregoing, solicitation shall not include solicitation of employees, vendors or customers (i) who first solicit employment or a relationship from Executive, or (ii) who are solicited (A) by advertising in periodicals of general circulation or by general circulation Internet advertising, or (B) by a search or consulting firm on behalf of Executive or Executive's affiliates, so long as Executive or such affiliates did not direct or encourage such firm to solicit such employee, vendor or customer of the Company. If any restriction set forth in this paragraph is held to be unreasonable, then Executive and the Company agree, and hereby submit, to the reduction and limitation of such prohibition to such area or period as shall be deemed reasonable. 7. Patent and Related Matter. 7.01 Disclosure and Assignment. Executive will promptly disclose in writing to the Company complete information concerning each and every invention, discovery, improvement, work of authorship, device, design, apparatus, practice, process, method or product whether patentable or not, made, developed, authored, perfected, devised, conceived or first reduced to practice by Executive, either solely or in collaboration with others, during the term of this Agreement, whether or not during regular working hours, 4 relating to the Business of the Company (hereinafter referred to as "Developments"). Executive, to the extent that he/she has the legal right to do so, hereby acknowledges that any and all of said Developments are the property of the Company and hereby assigns and agrees to assign to the Company any and all of Executive's right, title and interest in and to any and all of such Developments. 7.02 Limitation on Section 7.01. The provisions of section 7.01 shall not apply to any Development meeting the following conditions: (a) such Development was developed entirely on Executive's own time; and (b) such Development was made without the use of any Company equipment, supplies, facility or trade secret information, excluding Executives laptop; and (c) such Development does not relate (I) directly to the Business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; and (d) such Development does not result from any work performed by Executive for the Company. 7.03 Assistance of Executive. Upon request and without further compensation therefor, but at no expense to Executive, and whether during the term of this Agreement or thereafter, Executive will do all lawful acts, including, but not limited to, the execution of papers and lawful oaths and the giving of testimony, that in the opinion of the Company, its successors and assigns, may be necessary or desirable in obtaining, sustaining, reissuing, extending and enforcing United States and foreign patents and/or registrations including, but not limited to, design patents, on any and all of such Developments (other than those described in 7.02), and for perfecting affirming and recording the Company's complete ownership and title thereto, and to cooperate otherwise in all proceedings and matters relating thereto. 7.04 Obligations, Restrictions and Limitations. Executive understands that the Company may enter into agreements or arrangements with agencies of the United States Government, and that the Company may be subject to laws and regulations which impose obligations, restrictions and limitations on it with respect to inventions and patents which may be acquired by it or which may be conceived, authored or developed by employees, consultants or other agents rendering services to it. Executive agrees that he/she shall be bound by all such obligations, restrictions and limitations applicable to any such invention or work of authorship conceived, authored or developed by him/her during the term of this Agreement and shall take any and all further action which may be required to discharge such obligations and to comply with such obligations and to comply with such restrictions and limitations. 8. Termination 8.01 Grounds for Termination. This Agreement may be terminated: (a) by the Company, if Executive dies, or (b) by the Executive, if Executive becomes disabled (as defined below), or (c) by the Company, if the Executive has engaged in conduct constituting cause for his/her termination and the Company notifies Executive in writing of such election, or (d) by the Company without cause upon notice to the Executive in writing of such election, provided that such termination may only occur by unanimous decision of the Board of Directors if there are then three or fewer Directors or by a majority decision of the Board of Directors if there are then four or more Directors. 5 (e) by the Executive, if the Executive is constructively terminated, as defined in paragraph 8.01(2) herein and the Executive has notified the Company of his/her election to terminate for Constructive Termination, or (f) by the Executive upon notice to the Company in writing of such election. If this Agreement is terminated pursuant to subsection (a), (b), (c), (e) or (f) of this section 8.01, such termination shall be effective immediately. If this Agreement is terminated pursuant to subsection (d) of this section 8.01, such termination shall be effective thirty (30) days after delivery of the notice of termination. (1) "Cause" Defined. "Cause" means: (a) The Employee has breached the provisions of Section 5, 6 or 7 of this Agreement in any material respect, (b) The Executive has engaged in willful and material misconduct, including willful and material failure to perform the Employee's duties as an officer or employee of the Company and has failed to cure such default within 30 days after receipt of written notice of default from the Company, (c) The Executive has committed fraud, misappropriation or embezzlement in connection with the Company's business, or (d) Executive has been convicted or has pleaded nolo contendere to criminal misconduct that is detrimental to the Company's reputation or that calls into question, in the judgement of the Board, Executive's integrity in fulfilling his/her duties under this Agreement. In the event the Company terminates Executive's employment for "cause" pursuant to subsection 8.01 and Executive objects in writing to the Board's determination that there was proper "cause" for such termination within (30) days after Executive is notified of such termination, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If Executive fails to object to any such determination of "cause" in writing within such thirty (30) day period, he/she shall be deemed to have waived his/her right to object to that determination. If such arbitration determines that there was not proper "cause" for termination, such termination shall be deemed to be a termination pursuant to subsection 8.01(d). (2) "Constructive Termination" defined. Constructive Termination means termination by Executive after written notice to the Company that Executive deems such termination by Executive as a result of Constructive Termination, and only after: (a) A material breach by the Company of a material obligation of the Company under this Agreement after the Executive has given the Company written notice of the breach and the Company has not remedied the breach within 30 days; (b) A failure of the Company to pay when due to the Executive any annual base salary, annual bonus or other earned bonus or awards referred to in this Agreement; (c) The relocation of the Executive's principal place of employment to a location not within a 30 mile radius of such place of employment on the Effective Date; (d) A material reduction by the Company of the Executive's duties or responsibilities; 6 (e) The failure of the Company to obtain an agreement reasonably satisfactory to the Executive from any successor to assume and agree to perform this Agreement, or, if the business for which the Executive's services are principally performed is sold or transferred, the failure of the Company to obtain such an agreement from the purchaser or transferee of such business; or (f) The Company becomes insolvent or bankrupt where executive can no longer perform his/her duties as outlined above. In the event the Executive terminates Executive's employment for "Constructive Termination" pursuant to subsection 8.01 and the Company objects in writing to the Executive's determination that there was Constructive Termination within (30) days after Executive has notified the Company of the same, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If the Company fails to object to any such determination of "Constructive Termination" in writing within such thirty (30) day period, it shall be deemed to have waived its right to object to that determination. If such arbitration determines that there was not proper "Constructive Termination", such termination shall be deemed to be a termination pursuant to subsection 8.01(c). 8.02 "Disability" Defined. For purposes of this Agreement, the term "disabled" means any mental or physical condition which renders Executive unable to perform the essential functions of his/her positions, with or without reasonable accommodation, for a period of more than ninety (90) days during any consecutive one hundred twenty (120) day period. 8.03 Surrender of Records and Property. Upon termination of his/her employment with the Company, Executive shall deliver promptly to the Company all records, manual, book, blank forms, document, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof, which are the property of the Company or which relate in any way to the business, products, practices or techniques of the Company, and all other property, trade secrets and confidential information of the Company, including, but not limited to, all documents which in whole or case are in his/her possession or under his/her control. 8.04 Wage and Benefit Continuation. If Executive's employment by the Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the Company shall continue to pay to Executive his/her base salary and shall continue to provide health insurance benefits for Executive for a period 9 months after termination. Change in Control" as defined in Section 4.07, if Executive's employment is terminated by "Constructive Termination" as defined in Section 8.01(2) or without "Cause" as defined in as defined in Section 8.01(1) within 12 months after the effective date of a "Change in Control," the severance compensation package defined in this Section will be doubled to 18 months. Notwithstanding anything else in this Section 8.04, Executive shall not be entitled under this Section 8.04 or any other provision of this Agreement to receive any cash compensation pursuant to this Agreement which constitutes an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, or any successor provision or regulations promulgated. If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or 8.01 (f), Executive's right to base salary and benefits shall immediately terminate except as may otherwise be required by applicable law. If Executive's employment is terminated by the Company pursuant to subsection 8.01(a), 8.01(b), 8.01(d) or 8.01(e), Executive shall also be entitled to receive any bonus payment that as of the time of termination would have been payable to him/her pursuant to any incentive plan then in effect. 9. Indemnification and Directors & Officers Insurance 9.01 Indemnification. The Company will provide Executive indemnification, exculpation and expense advancement, to the fullest extent of the law, including, without limitation, entering into an indemnification agreement with Executive in at least as beneficial a form to Executive as the Company has entered into with any other officer or director of the Company. 7 9.02 Directors and Officers Insurance. The Company will provide, at its expense, Directors and Officers (D&O) insurance in an amount deemed appropriate by its Board of Directors and Officers. If the Company shall show any employee as a named insured under such policy, then the Executive shall be a named insured under such policy. 10. Settlement of Disputes. 10.01 Arbitration. Except as provided in section 10.02 any claims or disputes of any nature between the Company and Executive arising from or related to the performance, breach, termination, expiration, application, or meaning of this Agreement or any related matter relating to Executive's employment and the termination of that employment by the Company shall be resolved exclusively by arbitration in Denver, CO, in accordance with the then applicable rules of the American Arbitration Association. Any such arbitration shall be conducted by an arbitrator with said Rules, who has at least ten (10) years experience as an attorney in executive compensation and employment law. The fees of the arbitrator (s) and other cost, including attorney fees, incurred by Executive and the Company in connection with such arbitration shall be paid by the party who is unsuccessful in such arbitration, as determined by the arbitrator. The decision if the arbitrator(s) shall be final and binding upon both parties. Judgement of the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. In the event of submission of any dispute to arbitration, each party shall, not later than thirty (30) days prior to the date set forth hearing, provide to the other party and to the arbitrator(s) a copy of all exhibits upon which the party intends to rely at the hearing and a list of all persons each party intends to call at the hearing. 10.02 Resolution of Certain Claims- Injunctive Relief. Section 10.01 shall have no application to claims by the Company asserting a violation of section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise, the terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the Company in a lawsuit subject to the terms of section 10.03. Executive agrees that, in addition to, but not to the exclusion of any other available remedy, the Company shall have the right to enforce the provisions of sections 5, 6, 7 and 8.03 by applying for and obtaining temporary and permanent restraining orders injunctions from a court of competent jurisdiction without the necessity of filing a bond therefor and without the necessity of proving actual damages, and the Company shall be entitled to recover from the Employee its reasonable attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and 8.03. 10.03 Venue. Any action at law, suit in equity, or judicial proceeding arising directly or indirectly, or otherwise in connection with, out of, related to or from this Agreement or any provisions hereof shall be litigated only in the courts of the State of California. Executive waives any right the Executive may have to transfer or change the venue of any litigation brought against Executive by the Company. 10.04 Severability. To the extent any provisions of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provisions and if this Agreement shall be unaffected and shall continue in full force and effect. In furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provisions of this Agreement be in excess of that which is valid and enforceable under applicable law, then such provisions shall be construed to cover only that duration, extent or activities which may validly and enforceably be covered. Executive acknowledges the uncertainty of the law in respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. 11 Miscellaneous. 11.01 Governing Law. This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of California. 11.02 Prior Agreements. Except as set forth in Section 1, this Agreement contains the entire agreement of the parties relating to the employment of Executive by the Company and the ancillary matters discussed herein and supersedes all prior agreements and undertakings with respect to such matters, and the parties hereto made no arrangements, representations or warranties relating to such employment or ancillary matters which are not set forth herein. 8 11.03 Withholding Taxes. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes shall be required pursuant to any law governmental regulation, or ruling or any other amount owed to the Company. 11.04 Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the both Executive and Company. 11.05 No Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 11.06 Assignment. This Agreement shall not be assignable, in whole or in part, by either party without the written consent of the other party, except that the Company may, without the consent of the Executive, assign its rights and obligations under this Agreement to any corporation, firm or other business entity with or into which the Company may merge or consolidate, or to which the Company may sell or transfer all or substantially all of its assets, or of which 50% or more of the equity investment and of the voting control is owned, directly or indirectly, by, or is under common ownership with, the Company; provided, however, that no such assignment will relieve Company of any of its obligations hereunder. After any such assignee shall thereafter be deemed to be the Company for the purposes of all provisions of this Agreement including section 9. 11.07 Counterparts. This Agreement may be simultaneously executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but the same instrument. 11.08 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have given when personally delivered or three days after being mailed, if mailed, by first class mail, return receipt requested, or when receipt is acknowledged, if sent by facsimile, telecopy or other electronic transmission device. Notices, demands and communications to Company and the Executive will, unless another address is specified in writing, be sent to the address indicated below: Notices to Company: Notice to Executive: ------------------- -------------------- Stockpoint, Inc. 2600 Crosspark Road -------------------- Coralville, Iowa 52241 -------------------- Attn: President -------------------- 11.09 Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. 11.10 Effect of Termination. It is expressly understood that neither the Company nor the Executive shall have any continuing obligation under this agreement upon termination hereof, except in respect of the matters referenced in Sections 5, 6, 7 and 8.03. 9 IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of date set forth herein. Stockpoint, Inc. By: /s/ William E. Staib ---------------------------- Its CEO ---------------------------- EXECUTIVE /s/ L. Christopher Dominguez ------------------------------- L. Christopher Dominguez EX-10.7 27 SUBLEASE DATED 5/24/1999 1 EXHIBIT 10.7 SUBLEASE THIS SUBLEASE (this "Sublease") is made and entered as of the 24th day of May, 1999, by and between Neural Applications Corporation, a Delaware corporation having an office at 2600 Crosspark Road, Coralville, Iowa 52241 ("Sublessor"), and Systems Alternatives International LLC, a Delaware limited liability company having an office at 1705 Indian Wood Circle, Suite 100, Maumee, Ohio 43537 ("Sublessee"). BACKGROUND INFORMATION A. Pursuant to the terms and conditions of a certain land lease dated November 2, 1993, between University of Iowa Research Park Corporation ("University') and Liberty Growth, L.C., an Iowa limited liability company ("Liberty") (the "Land Lease", the terms of which, as limited and modified herein, are hereby made a part hereof and a copy of which is attached hereto as Exhibit A), Liberty has leased from the University that certain premises and related fixtures and equipment more particularly described in the Land Lease, which premises the University has leased from the Iowa State Board of Regents pursuant to a ground lease dated March 1, 1989 (the "Ground Lease"), and B. Pursuant to the terms and conditions of a certain lease dated October 7, 1993 between Liberty and Sublessor (the "Prime Lease," the terms of which, as limited and modified herein, are hereby made a part hereof and a copy of which is attached hereto as Exhibit B), Sublessor has leased from Liberty that certain premises and related fixtures and equipment more particularly described in the Prime Lease (the "Prime Lease Premises"), and C. Sublessee wishes to sublease from Sublessor and Sublessor desires to sublet to Sublessee, a portion of the Prime Lease Premises described as approximately _________ square feet on the first floor of the building located at 2600 Crosspark Road, Coralville, Iowa as depicted on Exhibit C attached hereto and incorporated herein upon the terms and conditions set forth herein (the "Subleased Premises"). D. In addition to the Subleased Premises, Sublessor desires to sublet to Sublessee, the personal property listed on Schedule 1 attached hereto and incorporated herein (the "Subleased Personal Property'). STATEMENT OF AGREEMENT In consideration of the foregoing and of the promises and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sublessor and Sublessee do hereby agree as follows: 1. Demise. Sublessor does hereby demise and sublease to Sublessee, and Sublessee does hereby sublease and hire from Sublessor, upon the terms, covenants and conditions set forth herein, the Subleased Premises and the Subleased Personal Property, subject to the Prime Lease and the Land Lease. 1 2 2. Term. The term of this Sublease (the "Term") shall be for a term of eighteen (18) months commencing on the date hereof (the "Commencement Date") and terminating at 11:59 p.m. on October 31, 2000. 3. Early Termination. At any time after October 25, 1999, Sublessee may terminate this Sublease upon thirty (30) days prior written notice to Sublessor. 4. Gross Rent. Commencing on the Commencement Date and during the Term, Sublessee shall pay to Sublessor at the address above or at such other address as Sublessor may, from time to time, designate in writing the gross rent in the amount of Seven Thousand Two Hundred and no/100 Dollars ($7,200.00) on or before the fist (1st) day of each month (collectively, "Rent"). 5. Use; Laws. Sublessee shall use and occupy the Subleased Premises in compliance with the use restrictions contained in Article 3 of the Land Lease and Sublessee agrees to be bound by all of the terms, conditions, covenants, provisions and agreements of the Prime Lease and the Land Lease, including the University of Iowa Oakdale Research Park Covenants, Conditions and Restrictions which contain the Design Guidelines. Sublessee shall not violate any applicable governmental laws, codes, ordinances, rules or regulations in connection with its use and occupancy of the Subleased Premises. 6. Maintenance. Sublessor shall keep the Subleased Premises clean and orderly and shall perform all repairs to the .Subleased Premises which is required of Sublessor under the Prime Lease; Sublessor shall maintain the Subleased Premises in accordance with the same high standards of janitorial maintenance and cleanliness as Sublessor maintains in connection with the remaining portion of the Prime Lease Premises. 7. Indemnification. To the extent the following are caused by the negligence or willful misconduct of Sublessee, its agents, employees and invitees, Sublessee shall pay all costs, losses or damages resulting from or arising out of (i) any breach of this Sublease, (ii) the use and occupancy of the Subleased Premises and any property of Sublessor or Liberty, or (iii) the injury to any persons. Sublessee shall indemnify, protect and save Sublessor harmless, and defend with counsel satisfactory to Sublessor, from and against any and all losses, damages or liabilities thereby or therefor and from and against any and all expenses, costs, attorneys' fees and costs of suit incurred in connection therewith. To the extent the following are caused by the negligence or willful misconduct of Sublessor, its agents, employees and invitees, Sublessor shall pay all costs, losses or damages resulting from or arising out of: (i) any breach of this Sublease, (ii) the use and occupancy of the Subleased Premises and any property of Sublessee or Liberty, or (iii) the injury to any persons. Sublessor shall indemnify, protect and save Sublessee harmless, and defend with counsel satisfactory to Sublessee, from and against any and all losses, damages or liabilities thereby or therefor and from and against any and all expenses, costs, attorneys' fees and costs of suit incurred in connection therewith. 2 3 8. Alterations and Signs. Sublessee may, with Sublessor's prior written approval, which approval shall not be unreasonably withheld or delayed, make minor alterations and/or erect or display signs on the Premises as permitted under the University of Iowa Research Park regulations, the Land Lease and the Prime Lease. 9. Utilities and Other Services. Sublessor shall secure and pay for all utilities and other services used in, on or about the Subleased Premises. To the extent that utilities and services are not provided by Liberty, Sublessor shall contract directly with the applicable utility company or service provider. 10. Real Estate Taxes. All real estate taxes levied or assessed against the Subleased Premises shall be timely paid by Sublessor. 11. Compliance with Prime Lease and Land Lease. The obligations of Sublessee and Sublessor hereunder are contingent upon Liberty's written consent hereto and the consent of the University. If Liberty and/or the University have not consented to this Sublease on or before June 30, 1999, this Sublease shall terminate and Sublessor and Sublessee shall be released from all obligations hereunder. 12. Access to Subleased Premises. Sublessor has the right of access to certain portions of the Subleased Premises as indicated on the floor plan attached hereto as Exhibit C. In order to maintain Sublessee's security and privacy, Sublessor shall, at its expense; expand its current key-card security system to include an electronic lock and secured card key swipe system at the location marked as Area " 3.2" on Exhibit C. 13. Default. If Sublessee shall fail to pay Rent within ten (10) days after Sublessor has delivered written notice to Sublessee that the same is due and payable, or if Sublessee shall fail to perform any other term, covenant or condition of this Sublease and such failure shall continue for a period of ten (10) days after Sublessor delivers written notice of such failure to Sublessee, then, in any such event Sublessor shall have the right to pursue the remedies against Sublessee which Liberty has against Sublessor for a breach of the Prime Lease. If Sublessor shall be in default in the performance of any of its obligations under this Sublease or under the Prime Lease, including, but not limited to, its obligations to repair and maintain the Subleased Premises and its obligation to pay rent, Sublessee may (but shall not be required to) (i) cure such default on behalf of Sublessor, and the amount of the reasonable cost to Sublessee of curing any such default shall be paid by Sublessor to Sublessee on demand, or deducted by Sublessee from its rent obligations under this Sublease, together with interest thereon at the rate of 12% per annum or (ii) terminate this Sublease. 14. Assignment and Subletting. Sublessee shall not assign, mortgage, hypothecate or otherwise transfer all or any part of its interest in this Sublease, nor sublet the Subleased Premises or any part thereof without first procuring the written consent of Sublessor, which consent shall not be unreasonably withheld or delayed. Notwithstanding the provisions of this Section 14 to the contrary, Sublessee may assign this Lease or sublet all or any part of the Subleased Premises to an affiliate, subsidiary or company under the common control of 3 4 Sublessee without Sublessor's consent, provided that the use of the Subleased Premises does not materially change. 15. Sublessee's Insurance. During the Term, Sublessee shall carry and maintain with responsible insurers licensed to transact insurance business in the State of Iowa, for the benefit of Sublessee, the following insurance: (a) Public Liability Insurance. Sublessee shall, at Sublessee's sole expense, keep in full force and effect a policy of general comprehensive public liability insurance with minimum limits of $2,000,000 on account of bodily injuries to or death of one or more persons as the result of any one accident or disaster and $500,000 on account of damage to property. (b) Personal Property Insurance. Sublessee shall maintain insurance on its furniture, furnishings, trade fixtures, inventory, equipment and other items of personal property located on the Subleased Premises in the amount of the full replacement value thereof. 16. Sublessor's Insurance. During the Term, Sublessor shall carry and maintain fire, extended coverage and all risks insurance on the improvements located on the Subleased Premises and the Prime Lease Premises in the amount required under the Prime Lease and any other type or types of insurance required of Sublessor under the Prime Lease. 17. Damage to Subleased Premises. If the Subleased Premises is destroyed by fire or other casualty; either in whole or in part, Sublessee may terminate this Sublease upon ten (10) days written notice to Sublessor. If Sublessee does not elect to terminate this Sublease, then Sublessor shall repair such damage within fifteen (15) days of its occurrence (unless such repairs are prevented by causes beyond Sublessor's control), and Sublessee's rent shall be abated proportionately. 18. Waiver of Subrogation. Sublessor and Sublessee agree that in the event the Subleased Premises, or any part thereof or the fixtures or equipment therein is damaged or destroyed by fire or casualty and the Subleased Premises, or part thereof or fixtures or equipment therein, or injury to a person is covered by the insurance, or would be covered by the insurance required under this Sublease, Sublessor or Sublessee, or the sublessees, assignees or transferees of Sublessor or Sublessee regardless of cause or origin (including negligence), then, in such event, the rights, if any, of any party against the other, or against the employees, agents or licensees of any party, with respect to such damage or destruction and with respect to any loss resulting therefrom (including the interruption of the business of any of the parties) are hereby waived to the extent of said insurance. All policies of insurance required under this Sublease shall contain a waiver of subrogation substantially equivalent to the terms of this Section. 19. Eminent Domain. If all or part of the Subleased Premises are taken under the power of eminent domain by any public authority, or deeded to such public authority in lieu thereof, and such taking, in Sublessee's discretion, interferes with Sublessee's use of the Subleased Premises, this Lease shall terminate and expire as of the date possession is taken by the public authority and the payment of Rents shall be prorated as of the termination date. Sublessee shall have the right to receive compensation or damages to which it is entitled at law. 4 5 20. Quiet Enjoyment. So long as Sublessee shall perform and observe all of the terms, covenants and conditions contained herein, Sublessee shall peaceably and quietly have and hold the Subleased Premises during the Term without hindrance by Sublessor or any person lawfully claiming through Sublessor, subject to the terms of this Sublease and the Prime Lease. 21. Surrender of Subleased Premises. Upon the termination of this Sublease, Sublessee shall surrender possession of the Subleased Premises in good and clean condition, ordinary wear and tear, casualty, and damage caused by fire or the elements excepted. Sublessee may remove any equipment or fixtures which Sublessee has installed in the Subleased Premises provided Sublessee repairs any and all damage caused by such removal. 22. Sublessor's Representation and Warranties. Sublessor represents and warrants to Sublessee that (i) the Prime Lease is in full force and effect and in good standing with the Liberty; (ii) there is no default thereunder in existence; (iii) Sublessor has fully paid all rent due thereunder and met all of its obligations owing to Liberty thereunder; (iv) Sublessor will maintain the Prime Lease in such condition during the Term; and (v) subject to Liberty's consent, has authority under the Prime Lease to enter into this Sublease. 23. Successors and Assigns. This Sublease shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors and assigns. 24. Applicable Law. This Sublease shall be construed in accordance with the laws of the State of Iowa. 25. Brokers. Each party shall defend and indemnify the other party from any commissions or finders fees as a result of this Sublease which may be due to any person claiming through the indemnifying party. 26. Notices. Any notice required to be given under this Sublease shall be hand delivered or sent by U.S. certified mail, return receipt requested, postage prepaid, and shall be deemed delivered on actual receipt or refusal of such notice with all such notices sent to the address specified on page 1 hereof, unless otherwise specified in writing by either party. 27. Sublessor Default. In the event that Sublessor is in default under the terms of the Prime Lease, Liberty agrees that it shall not exercise its remedies thereunder or terminate the Prime Lease until Liberty has given Sublessor and Sublessee notice of such default as set forth in the Prime Lease. If Sublessee performs Sublessor's obligations under the Prime Lease, Liberty agrees to accept performance by Sublessee. Liberty shall not terminate the Prime Lease so long as Sublessee and/or Sublessor performs the obligations of Sublessor under the Prime Lease. All amounts expended by Sublessee under this paragraph to cure a default of Sublessor under the Prime Lease shall be reimbursed by Sublessor within ten (10) days after written notice from Sublessee to Sublessor, and any amount not paid within such ten (10) day period may be deducted by Sublessee from the amounts due to Sublessor under this Sublease. 26. Telecopy Counterpart. This Sublease may be executed and delivered by telecopy and a telecopy counterpart of this Sublease executed by any party shall constitute, for all 5 6 purposes, an original document; any party executing this Sublease by telecopy agrees promptly to deliver an executed counterpart of this Sublease but the failure of such party to deliver or of any other party to account for or produce such counterpart shall not affect the binding and enforceable nature of the telecopy counterpart and the telecopy counterpart shall continue to be an original, binding agreement. [signature pages to follow] 6 7 IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease to be executed by their duly authorized representatives as of the day and year first written above.
Signed and Acknowledged in the Presence of: SUBLESSOR: NEURAL APPLICATIONS CORPORATION /s/ [illegible] By: /s/ Robert A. Squires - -------------------------------------------- ------------------------------------------ (Signature Witness #1) Robert A. Squires, President /s/ [illegible] - -------------------------------------------- (Print Name Witness #1) /s/ [illegible] - -------------------------------------------- (Signature Witness #2) /s/ George L. Jenkins - -------------------------------------------- (Print Name Witness #2) Signed and Acknowledged in the Presence of: SUBLESSEE: SYSTEMS ALTERNATIVES INTERNATIONAL LLC /s/ [illegible] By: /s/ John W. Underwood - -------------------------------------------- ------------------------------------------ (Signature Witness #1) John W. Underwood, President /s/ [illegible] - -------------------------------------------- (Print Name Witness #1) /s/ [illegible] - -------------------------------------------- (Signature Witness #2) /s/ George L. Jenkins - -------------------------------------------- (Print Name Witness #2)
7 8 STATE OF OHIO SS: COUNTY OF FRANKLIN The foregoing instrument was acknowledged before me this ______ day of May, 1999, by ROBERT A. SQUIRES, the PRESIDENT of Neural Applications Corporation, a Delaware corporation, on behalf of the corporation. ---------------------------------------- Notary Public STATE OF OHIO SS: COUNTY OF FRANKLIN The foregoing instrument was acknowledged before me this ______ day of May, 1999, by JOHN W. UNDERWOOD, the PRESIDENT of Systems Alternatives International LLC, a Delaware limited liability company, on behalf of the limited liability company. ---------------------------------------- Notary Public 8 9 CONSENT OF LANDLORD UNDER PRIME LEASE Liberty Growth, L.C., an Iowa limited liability company, as owner and "Landlord" under the Prime Lease, hereby consents to the Sublease attached hereto between Neural Applications Corporation, a Delaware corporation, as "Sublessor", and Systems Alternatives International LLC, a Delaware limited liability company, as "Sublessee", of even date herewith. Except as specifically set forth in the Sublease, the consent to the Sublease shall not be deemed Liberty's consent to any future sublease of the Premises by Sublessor or Sublessee or the assignment of the Prime Lease or the Sublease to any other person and in no event shall Sublessee or Sublessor sublease the Subleased Premises or assign the Prime Lease or the Sublease without seeking Liberty's consent as set forth in the Prime Lease. In the event that the Prime Lease terminates for any reason, this Sublease shall not terminate and shall thereafter be a direct lease for a term of sixty (60) days upon the terms and conditions set forth in this Sublease and the Prime Lease, as the context requires. At the expiration of such 60-day period, this Sublease and all Sublessee's rights in and to the Subleased Premises shall terminate between Liberty and Sublessee with respect to the Subleased Premises. IN WITNESS WHEREOF, Liberty has caused this Consent to be executed as of the day of May 21,1999.
Signed and Acknowledged in the Presence of: LANDLORD: LIBERTY GROWTH, L.C., an Iowa limited liability company By: - -------------------------------------------- ------------------------------------------ (Signature Witness #1) James W. Peterson (Print Name) Barbara J. Fry Title: Member - -------------------------------------------- --------------------------------------- (Print Name Witness #1) - -------------------------------------------- (Signature Witness #2) Staci E. Haynes - -------------------------------------------- (Print Name Witness #2) STATE OF IOWA -------------- SS: COUNTY OF JOHNSON --------------
The foregoing instrument was acknowledged before me this 21st day of May, 1999, by James W. Peterson, the Member of Liberty Growth L.C., an Iowa limited liability company, on behalf of the company. ---------------------------------------- Notary Public, Robert N. Downer 9 10 CONSENT OE LANDLORD UNDER LAND LEASE University of Iowa Reseaxch Park Corporation, an Iowa non-profit corporation, as owner and "Lessor" under its Land Lease dated November 2, 1993 with Liberty Growth, L.C., ("Lessee" under said Land Lease and "Landlord" under the Prime Lease) hereby consents to tile Sublease attached hereto between Neural Applications Corporation, a Delaware corporation, as "Sublessor", and Systems Alternatives International LLC, a Delaware limited liability company, as "Sublessee". Except as specifically set forth in the Sublease, the consent to the Sublease shall not be deemed University of Iowa Research Park Corporation's consent to any future sublease of the Premises by Sublessor or Sublessee or the assignment of the Land Lease, Prime Lease or the Sublease to any other person and in no event shall Sublessee or Sublessor sublease the Subleased Premises or assign the Land Lease, Prime Lease or the Sublease without seeking University of Iowa Research Park Corporation's consent as set forth in the Land Lease. IN WITNESS WHEREOF, the University of Iowa. Research Park Corporation has caused this Consent to be executed as of the 21 day of May 1999. Signed and Acknowledged in the Presence of: University of Iowa Research Park Corporation By: - -------------------------------------------- ------------------------------------------ (Signature Witness #1) W. Bruce Wheaton (Print Name) Diana L. Pavelka Title: Director, UI Oakdale Research Park - -------------------------------------------- --------------------------------------- (Print Name Witness #1) - -------------------------------------------- (Signature Witness #2) Debra S. Eckhoff - -------------------------------------------- (Print Name Witness #2) STATE OF IOWA --------------- SS: COUNTY OF JOHNSON ---------------
The foregoing instrument was acknowledged before me this 21st day of May, 1999, by Bruce Wheaton, the Director of University of Iowa Research Park Corporation, an Iowa non-profit corporation, on behalf of the corporation. ---------------------------------------- Notary Public 10 EX-10.8 28 LEASE DATED 9/30/1999 1 EXHIBIT 10.8 THE ROBERT DOLLAR BUILDING 311 CALIFORNIA STREET SAN FRANCISCO, CALIFORNIA OFFICE LEASE BASIC LEASE INFORMATION DATE: September 30, 1999 LANDLORD: The Robert Dollar Building Associates, Ltd., a California limited partnership TENANT: Stockpoint, Inc., a Delaware corporation TENANT'S ADDRESS FOR NOTICE: BEFORE COMMENCEMENT DATE: 475 Sansome Street, 8th Floor San Francisco, CA 94111 AFTER COMMENCEMENT DATE: The Robert Dollar Building. 311 California Street, Suite 200 San Francisco, CA 94104 LANDLORD'S ADDRESS FOR NOTICES: The Robert Dollar Building Associates, Ltd. c/o Woodmont Real Estate Services 1050 Ralston Avenue Belmont, California 94002 Attn: Stephen M. Hlebasko LEASED PREMISES: Suite 200, The Robert Dollar Building NET RENTABLE AREA OF PREMISES: 8,906 square feet INITIAL TERM: Eighteen (18) months COMMENCEMENT DATE: October 18, 1999 EXPIRATION DATE: Eighteen (18) months after Commencement Date MONTHLY BASE RENT: $30,400.00 BASE YEAR FOR TAXES AND EXPENSES: 2000 TENANT'S PRORATA SHARE: 10.77% EXHIBITS: EXHIBIT A - PREMISES EXHIBIT B - WORK AGREEMENT EXHIBIT C - RULES EXHIBIT D - ESTOPPEL CERTIFICATE LETTER OF CREDIT EACH REFERENCE TO BASIC LEASE INFORMATION IN THE PROVISIONS OF THE LEASE SHALL INCORPORATE THE APPLICABLE BASIC LEASE INFORMATION SPECIFIED HEREIN. IN THE EVENT OF ANY CONFLICT BETWEEN ANY BASIC LEASE INFORMATION AND THE LEASE, THE LEASE SHALL CONTROL. 2 OFFICE BUILDING LEASE TABLE OF CONTENTS ARTICLE 1.........................................................................................................1 Premises and Term..............................................................................................1 ARTICLE 2.........................................................................................................1 Base Rent......................................................................................................1 ARTICLE 3.........................................................................................................1 Additional Rent................................................................................................1 ARTICLE 4.........................................................................................................3 Commencement of Term...........................................................................................3 ARTICLE 5.........................................................................................................4 Condition of Premises..........................................................................................4 ARTICLE 6.........................................................................................................4 Use and Rules..................................................................................................4 ARTICLE 7.........................................................................................................5 Services and Utilities.........................................................................................5 ARTICLE 8.........................................................................................................6 Alterations and Liens..........................................................................................6 ARTICLE 9.........................................................................................................7 Repairs........................................................................................................7 ARTICLE 10........................................................................................................8 Casualty Damage................................................................................................8 ARTICLE 11........................................................................................................8 Insurance, Subrogation, and Waiver of Claims...................................................................8 ARTICLE 12........................................................................................................9 Condemnation...................................................................................................9 ARTICLE 13........................................................................................................9 Return of Possession...........................................................................................9 ARTICLE 14.......................................................................................................10 Holding Over..................................................................................................10 ARTICLE 15.......................................................................................................10 No Waiver.....................................................................................................10 ARTICLE 16.......................................................................................................10 Attorneys' Fees and Jury Trial................................................................................10 ARTICLE 17.......................................................................................................10 Personal Property Taxes, Rent Taxes and Other Taxes...........................................................10 ARTICLE 18.......................................................................................................11 Approvals.....................................................................................................11 ARTICLE 19.......................................................................................................11 Subordination, Attainment and Mortgagee Protection............................................................11 ARTICLE 20.......................................................................................................12 Estoppel Certificate..........................................................................................12 ARTICLE 21.......................................................................................................12 Assignment and Subletting.....................................................................................12 ARTICLE 22.......................................................................................................14 Rights Reserved by Landlord...................................................................................14 ARTICLE 23.......................................................................................................15 Landlord's Remedies...........................................................................................15 ARTICLE 24.......................................................................................................17 Landlord's Right to Cure......................................................................................17 ARTICLE 25.......................................................................................................17 Captions, Definitions and Severability........................................................................17 ARTICLE 26.......................................................................................................20 Conveyance by Landlord and Liability..........................................................................20
i 3 ARTICLE 27.......................................................................................................20 Indemnification...............................................................................................20 ARTICLE 28.......................................................................................................21 Safety and Security Devices, Services and Programs............................................................21 ARTICLE 29.......................................................................................................21 Communications and Computer Lines.............................................................................21 ARTICLE 30.......................................................................................................22 Hazardous Materials...........................................................................................22 ARTICLE 31.......................................................................................................23 Miscellaneous.................................................................................................23 ARTICLE 32.......................................................................................................24 [Intentionally omitted].......................................................................................24 ARTICLE 33.......................................................................................................24 Notices.......................................................................................................24 ARTICLE 34.......................................................................................................24 Real Estate Brokers...........................................................................................24 ARTICLE 35.......................................................................................................24 [Intentionally Omitted].......................................................................................24 ARTICLE 36.......................................................................................................24 Entire Agreement..............................................................................................24 EXHIBIT A........................................................................................................ 1 PREMISES...................................................................................................... 1 EXHIBIT B........................................................................................................ 1 WORK AGREEMENT................................................................................................ 1 EXHIBIT C........................................................................................................ C RULES......................................................................................................... C EXHIBIT D LETTER OF CREDIT
ii 4 OFFICE LEASE THIS LEASE made as of the 30th day of September, 1999, between THE ROBERT DOLLAR BUILDING ASSOCIATES, LTD., a California limited partnership and STOCKPOINT, INC., a Delaware corporation ("Tenant"). ARTICLE 1 PREMISES AND TERM Landlord hereby leases to Tenant and Tenant hereby leases from Landlord that certain space known as Suite 200 ("Premises") described or shown on EXHIBIT A attached hereto, in the building known as THE ROBERT DOLLAR BUILDING ("Building") located at 311 California Street, San Francisco, California ("Property", as further described in Article 25), subject to the provisions herein contained. The term ("Term") of this Lease shall commence on the 18th day of October, 1999 ("Commencement Date"), and end on the 17th day of April, 2001 ("Expiration Date"), unless sooner terminated as provided herein. The Commencement Date shall be subject to adjustment as provided in Article 4. Landlord and Tenant agree that for purposes of this Lease the net rentable area of the Premises is 8,906 square feet and the net rentable area of the Property is 82,699 square feet. Notwithstanding the foregoing, and provided no Default exists or is continuing, both on the date notice is given and on the date such notice is effective, Tenant, upon nine (9) months written notice: (a) may terminate this lease, but in no event prior to October 31, 2000; and (b) may extend, with one or more notices, the Expiration Date, but in no event beyond October 31, 2004. ARTICLE 2 BASE RENT Tenant shall pay Landlord monthly Base Rent of Thirty Thousand Four Hundred and No/100 Dollars ($30,400.00) in advance on or before the first day of each calendar month during the Term, except that Base Rent for the first full calendar month of the Term shall be paid when Tenant executes this Lease. If the Term commences on a day other than the first day of a calendar month, or ends on a day other than the last day of a calendar month, then the Base Rent for any such partial month shall be prorated on the basis of 1/30th of the monthly Base Rent for each day of such month. ARTICLE 3 ADDITIONAL RENT (A) TAXES. Tenant shall pay Landlord an amount equal to Tenant's Prorata Share of Taxes in excess of the amount of Taxes paid by Landlord during the calendar year 2000 ("Base Year"). The terms "Taxes" and "Tenant's Prorata Share" shall have the meanings specified therefor in Article 25. (B) OPERATING EXPENSES. Tenant shall pay Landlord an amount equal to Tenant's Prorata Share of Operating Expenses in excess of the amount of Operating Expenses paid by Landlord during the Base Year. The terms "Operating Expenses" and "Tenant's Prorata Share" shall have the meanings specified therefor in Article 25. (C) MANNER OF PAYMENT. Taxes and Operating Expenses shall be paid in the following manner: (i) Landlord may reasonably estimate in advance the amounts Tenant shall owe for Taxes and Operating Expenses for any full or partial calendar year of the Term. In such event, Tenant shall pay such estimated amounts, on a monthly basis, on or before the first day of each calendar month, together with Tenant's payment of Base Rent. Such estimate may be reasonably adjusted from time to time by Landlord. (ii) Within 120 days after the end of each calendar year, or as soon thereafter as practicable, Landlord shall provide a statement (the "Statement") to Tenant showing: (a) the amount of actual Taxes and Operating Expenses for such calendar year, with a listing of amounts for major categories of Operating Expenses, and such amounts for the Base Years, (b) any amount paid by Tenant towards Taxes and Operating Expenses during 1 5 such calendar year on an estimated basis, and (c) any revised estimate of Tenant's obligations for Taxes and Operating Expenses for the current calendar year. (iii) If the Statement shows that Tenant's estimated payments were less than Tenant's actual obligations for Taxes and Operating Expenses, Tenant shall pay the difference. If the Statement shows an increase in Tenant's estimated payments for the current calendar year, Tenant shall pay the difference between the new and former estimates, for the period from January 1 of the current calendar year through the month in which the Statement is sent. Tenant shall make such payments within thirty (30) days after Landlord sends the Statement. (iv) If the Statement shows that Tenant's estimated payments exceeded Tenant's actual obligations for Taxes and Operating Expenses, Tenant shall receive a credit for the difference against payments of Rent next due. If the Term shall have expired and no further Rent shall be due, Tenant shall receive a refund of such difference within thirty (30) days after Landlord sends the Statement. (v) So long as Tenant's obligations hereunder are not materially adversely affected thereby, the Landlord reserves the right to reasonably change, from time to time, the manner or timing of the foregoing payments. In lieu of providing one Statement covering Taxes and Operating Expenses, Landlord may provide separate statements, at the same or different times. No delay by Landlord in providing the Statement (or separate statements) shall be deemed a default by Landlord or a waiver of Landlord's right to require payment of Tenant's obligations for actual or estimated Taxes or Operating Expenses. In no event shall a decrease in Taxes or Operating Expenses below the Base Year amounts ever decrease the monthly Base Rent or give rise to a credit in favor of Tenant. (D) PRORATION. If the Term commences other than on January 1, or ends other than on December 31, Tenant's obligations to pay estimated and actual amounts towards Taxes and Operating Expenses for such first or final calendar years shall be prorated to reflect the portion of such years included in the Term. Such proration shall be made by multiplying the total estimated or actual (as the case may be) Taxes and Operating Expenses, for such calendar years, as well as the Base Year amounts, by a fraction, the numerator of which shall be the number of days of the Term during such calendar year, and the denominator of which shall be 365. (E) LANDLORD'S RECORDS. Landlord shall maintain records respecting Taxes and Operating Expenses and determine the same in accordance with sound accounting and management practices, consistently applied. Although this Lease contemplates the computation of Taxes and Operating Expenses on a cash basis, Landlord shall make reasonable and appropriate accrual adjustments to ensure that each calendar year, including the Base Years, includes substantially the same recurring items. Landlord reserves the right to change to a full accrual system of accounting so long as the same is consistently applied and Tenant's obligations are not material adversely affected. Tenant or its representative shall have the right to examine such records upon reasonable prior notice specifying such records Tenant desires to examine, during normal business hours at the place or places where such records are normally kept by sending such notice no later than forty-five (45) days following the furnishing of the Statement. Tenant may take exception to matters included in Taxes or Operating Expenses, or Landlord's computation of Tenant's Prorata Share of either, by sending notice specifying such exception and the reasons therefor to Landlord no later than thirty (30) days after Landlord makes such records available for examination. Such Statement shall be considered final, except as to matters to which exception is taken after examination of Landlord's records in the foregoing manner and within the foregoing times. Tenant acknowledges that Landlord's ability to budget and incur expenses depends on the finality of such Statement, and accordingly agrees that time is of the essence of this Paragraph. If Tenant takes exception to any matter contained in the Statement as provided herein, Landlord shall refer the matter to an independent certified public accountant, whose certification as to the proper amount shall be final and conclusive as between Landlord and Tenant. Tenant shall promptly pay the cost of such certification unless such certification determines that Tenant was overbilled by more than five percent (5%). Pending resolution of any such exceptions in the foregoing manner, Tenant shall continue paying Tenant's Prorata Share of Taxes and Operating Expenses in the amounts determined by Landlord, subject to adjustment after any such exceptions are so resolved. (F) RENT AND OTHER CHARGES. Base Rent, Taxes, Operating Expenses, and any other amounts which Tenants is or becomes obligated to pay Landlord under this Lease or other agreement entered in connection herewith, are sometimes herein referred to collectively as "Rent," and all remedies 2 6 applicable to the non-payment of Rent shall be applicable thereto. Rent shall be paid in the lawful currency of the United State of America, to Landlord, in care of Woodmont Real Estate Services, 1050 Ralston Avenue, Belmont, CA 94002, Attn: Tom Robertson, or at such other place as Landlord may designate. Rent shall be paid without any prior demand or notice therefor (except as expressly provided herein) and shall in all events be paid without any deduction, set-off or counterclaim (including, without limitation, the provisions of California Civil Code Sections 1941 and 1942 or any other Law now or hereafter in effect which would give Tenant the right to make repairs at the expense of Landlord or in lieu thereof to vacate the Premises, which rights Tenant expressly waives hereby) and without relief from any valuation or appraisement laws. Landlord and Tenant agree that it would be impossible or extremely impracticable to determine the actual amount of damages Landlord would sustain in the event Tenant fails to pay Rent or additional charges due hereunder within the times required hereunder. Therefore, Landlord and Tenant agree that if Tenant shall fail to pay any Rent or additional charges payable by Tenant hereunder within five (5) days after the due date, Tenant shall pay to Landlord, as liquidated damage to compensate Landlord for its administrative costs resulting from such failure, a late payment charge equal to ten percent (10%) of such unpaid amounts. In addition to such late charge, any Rent not paid more than fifteen (15) days after due shall accrue interest from the due date at the Default Rate, until payment is received by Landlord. Such late payment charge and interest payments shall not be deemed consent by Landlord to late payments, nor a waiver of Landlord's right to insist upon timely payments at any time, nor a waiver of any remedies to which Landlord is entitled as a result of the late payment of Rent. Landlord may apply payments received form Tenant to any obligations of Tenant then accrued, without regard to such obligations as may be designated by Tenant. ARTICLE 4 COMMENCEMENT OF TERM The Commencement Date set forth in Article 1 shall be delayed and Rent shall be abated to the extent that Landlord fails: (i) after October 7, 1999, to provide Tenant eight (8) hours per day access to the Premises for Tenant to install its telephone and LAN wires, only as to the number of days from October 8, 1999 through October 17, 1999 that such access was not provided, or (ii) to deliver possession of the Premises for any other reason, including but not limited to holding over by prior occupants, except to the extent that Tenant, its contractors, agents or employees in any way contribute to either such failures. If Landlord so fails for a thirty (30) day initial grace period, Tenant shall have the right to terminate this Lease by written notice to Landlord any time thereafter. Any such delay in the Commencement Date shall not subject Landlord to liability for loss or damage resulting therefrom, and Tenant's sole recourse with respect thereto shall be the abatement of Rent and right to terminate this Lease as described above. Upon any such termination, Landlord and Tenant shall be entirely relieved of their obligations hereunder, and any Security Deposit (as defined in Article 35) and Rent payments shall be returned to Tenant. During any period that Tenant shall be permitted to enter the Premises prior to the Commencement Date other than to occupy the same (e.g., to perform alterations or improvements), Tenant shall comply with all terms and provisions of this Lease, except those provisions requiring the payment of Rent. Landlord shall permit early entry, provided the Premises are legally available and Landlord has completed any work required under Exhibit B hereto. During such period prior to the Commencement Date that Tenant is provided access to the Premises, Tenant shall use all reasonable efforts to follow the instructions of the existing tenant thereof and to minimize interference with said tenant's business and employees. If such existing tenant shall direct Tenant to leave the Premises, Tenant shall so leave. If Landlord indemnifies said existing tenant for losses and damages, including lost business, due to Tenant's actions or inactions during such early access, and Landlord actually pays such losses and damages, then Tenant shall reimburse Landlord therefor, and such obligation shall constitute Rent hereunder. If the existing tenant does not permit such access, this Lease shall remain in full force and effect, such failure shall operate only to defer the Commencement Date as set forth above, and shall not constitute a default on Landlord's part under this Lease. This lease is conditioned upon Tenant delivering to Landlord: (a) By Noon, October 1, 1999, a letter of comfort from Wells Fargo Bank ("WFB") regarding the Letter of Credit; and (b) By 5:00 p.m., October 5, 1999, the 3 7 Letter of Credit in the form attached hereto, expiring no less than one (1) year after issuance, from a bank reasonably acceptable to Landlord. Landlord accepts WFB. Tenant will use its best efforts to satisfy said conditions. ARTICLE 5 CONDITION OF PREMISES Tenant has inspected the Premises, Property, Systems and Equipment (as defined in Article 25), or has had an opportunity to do so, and agrees to accept the same "as is" without any agreement, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements. ARTICLE 6 USE AND RULES (A) Tenant shall use the Premises for offices (the "Permitted Use") and no other purpose whatsoever, in compliance with all applicable Laws, and without disturbing or interfering with any other tenant or occupant of the Property. Tenant shall not use the Premises in any manner so as to cause a cancellation of Landlord's insurance policies, or an increase in the premiums thereunder. Tenant shall comply with all rules set forth in EXHIBIT C attached hereto (the "Rules"). Landlord shall have the right to reasonably amend such Rules and supplement the same with other reasonable Rules (not expressly inconsistent with this Lease) relating to the Property, or the promotion of safety, care cleanliness or good order therein, and all such amendments or new Rules shall be binding upon Tenant after five (5) days' notice thereof to Tenant. All Rules shall be applied on a non-discriminatory basis, but nothing herein shall be construed to give Tenant or any other Person (as defined in Article 25) any claim, demand or cause of action against Landlord arising out of the violation of such Rules by any other tenant, occupant, or visitor of the Property, or out of the enforcement or waiver of the Rules by Landlord in any particular instance. (B) Landlord shall have the right at any time and from time to time to change, add to, subtract from, or alter any part of the Property, to dedicate portions of the Property for governmental purposes and to convey portions to others, so long as such changes do not materially adversely affect the character of the Building as a whole. Landlord shall not be subject to liability nor shall Tenant be entitled to compensation or diminution or abatement of Rent because of such changes. Landlord shall use reasonable efforts not to interfere unreasonably with the normal business operations of Tenant, but Landlord shall not be liable to Tenant for interference or inconvenience caused by any action of Landlord under the provisions of this Paragraph. Landlord reserves the right, from time to time, to utilize and reserve portions of the Property for kiosks, displays or other uses. (C) Tenant shall be open for business during the entire Term of this Lease and shall conduct its business in a first class and reputable manner. Tenant shall furnish, install and maintain in the Premises all equipment and facilities properly necessary for Tenant's Permitted Use of the Premises. Tenant, at its sole cost and expense, shall comply with all Laws and with requirements of Landlord's insurance underwriters, applicable fire rating bureaus or similar bodies, now or hereafter in effect pertaining to the Premises or Tenant's use or occupancy of the Premises or the acts or omissions of Tenant in the Premises, irrespective of whether such Laws or requirements are foreseen, unforeseen, ordinary, extraordinary or substantial, or whether such compliance is required because of changes in Laws or by expansion and/or modifications of the Premises or the Building or necessitates structural changes or improvements or interferes with the use and enjoyment of the Premises. Landlord makes no representation that Tenant's proposed Permitted Use of the Premises will comply with applicable zoning requirements or other Laws. Tenant, at its sole cost and expense, shall promptly comply with all requirements of all municipal, state, and federal authorities not in force, or which may hereafter be in force relating to, or affecting the condition, use or occupancy of, the Premises. The parties agree that Tenant shall be solely responsible for obtaining, at Tenant's sole cost and expense, a certificate of occupancy and any other governmental approvals as may be imposed or required to enable Tenant to lawfully conduct its business pursuant to Tenant's Permitted Use. Tenant shall have no right, nor shall Landlord have any obligation, to apply for any variances, special use permits, request for zoning change, or any other modification or alteration that would otherwise affect Landlord or alter in any way Landlord's current and permitted use of the Property. Tenant shall conform its Permitted Use so as to not cause any change in occupancy category or group under any applicable building codes or necessitate any alteration or modification of any portion of the Property (whether or not structural in nature). 4 8 (D) Without limiting the generality of the other provisions of this Article 6, Tenant shall not (1) use the Premises for the preparation in any manner of any food or beverages (except as may be permitted in the Rules); (2) cause, maintain, or allow any waste or nuisance in, on or about the Premises; (3) permit on the Premises a substance or material which presents a fire, explosion or other hazard; (4) sell lottery tickets in or from the Premises; (5) conduct sales in or from the Premises unless otherwise so provided under Tenant's Permitted Use; (6) disturb the quiet enjoyment of the Building by another tenant or occupant, or obstruct or interfere with the rights of others; (7) allow the Premises to be used for improper, immoral or objectionable purposes; (8) do any act tending to injure the reputation of the Building; (9) permit noise or odors in the Premises which are objected to by Landlord or by a tenant or an occupant of the Building; or allow noise, vibrations or odors to carry outside the Premises; (10) permit the operation of coin-operated or vending machines or pay telephones on the Premises, other than in areas reserved solely for the use of Tenant's employees; (11) use areas outside the Premises for storage or for any other purpose not otherwise permitted under this Lease; (12) permit the use of the Premises as sleeping or living quarters, or lodging rooms; (13) install radios, televisions or other devices exterior to the Premises or erect an aerial on the roof or exterior walls of the Building; (14) do, omit, or permit to be done or omitted anything which shall cause insurance premiums with respect to all or part of the Building or the Premises to be incurred or insurance coverage to be increased or insurance coverage to be cancelled (Landlord agrees that Tenant's Permitted Use of the Premises pursuant to this Article 6, if in strict conformity with the provisions of the Lease, shall not constitute a violation of this subsection); (15) receive, deliver or remove merchandise, supplies or equipment, or remove or store refuse, other than in areas approved in advance in writing by Landlord; (16) use the Premises or permit anything to be done in, on, or about the Premises which will in any way conflict with any Laws now in force or which may hereafter be enacted or promulgated; or (17) bring into the Premises any chemicals or other items that are included in any list or definition of hazardous chemicals, materials or waste published by any federal, state or local governing or regulatory body, or any such chemicals, materials or waste which would trigger any employee "right-to-know" or notification provisions adopted by any such bodies. ARTICLE 7 SERVICES AND UTILITIES Landlord shall provide during Normal Business Hours (as defined in Article 25) the following services and utilities (the cost of which shall be included in Operating Expenses unless otherwise stated herein or in any separate rider hereto): (A) Electricity for standard building office lighting fixtures, and equipment and accessories customary for offices (up to 215 hours per month) where: (1) the connected electrical load of all the same does not exceed an average of 4 watts per square foot of the Premises (or such lesser amount as may be available, based on the safe and lawful capacity of the existing electrical circuit(s) and facilities serving the Premises), (2) the electricity will be at nominal 120 volts, single phase (or 110 volts, depending on available service in the Building), and (3) the safe and lawful capacity of the existing electrical circuit(s) serving the Premises is not exceeded. (B) Heat to provide a temperature required, in Landlord's reasonable opinion and in accordance with applicable law, for occupancy of the Premises during Normal Business Hours, except on Holidays (as defined in Article 25). Landlord shall not be responsible for inadequate ventilation to the extent the same occurs because Tenant uses any item of equipment consuming more than 500 watts at rated capacity without providing adequate ventilation therefor. (C) Water for drinking, lavatory and toilet purposes at those points of supply provided for the nonexclusive general use of Tenant with other tenants at the Property. (D) Customary office cleaning and trash removal service Monday through Friday (or Sunday through Thursday) in and about the Premises. (E) Operatorless passenger elevator service and freight elevator service (subject to scheduling by Landlord) in common with Landlord and other tenants and their contractors, agents and visitors. (F) In the event any municipal, state, federal or other regulatory body (whether judicial, executive or legislative) imposes mandatory controls on Landlord or the Property (including the common areas) relating to the 5 9 use or conservation of energy or water, gas, light or electricity or the reduction of automobile use or automobile or other emissions, or in the event such a body requests voluntary cutbacks or conservation, or suggests voluntary guidelines for the use of energy or water, gas, light or electricity usage or the reduction of automobile use or automobile or other emissions and Landlord (in its absolute discretion) deems it advisable, appropriate or necessary to comply with such voluntary cutbacks, conservation or guidelines, Landlord may comply with such mandatory or voluntary controls to the extent it can control the use of energy or light, gas, water or electricity at the Property (including the common areas) or the reduction of automobile use or automobile or other emissions. No such compliance shall in any event constitute a partial or complete eviction of Tenant hereunder, nor shall it entitle Tenant to any abatement or mitigation of Rent or other charges, nor shall Landlord in any way be liable for damages or injury caused thereby to Tenant's property, employees, customers, or suppliers. In the event the local trash removal authority requires separation of trash for recycling, Tenant shall comply with all such requirements. Landlord may install and operate meters or any other reasonable system for monitoring or estimating any services or utilities used by Tenant in excess of those required to be provided by Landlord under this Article (including a system for Landlord's engineer to reasonably estimate any such excess usage). If such system indicates such excess services or utilities, Tenant shall pay Landlord's reasonable charges for installing and operating such system and any supplementary ventilation, heat, electrical or other systems or equipment (or adjustments or modifications to the existing Systems and Equipment), and Landlord's reasonable charges for the amount of excess services or utilities used by Tenant. Landlord does not warrant that any services or utilities will be free from shortages, failures, variations, or interruptions caused by repairs, maintenance, replacements, improvements, alterations, changes of service, strikes, lockouts, labor controversies, accidents, inability to obtain services, fuel, steam, water or supplies, governmental requirements or requests, or other causes beyond Landlord's reasonable control. None of the same shall be deemed an eviction or disturbance of Tenant's use and possession of the Premises or any part thereof, or render Landlord liable to Tenant for abatement of Rent, or relieve Tenant from performance of Tenant's obligations under this Lease. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damages. ARTICLE 8 ALTERATIONS AND LIENS Tenant shall make no additions, changes, alterations or improvements (the "Work") to the Premises or the Systems and Equipment (as defined in Article 25) pertaining to the Premises without the prior written consent of Landlord. Landlord may impose reasonable requirements as a condition of such consent including without limitation the submission of plans and specifications for Landlord's prior written approval, obtaining necessary permits, posting bonds, obtaining insurance, prior approval of contractors, subcontractors and suppliers, prior receipt of copies of all contracts and subcontracts, contractor and subcontractor lien waivers, affidavits listing all contractors, subcontractors and suppliers, use of union labor (if Landlord uses union labor), affidavits from engineers acceptable to Landlord stating that the Work will not adversely affect the Systems and Equipment or the structure of the Property, and requirements as to the manner and times in which such Work shall be done. All Work shall be performed in a good and workmanlike manner and all materials used shall be of a quality comparable to or better than those in the Premises and Property and shall be in accordance with plans and specifications approved by Landlord, and Landlord may require that all such Work be performed under Landlord's supervision. In all cases, other than for painting and carpeting, Tenant shall pay Landlord a reasonable fee equal to five percent (5%) of the total cost of the proposed Work to cover Landlord's overhead in reviewing Tenant's plans and specifications and performing any supervision of the Work. If Landlord consents to or supervises the Work, such consent and/or supervision shall not be deemed a warranty as to the adequacy of the design, workmanship or quality of materials, and Landlord hereby expressly disclaims any responsibility or liability for the same. Landlord shall under no circumstances have any obligation to repair, maintain or replace any portion of the Work. Tenant shall keep the Property and Premises free from any mechanic's, materialman's or similar liens or other such encumbrances in connection with any Work on or respecting the Premises not performed by or at the request of Landlord, and shall indemnify and hold Landlord harmless from and against any claims, liabilities, judgments, or costs (including attorneys' fees) arising out of the same or in connection therewith. Tenant shall give Landlord notice at least twenty (20) days prior to the commencement of any Work on the Premises (or such 6 10 additional time as may be necessary under applicable Laws), to afford Landlord the opportunity of posting and recording appropriate notices of non-responsibility. Tenant shall remove any such lien or encumbrance by bond or otherwise within thirty (30) days after written notice by Landlord, and if Tenant shall fail to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof. The amount so paid shall be deemed additional Rent under this Lease payable upon demand, without limitation as to other remedies available to Landlord under this Lease. Nothing contained in this Lease shall authorize Tenant to do any act which shall subject Landlord's title to the Property or Premises to any liens or encumbrances whether claimed by Operation of law or express or implied contract. Any claim to a lien or encumbrance upon the Property or Premises arising in connection with any Work on or respecting the Premises not performed by or at the request of Landlord shall be null and void or, at Landlord's option, shall attach only against Tenant's interest in the Premises and shall in all respects be subordinate to Landlord's title to the Property and Premises. ARTICLE 9 REPAIRS (A) Except for customary cleaning and trash removal provided by Landlord under Article 7, and damage covered under Article 10, Tenant shall keep the Premises in good and sanitary condition, working order and repair (Including without limitation, carpet, wall-covering, doors, plumbing and other fixtures, equipment, alterations and improvements whether installed by Landlord or Tenant). In the event that any repairs, maintenance or replacements are required, Tenant shall promptly arrange for the same either through Landlord for such reasonable charges as Landlord may from time to time establish, or such contractors as Landlord generally uses at the Property, or such other contractors as Landlord shall first approve in writing. Any such repairs or maintenance shall be performed in a first class, workmanlike manner and such repairs, maintenance and replacements shall be of a quality and class equal to or better than the original work or item, subject to approval by Landlord in advance in writing. If Tenant does not promptly make such arrangements and complete such repairs or maintenance in a manner and quality acceptable to Landlord, Landlord may, but need not, make such repairs, maintenance and replacements, and the costs paid or incurred by Landlord therefor shall be reimbursed by Tenant promptly after request by Landlord. Tenant shall indemnify Landlord and pay for any repairs, maintenance and replacements to areas of the Property outside the Premises, caused, in whole or in part, as a result of moving any furniture, fixtures, or other property to or from the Premises, or by Tenant or its employees, agents, contractors, or visitors (notwithstanding anything to the contrary contained in this Lease). Except as provided in the preceding sentence or for damage covered under Article 10, Landlord shall keep the common areas of the Property in good and sanitary condition, working order and repair (the cost of which shall be included in Operating Expenses, as described in Article 25, except as limited therein). (B) Except as otherwise provided in Article 10 relating to destruction or Article 12 relating to a taking by power of eminent domain, there shall be no allowance, abatement or offset of Rent or other charges payable hereunder, or liability to Tenant for diminution of rental value or interference with Tenant's business and no claim by Tenant for eviction from the Premises by reason of inconvenience, annoyance or injury to Tenant arising from any repairs, alterations, replacements or improvements made to the Premises, the Building, the common areas, the Property or any portion thereof by Landlord, its agents, employees or contractors, or by Landlord's mortgagee or by a beneficiary under a deed of trust covering the Premises. To the extent Landlord may be responsible for repairs under this Lease, Landlord shall not be liable to Tenant for failure to make repairs to the Premises, the Building, the common areas, the Property or any portion thereof, unless Landlord has received from Tenant written notice of the need for such repairs and has failed to commence and diligently proceeded to complete such repairs within a reasonably practicable time thereafter. In no event shall Tenant be entitled to make such repairs itself and deduct or offset the cost thereof against the Rent or other charges payable hereunder. Tenant hereby waives all rights to make repairs at the expense of Landlord as provided by any law, statute or ordinance now or hereafter in effect, including, but without limitation, the provisions of Sections 1941 and 1942 of the California Civil Code. (C) Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof except as may be specified in Exhibit B hereto. 7 11 ARTICLE 10 CASUALTY DAMAGE If the Premises or any common areas of the Property providing access thereto shall be damaged by fire or other casualty, Landlord shall use available insurance proceeds to restore the same. Such restoration shall be to substantially the same condition as existed prior to the casualty, except for modifications required by zoning and building codes and other Laws or by any Holder (as defined in Article 25), or any other modifications to the common areas deemed desirable by Landlord (provided access to the Premises is not materially impaired), and except that Landlord shall not be required to repair or replace any of Tenant's furniture, furnishings, fixtures or equipment. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair thereof. However, Landlord shall allow Tenant a proportionate abatement of Rent during the time and to the extent the Premises are unfit for occupancy for the purposes permitted under this Lease and not occupied by Tenant as a result thereof (unless Tenant or its employees or agents caused the damage). Notwithstanding the foregoing to the contrary, Landlord may elect to terminate this Lease by notifying Tenant in writing of such termination within sixty (60) days after the date of damage (such termination notice to include a termination date providing at least ninety (90) days for Tenant to vacate the Premises), if the Property shall be materially damaged by Tenant or its employees or agents, or if the Property shall be damaged by fire or other casualty or cause such that: (a) repairs to the Premises and access thereto cannot reasonably be completed within 120 days after the casualty without the payment of overtime or other premiums, (b) more than 25% of the Premises is affected by the damage, and fewer than 24 months remain in the Term, or any material damage occurs to the Premises during the last 12 months of the Term, (c) any Holder (as defined in Article 25) shall require that the insurance proceeds or any portion thereof be used to retire the Mortgage debt (or shall terminate the ground lease, as the case may be), or the damage is not fully covered by Landlord's insurance policies, or (d) the cost of the repairs, alterations, restoration or improvement work would exceed 25% of the replacement value of the Building, or the nature of such work would make termination of this Lease necessary or convenient. Tenant agrees that Landlord's obligation to restore, and the abatement of Rent provided herein, shall be Tenant's sole recourse in the event of such damage, and waives any other rights Tenant may have under any applicable Law to terminate the Lease by reason of damage to the Premises or Property, including all rights under California Civil Code, Sections 1932(2), 1933(4), and 1942, as the same may be modified or replaced hereafter. Tenant acknowledges that this Article represents the entire agreement between the parties respecting damage to the Premises or Property. ARTICLE 11 INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS (A) Tenant shall maintain during the Term comprehensive (or commercial) general liability insurance, with limits of not less than Two Million Dollars ($2,000,000) combined single limit for personal injury, bodily injury or death, or property damage or destruction (including loss of use thereof) for any one occurrence. Such insurance shall be on an occurrence basis, shall name Landlord, San Francisco Property Company-Pacific, and Trans-Pacific Partners Company as additional insureds and shall include endorsements for Tenant's indemnity obligations hereunder. Tenant shall also maintain during the Term workers' compensation insurance as required by statute, and primary, noncontributory, "all-risk" property damage insurance covering Tenant's personal property, business records, fixtures and equipment, for damage or other loss caused by fire or other casualty or cause including, but not limited to, vandalism and malicious mischief, theft, water damage of any type (including sprinkler leakage, bursting or stoppage of pipes), explosion, business interruption (in an amount sufficient to pay at least twelve (12) months Rent), and other insurable risks in amounts not less than the full insurable replacement value of such property and full insurable value of such other interests of Tenant (subject to reasonable deductible amounts of not more than Five Thousand Dollars ($5,000)). (B) Tenant shall provide Landlord with certificates evidencing such coverage (and, with respect to liability coverage, showing Landlord, San Francisco Property Company-Pacific, and Trans-Pacific Partners Company as additional insureds) prior to the Commencement Date, which shall state that such insurance coverage may not be changed or cancelled without at least thirty (30) days' prior written notice to Landlord, and Tenant shall provide renewal certificates to Landlord at least thirty (30) days prior to expiration of such policies. Landlord may periodically, but not more often than every five (5) years, require that Tenant reasonably increase the aforementioned coverage. Except as provided to the contrary herein, any insurance carried by Landlord or Tenant 8 12 shall be for the sole benefit of the party carrying such insurance. Any insurance policies hereunder may be "blanket policies." All insurance required hereunder shall be provided by responsible insurers and Tenant's insurer shall be reasonably acceptable to Landlord. By this Article, Landlord and Tenant intend that their respective property loss risks shall be borne by their respective insurance carriers to the extent above provided, and Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a property loss to the extent that such coverage is agreed to be provided hereunder. The parties each hereby waive all rights and claims against each other for such losses, and waive all rights of subrogation of their respective insurers, provided such waiver of subrogation shall not affect the right of the insured to recover thereunder. The parties agree that their respective insurance policies are now, or shall be, endorsed such that said waiver of subrogation shall not affect the right of the insured to recover thereunder, so long as no material additional premium is charged therefor. ARTICLE 12 CONDEMNATION If the whole or any material part of the Premises or Property shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises or Property, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to terminate this Lease upon ninety (90) days' written notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking, condemnation, reconfiguration, vacation, deed or other instrument. Tenant shall have reciprocal termination rights if the whole or any material part of the Premises is permanently taken, or if access to the Premises is permanently materially impaired. Landlord shall be entitled to receive the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant's personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Term, and for moving expenses (so long as such claim does not diminish or delay the award available to Landlord or any Holder, and such claim is payable separately to Tenant). All Rent shall be apportioned as of the date of such termination, or the date of such taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. ARTICLE 13 RETURN OF POSSESSION At the expiration or earlier termination of this Lease or Tenant's right of possession, Tenant shall surrender possession of the Premises in the condition required under Article 9, ordinary wear and tear excepted, and shall surrender all keys, any key cards, and any parking stickers or cards, to Landlord, and advise Landlord as to the combination of any locks or vaults then remaining in the Premises, and shall remove all trade fixtures and personal property. All obligations or rights of either party arising during or attributable to the period ending upon expiration or earlier termination of this Lease (including, without limitation, the indemnity obligations in Article 27), and all obligations or rights of either party hereunder expressly arising on or following such expiration or earlier termination (including without limitation the provisions of this Article), shall survive such expiration or earlier termination. All improvements, fixtures, and other items in or upon the Premises (except trade fixtures and personal property belonging to Tenant), whether installed by Tenant or Landlord, shall be Landlord's property and shall remain upon the Premises, all without compensation, allowance or credit to Tenant. However, if prior to such termination or within ten (10) days thereafter Landlord so directs by written notice, Tenant shall promptly remove such of the foregoing items as are designated in such notice and restore the Premises to the condition in which it existed prior to the installation of such items. If Tenant shall fail to perform any repairs or restoration, or fail to remove any items from the Premises required hereunder, Landlord may do so, and Tenant shall pay Landlord the cost thereof upon demand. All property removed from the Premises by Landlord pursuant to any provisions of this Lease or any Law may be handled or stored by Landlord at Tenant's expense, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. All property not removed from the Premises or retaken from storage by Tenant within thirty (30) days after expiration or earlier termination of this Lease or Tenant's right to possession shall, at Landlord's option, be conclusively deemed to have been conveyed by Tenant to Landlord as if by bill of sale without payment by Landlord. Unless prohibited by applicable Law, Landlord shall have a lien against such property for the costs incurred in removing and storing the same. Notwithstanding anything to the contrary contained in this Lease (but subject to any obligation of Tenant under this Lease to repair damage 9 13 caused by the removal of Tenant's fixtures, equipment or other property as provided for herein), Tenant shall surrender the Premises in broom clean condition subject to normal wear and tear and to damage caused by casualty. ARTICLE 14 HOLDING OVER Unless Landlord expressly agrees otherwise in writing, Tenant shall pay Landlord one hundred fifty percent (150%) of the amount of Rent then applicable, or the highest amount permitted by Law, whichever shall be less, for each month (and the full such monthly amount for any partial month) Tenant shall retain possession of the Premises or any part thereof after expiration or earlier termination of this Lease, together with all damages sustained by Landlord on account thereof. The foregoing provisions shall not serve as permission for Tenant to hold-over, nor serve to extend the Term (although Tenant shall remain bound to comply with all provisions of this Lease until Tenant vacates the Premises, and shall be subject to the provisions of Article 13). Notwithstanding the foregoing to the contrary, at any time before or after expiration or earlier termination of the Lease, Landlord may serve written notice to Tenant, advising Tenant of the amount of Rent and other terms required should Tenant desire to enter a month-to-month tenancy. If Tenant shall hold over more than one (1) full calendar month after such notice, Tenant shall thereafter be deemed a month-to-month tenant, on the terms and provisions of this Lease then in effect, as modified by Landlord's notice (except that Tenant shall not be entitled to any renewal or expansion rights contained in this Lease or any amendments hereto). ARTICLE 15 NO WAIVER No provision of this Lease will be deemed waived by either party unless expressly waived in writing signed by the waiving party. No waiver shall be implied by delay or any other act or omission of either party. No waiver by either party of any provision of this Lease shall be deemed a waiver of such provision with respect to any subsequent matter relating to such provision, and Landlord's consent or approval respecting any action by Tenant shall not constitute a waiver of the requirement for obtaining Landlord's consent or approval respecting any subsequent action. Acceptance of Rent by Landlord shall not constitute a waiver of any breach by Tenant of any term or provisions of this Lease. No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord's right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the full amount due. The acceptance of Rent or of the performance of any other term or provision from any Person other than Tenant, including any Transferee (as defined in Article 21), shall not constitute a waiver of Landlord's right to approve any Transfer (as defined in Article 21). ARTICLE 16 ATTORNEYS' FEES AND JURY TRIAL In the event of any litigation between the parties, the prevailing party shall be entitled to obtain, as part of the judgment, all reasonable attorneys' fees, costs and expenses incurred in connection with such litigation, except as may be limited by applicable Law. In the interest of obtaining a speedier and less costly hearing of any dispute, the parties hereby each irrevocably waive the right to trial by jury. ARTICLE 17 PERSONAL PROPERTY TAXES, RENT TAXES AND OTHER TAXES Tenant shall pay prior to delinquency all taxes, assessments, license fees, charges or other governmental impositions assessed against or levied or imposed upon Tenant's business operations, or upon Tenant's leasehold interest, or Tenant's fixtures, furnishings, equipment and personal property located in the Premises, and any Work to the Premises under Article 8 or the Work Agreement. Whenever possible, Tenant shall cause all such items to be assessed and billed separately from the Property of Landlord. In the event any such items shall be assessed and billed with the property of Landlord, Tenant shall pay Landlord its share of such taxes, charges or other governmental impositions within thirty (30) days after Landlord delivers a statement and a copy of the assessment or other documentation showing the amount of such impositions applicable to Tenant's property. Tenant shall pay any 10 14 rent tax or sales tax, service tax, transfer tax or value added tax, or any other applicable tax on the Rent or services herein or otherwise respecting this Lease. ARTICLE 18 APPROVALS Unless expressly provided in this Lease to the contrary (and except for matters affecting the structure, safety or security of the Property, or the appearance of the Property from any common or public areas), whenever Landlord's approval or consent is expressly required under this Lease (including Article 21) or any other agreement between the parties, Landlord shall not unreasonably withhold or delay such approval or consent (reasonableness shall be a condition to Landlord's enforcement of such consent or approval requirement, and not a covenant). If Tenant believes Landlord has unreasonably withheld or delayed giving such approval or consent, Tenant's sole and exclusive remedy shall be to request a court of competent jurisdiction to grant injunctive relief to compel Landlord to grant such approval or consent, and Tenant expressly waives any and all rights it may have, now or in the future, to bring an action or make a claim for any other relief, including without limitation declaratory judgment, damages or other monetary relief including, but not limited to, punitive damages. ARTICLE 19 SUBORDINATION, ATTAINMENT AND MORTGAGEE PROTECTION (A) SUBORDINATION AND ATTORNMENT. This Lease is subject and subordinate to all Mortgages (as defined in Article 25) now or hereafter placed upon the Property, and all other encumbrances and matters of public record applicable to the Property. If any foreclosure proceedings are initiated by any Holder (as defined in Article 25) or a deed in lieu of such foreclosure is granted, Tenant agrees, upon written request of any such Holder, purchaser at foreclosure sale or grantee of a deed in lieu of foreclosure, to attorn and pay Rent to such party and to execute and deliver any instruments necessary or appropriate to evidence or effectuate such attornment (provided such Holder or purchaser or grantee shall agree to accept this Lease and not disturb Tenant's occupancy, and so long as Tenant does not default and fail to cure within the time permitted hereunder). However, in the event of attornment, no Holder, purchaser at foreclosure sale or grantee of a deed in lieu of foreclosure shall be: (i) liable for any act or omission of Landlord or subject to any offsets or defenses which Tenant might have against Landlord (prior to such party becoming Landlord under such attornment), (ii) liable for any security deposit or bound by any prepaid Rent, in excess of Rent for the month in which such party becomes Landlord under such attornment, not actually received by such party, or (iii) bound by any future modification of this Lease not consented to by such party. Any Holder may elect to make this Lease prior to the lien of its Mortgage by giving written notice to Tenant, and if the Holder of any prior Mortgage shall require, this Lease shall be prior to any subordinate Mortgage. (B) MORTGAGEE PROTECTION. Notwithstanding anything herein to the contrary, Tenant shall not have any duty to send any notice referred to in Paragraphs (i) and (ii) of this Article 19, Section (B) to any Holder who does not by written notice to Tenant specify the address to which copies are to be sent. All notices and copies of notices required to be sent or delivered pursuant to Paragraphs (i) and (ii) of this Article 19, Section (B) shall be sent in the same manner as notices otherwise are to be sent under the terms of this Lease. Any Holder's address for receipt of notices may be changed by written notice to Tenant. (i) Tenant shall send to all Holders a copy of all notices of default sent by Tenant to Landlord. (ii) Notwithstanding anything to the contrary contained in the Lease and subject to any limitation on Tenant's rights to terminate the Lease otherwise contained in the Lease, Tenant may seek to terminate the Lease pursuant to any express provision therein contained only after Tenant has sent to each Holder a written notice specifying the reason for such purported termination and: (a) In the event such reason constitutes a failure by Landlord to pay any funds to Tenant or to any other party, no such Holder cures such failure within thirty (30) days after receipt by all Holders of the written notice of default from Tenant; 11 15 (b) In the event of any other reason which may be specified in the Lease susceptible of being cured by any Holder, no Holder commences within thirty (30) days after receipt by all Holders of written notice of such reason from Tenant the work of curing such matter and carries the same to completion with all reasonable dispatch. So long as any Holder is proceeding diligently pursuant to any of the provisions of this Paragraph (ii) or is otherwise attempting to remedy the situation giving rise to Tenant's right to terminate the Lease, Tenant's rights so to terminate the Lease shall be suspended. Once the Holder has so proceeded, Tenant may not commence any proceeding or other efforts to terminate the Lease without prior written notice to all Holders. (iii) Any Holder shall have the right to perform any obligations of Landlord under the Lease, and Tenant shall accept such performance by or at the instance of any Holder as if the same had been made by Landlord. Subject to the provisions of Paragraph (ii) above, no default shall be deemed to exist under the Lease if proceedings shall in good faith have been commenced promptly to rectify the same and prosecuted to completion with diligence. (iv) Nothing herein contained shall be deemed to require any Holder to continue with any foreclosure or any other proceedings against Landlord's interest or with efforts to obtain a deed in lieu of foreclosure or, once having obtained possession of the premises, to continue in possession thereof. (v) Landlord and Tenant shall cooperate and agree to include in the Lease by suitable amendment from time to time any provision which may reasonably be requested by any proposed Holder for purposes of implementing the lender protection provisions herein contained. ARTICLE 20 ESTOPPEL CERTIFICATE Tenant shall from time to time, within ten (10) days after written request from Landlord, execute, acknowledge and deliver a statement in the form of Exhibit D attached hereto (i) certifying that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect (or, if this Lease is claimed not be in force and effect, specifying the grounds therefor) and any dates to which the Rent has been paid in advance, and the amount of any Security Deposit, (ii) acknowledging that there are not any uncured defaults on the part of Landlord hereunder (or specifying such defaults if any are claimed), and (iii) certifying such other matters as Landlord may reasonably request, or as may be requested by Landlord's current or prospective Holders, insurance carriers, auditors, or prospective purchasers. Any such statement may be relied upon by any such parties. If Tenant shall fail to execute and return such statement within the time required herein, Landlord acting in good faith shall be authorized as Tenant's attorney-in-fact to execute such statement on behalf of Tenant, and Tenant shall be deemed to have agreed with the matters set forth therein. ARTICLE 21 ASSIGNMENT AND SUBLETTING (A) TRANSFERS. Tenant shall not, without the prior written consent of Landlord, which consent shall be given only upon the satisfaction of the conditions contained in this Article 21 as set forth below: (i) assign, mortgage, pledge, hypothecate, encumber, permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, by operation of law or otherwise, (ii) sublet the Premises or any part thereof, or (iii) permit the use of the Premises by any Persons (as defined in Article 25) other than Tenant and its employees (all of the foregoing are hereinafter sometimes referred to collectively as "Transfers" and any Person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a "Transferee"). If Tenant shall desire Landlord's consent to any Transfer, Tenant shall notify Landlord in writing, which notice shall include: (a) the proposed effective date (which shall not be less than fifteen (15) business days nor more than one hundred eighty (180) days after Tenant's notice), (b) the portion of the Premises to be Transferred (herein called the "Subject Space"), (c) the terms of the proposed Transfer and the consideration therefor, the name and address of the proposed Transferee, and a copy of all documentation pertaining to the proposed Transfer, (d) current, audited financial statements of the proposed Transferee certified by an officer, partner or owner thereof, and any other information to enable Landlord to determine the financial responsibility, character, and reputation of the proposed Transferee, nature of such Transferee's business and prior experience in owning and operating other businesses, (e), the proposed use of the 12 16 Subject Space by the proposed Transferee, and (f) such other information as Landlord may reasonably require. Any Transfer made without complying with this Article shall, at Landlord's option, be null, void and of no effect (unless waived in writing by Landlord), or shall constitute a Default under this Lease. Whether or not Landlord shall consent to the Transfer and to the Transferee, Tenant shall pay: (i) Five Hundred Dollars ($500) towards Landlord's review and processing expenses at such time as the request is made, and (ii) any reasonable legal fees incurred by Landlord, within thirty (30) days after written request by Landlord. (B) APPROVAL. Landlord will not unreasonably withhold its consent to any proposed Transfer of the Subject Space to the Transferee on the terms specified in Tenant's notice, provided that the following conditions are satisfied: (i) Transferee is of a character or reputation or engaged in a business which is consistent with the quality of the Property and would not be a significantly less prestigious occupant of the Property than Tenant, (ii) Transferee intends to use the Subject Space for purposes which are permitted under this Lease, (iii) the Subject Space is not less than the entire area of the Premises; provided, however, that Landlord may in its sole and absolute discretion permit a Transfer of less than all of the Premises subject to such conditions Landlord deems applicable, including without limitation the condition that the Subject Space be regular in shape with appropriate means of ingress and egress suitable for normal renting purposes, (iv) Transferee is not a governmental agency or instrumentality, or a Person with whom Landlord or any agent of Landlord has solicited or is negotiating with as a potential tenant at the Property, (v) Transferee has a reasonable financial condition in relation to the obligations to be assumed in connection with the Transfer, (vi) Tenant is not in Default hereunder either at the time Tenant requests consent to the proposed Transfer or on the effective date of the Transfer, and (vii) Tenant and Transferee execute documentation concerning the Transfer which is reasonably acceptable to Landlord, including without limitation a sublease or assignment and a Landlord's consent on Landlord's form, all of which shall be delivered to Landlord prior to the Transfer. Subject to the satisfaction of the foregoing conditions, Landlord's consent to any Transfer shall not be unreasonably withheld. (C) TRANSFER PREMIUM. If Landlord consents to a Transfer and as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay Landlord fifty percent (50%) of any Transfer Premium derived by Tenant from such Transfer. "Transfer Premium" shall mean all rent, additional rent or other consideration paid by such Transferee in excess of the Rent payable by Tenant under this Lease (on a monthly basis during the Term, and on a per rentable square foot basis, if less than all of the Premises is transferred), after deducting the reasonable expenses incurred by Tenant for any changes, alterations and improvements to the Premises, any other economic concessions or services provided to Transferee, and any customary brokerage commissions paid in connection with the Transfer. If part of the consideration for such Transfer shall be payable other than in cash, Landlord's share of such non-cash consideration shall be in such form as is reasonably satisfactory to Landlord. The percentage of the Transfer Premium due Landlord hereunder shall be paid within ten (10) days after Tenant receives any Transfer Premium from the Transferee. (D) RECAPTURE. Notwithstanding anything to the contrary contained in this Article, Landlord shall have the option, by giving written notice to Tenant within fifteen (15) business days after receipt of Tenant's notice of any proposed Transfer, to recapture the Subject Space. Such recapture notice shall cancel and terminate this Lease with respect to the Subject Space as of the date stated in Tenant's notice as the effective date of the proposed Transfer (or, at Landlord's option, shall caused the Transfer to be made to Landlord or its agent, in which case the parties shall execute the Transfer documentation promptly thereafter). If this Lease shall be cancelled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, this Lease as so amended shall continue thereafter in full force and effect and, upon request of either party, the parties shall execute written confirmation of the same. (E) TERMS OF CONSENT. If Landlord consents to a Transfer: (i) the terms and conditions of this Lease, including among other things Tenant's liability for the Subject Space, shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) no Transferee shall succeed to any rights provided in this Lease or any amendment hereto to extend the Term of this Lease, expand the Premises, or lease additional space, any such rights being deemed personal to Tenant, (iv) Tenant shall deliver to Landlord promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, and (v) Tenant shall furnish, upon Landlord's request, a complete statement certified by an independent certified public accountant, or Tenant's 13 17 chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive from such Transfer. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer and shall have the right to make copies thereof. If the Transfer Premium respecting any Transfer shall be found understated, Tenant shall within thirty (30) days after demand pay the deficiency, and if understated by more than two percent (2%), Tenant shall pay Landlord's costs of such audit. Any sublease hereunder shall be subordinate and subject to the provisions of this Lease, and if this Lease shall be terminated during the term of any sublease, Landlord shall have the right to: (aa) treat such sublease as cancelled and repossess the Subject Space by any lawful means, or (bb) require that such subtenant attorn to and recognize Landlord as its landlord under any such sublease. If Tenant shall Default and fail to cure within the time permitted for cure under Article 23(A), Landlord is hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to make all payments under or in connection with the Transfer directly to Landlord (which Landlord shall apply towards Tenant's obligations under this Lease) until such Default is cured. (F) CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer" shall also include (i) if Tenant is a partnership, the withdrawal or change (voluntary, involuntary or by operation of law) of a majority of the partners, or a transfer of a majority of partnership interests, within a twelve (12) month period, or the dissolution of the partnership, or (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), the dissolution, merger, consolidation or other reorganization of Tenant, or (iii) within a twelve (12) month period: (aa) the sale or other transfer of more than an aggregate of fifty percent (50%) of the voting shares of Tenant (other than to immediate family members by reason of gift of death or (bb) the sale, mortgage, hypothecation or pledge of more than an aggregate of fifty percent (50%) of Tenant's net assets. ARTICLE 22 RIGHTS RESERVED BY LANDLORD Except to the extent expressly limited herein, Landlord reserves full rights to control the Property (which rights may be exercised without subjecting Landlord to claims for constructive eviction, abatement of Rent, damages or other claims of any kind), including without limitation the following rights: (A) To change the name or street address of the Property; install and maintain signs on the exterior and interior of the Property; retain at all times, and use in appropriate instances, keys to all doors within and into the Premises; grant to any Person the right to conduct any business or render any service at the Property, whether or not it is the same or similar to Tenant's Permitted Use; and have access for Landlord and other tenants of the Property to any mail chutes located on the Premises according to the rules of the United States Postal Service. (B) To enter the Premises at reasonable hours for reasonable purposes, including inspection and the supplying of cleaning service or other services to be provided Tenant hereunder; to show the Premises to current and prospective mortgage lenders, ground lessors, insurers, and prospective purchasers, tenants and brokers, at reasonable hours; and, if Tenant shall abandon the Premises at any time, or shall vacate the same during the last six (6) months of the Term, to decorate, remodel, repair, or alter the Premises. (C) To limit or prevent access to the Property, shut down elevator service, activate elevator emergency controls, or otherwise take such action or preventative measure deemed necessary by Landlord for the safety of tenants or other occupants of the Property or the protection of the Property and other property located thereon or therein, in case of fire, invasion, insurrection, riot, civil disorder, public excitement or other dangerous condition, or threat thereof. (D) To decorate and to make alterations, additions and improvements, structural or otherwise, in or to the Property or any part thereof, and any adjacent building, structure, parking facility, land, street or alley (including without limitation changes and reductions in corridors, lobbies, parking facilities and other public areas and the installation of kiosks, planters, sculptures, displays, escalators, mezzanines, and other structures, facilities, amenities and features therein, and changes for the purpose of connection with or entrance into or use of the Property in conjunction with any adjoining or adjacent building or buildings, now existing or hereafter constructed). In connection with such matters, or with any other repairs, maintenance, improvements or alterations in or about the Property, Landlord may erect scaffolding and other structures reasonably required, and during such operations may 14 18 enter upon the Premises and take into and upon or through the Premises all materials required to make such repairs, maintenance, alterations or improvements, and may close public entry ways, other public areas, restrooms, stairways or corridors. (E) To substitute for the Premises other premises (herein referred to as the "new premises") at the Property provided: (i) the new premises shall be similar to the Premises in area, (ii) Landlord shall give Tenant at least thirty (30) days' written notice before making such change, and the parties shall execute an amendment to the Lease confirming the change within thirty (30) days after either party shall request the same; and (iii) if Tenant shall already have taken possession of the Premises: (aa) Landlord shall pay the direct, out-of-pocket, reasonable expenses of Tenant in moving from the Premises to the new premises and improving the new premises so that they are substantially similar to the Premises, and, (bb) such move shall be made during evenings, weekends, or otherwise so as to incur the least inconvenience to Tenant. In connection with entering the Premises to exercise any of the foregoing rights, Landlord shall (i) provide reasonable advance written or oral notice to Tenant's on-site manager or other appropriate person (except in emergencies, or for routine cleaning or other routine matters), and (ii) take reasonable steps to minimize any interference with Tenant's business. ARTICLE 23 LANDLORD'S REMEDIES (A) DEFAULT. The occurrence of any one or more of the following events shall constitute a "Default" by Tenant which, if not cured within any applicable time permitted for cure below, shall give rise to Landlord's remedies set forth in Paragraph (B) below: (i) failure by Tenant to make when due any payment of Rent; (ii) failure by Tenant to observe or perform any of the terms or conditions of this Lease to be observed or performed by Tenant (other than the payment of Rent) unless such failure is cured within thirty (30) days after written notice by Landlord to Tenant (or such shorter period expressly provided elsewhere in this Lease); (iii) failure by Tenant to comply with the Rules, unless such failure is cured within five (5) days after notice; (iv) vacation of all or a substantial portion of the Premises for more than thirty (30) consecutive days or the failure to take possession of the Premises within sixty (60) days after the Commencement Date; (v) either (aa) making by Tenant or any guarantor of this Lease ("Guarantor") of any general assignment for the benefit of creditors, or (bb) filing by or against Tenant or any Guarantor of a petition to have Tenant or such Guarantor adjudged a bankrupt or a petition for reorganization or arrangement under any Law relating to bankruptcy (unless, in the case of a petition filed against Tenant or such Guarantor, the same is dismissed within sixty (60) days), or (cc) appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located on the Premises or of Tenant's interest in this Lease (unless possession is restored to Tenant within thirty (30) days), or (cc) appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located on the Premises or of Tenant's interest in this Lease (unless possession is restored to Tenant within thirty (30) days), or (dd) attachment, execution or other judicial seizure of substantially all of Tenant's assets located on the Premises or of Tenant's interest in this Lease, or (ee) Tenant's or any Guarantor's convening of a meeting of its creditors or any class thereof for the purpose of effecting a moratorium upon or composition of its debts, or (ff) Tenant's or any Guarantor's insolvency or admission of an inability to pay its debts as they mature; (vi) any material misrepresentation herein, or material misrepresentation or omission in any financial statements or other materials provided by Tenant or any Guarantor in connection with negotiating or entering this Lease or in connection with any Transfer under Article 21; (vii) Tenant's failure to deliver, within thirty (30) days of then extant expiration date, a one (1) year extension to the Letter of Credit; or (viii) failure by Tenant to cure within any applicable times permitted thereunder any default under any other lease for space at the Property, now or hereafter entered into by Tenant (and any Default hereunder not cured within the times permitted for cure herein shall, at Landlord's election, constitute a default under any such other lease or leases). Failure by Tenant to comply with the same term or condition of this Lease on three (3) occasions during any twelve (12) month period shall cause any failure to comply with such term or condition during the succeeding twelve (12) month period, at Landlord's option, to constitute an incurable Default, if Landlord has given Tenant notice of each such failure within ten (10) days after each such failure occurs. The notice and cure periods provided herein are in lieu of, and not in addition to, any notice and cure periods provided by Law. (B) REMEDIES. In the event of any Default by Tenant as provided in Article 23(A) above, Landlord may, at any time thereafter, with or without notice or demand and without limiting Landlord in the exercise of a 15 19 right or remedy which Landlord may have by reason of such Default and in addition to any other right or remedy Landlord may have at law or in equity (all of which remedies shall whenever possible be deemed to be cumulative and not exclusive) exercise any or all of the following remedies: (i) Terminate this Lease and recover damages as provided by California Civil Code Section 1951.2, including without limitation all Costs of Reletting (as defined in Paragraph (D) below) and recovery of the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of Rent loss for the same period that the Tenant proves could have been reasonably avoided, as computed pursuant to subsection (b) of California Civil Code Section 1951.2. (ii) Continue this Lease in effect even though Tenant has breached the Lease and abandoned the Premises and enforce all of Landlord's rights and remedies under this Lease, as provided by California Civil Code Section 1951.4, including the right to recover Rent as it becomes due for so long as Landlord does not terminate Tenant's right to possession. Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of Tenant's right to possession. (iii) Following Tenant's vacation or abandonment of the Premises or issuance of a court order or judgment giving Landlord the right to possession of the Premises, enter the Premises and remove therefrom all persons not claiming rights as tenants and all property, and store such property in a public warehouse or elsewhere at the cost and expense of and for the account of Tenant. In the event that Tenant shall not immediately pay the cost of storage of such property after the same has been stored for a period of thirty (30) days or more, Landlord may sell any or all such property as a public or private sale in such manner and at such times and places as Landlord may deem proper, without notice to or demand upon Tenant, and apply the proceeds therefrom pursuant to applicable California law. (iv) Have a receiver appointed for Tenant, upon application by Landlord: (aa) to take possession of the Premises; (bb) to apply any Rent collected from the Premises first to the costs of such receivership, then to all amounts (other than Rent) owing under this Lease, and then to Rent owing under this Lease; and (cc) to exercise all other rights and remedies granted to Landlord pursuant to Article 23(B)(iii) above. The remedies set forth in this Article 23(B) shall be subject to applicable law including, but not limited to, the unlawful detainer statutes of the State of California. (C) SPECIFIC PERFORMANCE AND COLLECTION OF RENT. Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Paragraph (B) above or any Law or other provision of this Lease), without prior demand or notice except as required by applicable Law: (i) to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof, and (ii) to sue for and collect any unpaid Rent which has accrued as provided in Paragraph (B) above. (D) CERTAIN DEFINITIONS. "Costs of Re-Letting" shall include, without limitation, all reasonable costs and expenses incurred by Landlord for any repairs, maintenance, changes, alterations and improvements to the Premises, brokerage commissions, advertising costs, attorneys' fees, any customary free rent periods or credits, tenant improvement allowances, take-over lease obligations and other customary, necessary or appropriate economic incentives required to enter leases with Replacement Tenants, and costs of collecting rent from Replacement Tenants. "Replacement Tenants" shall mean any Persons (as defined in Article 25) to whom Landlord relets the Premises or any portion thereof pursuant to this Article. (E) OTHER MATTERS. No re-entry or repossession, repairs, changes, alterations and additions, reletting, acceptance of keys from Tenant, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant's right to possession, or accept a surrender of the Premises, nor shall the same operate to release the Tenant in whole or in part from any of Tenant's obligations hereunder, unless express written notice of such intention is sent by Landlord or its agent to Tenant. To the fullest extent permitted by Law, all rent and other consideration paid by any Replacement Tenants shall be applied: first, to the Costs of Re-Letting, second, to the payment of any Rent theretofore accrued, and the residue, if any, shall be held by Landlord and 16 20 applied to the payment of other obligations of Tenant to Landlord as the same become due (with any remaining residue to be retained by Landlord). Rent shall be paid without any prior demand or notice therefor (except as expressly provided herein) and without any deduction, set-off or counterclaim, or relief from any valuation or appraisement laws. Landlord may apply payments received from Tenant to any obligations of Tenant then accrued, without regard to such obligations as may be designated by Tenant. Landlord shall be under no obligation to observe or perform any provision of this Lease on its part to be observed or performed which accrues after the date of any Default by Tenant hereunder unless and until the Default has been cured within the times permitted hereunder. The times set forth herein for the curing of Defaults by Tenant are of the essence of this Lease. Tenant hereby irrevocably waives any right otherwise available under any Law to redeem or reinstate this Lease. (F) LETTER OF CREDIT. If Landlord draws against the Letter of Credit, Landlord shall, immediately upon final determination of its full remedies and damages hereunder, return the excess, if any, of such drawn amount over said remedies and damages. ARTICLE 24 LANDLORD'S RIGHT TO CURE If Landlord shall fail to perform any term or provision under this Lease required to be performed by Landlord, Landlord shall not be deemed to be in default hereunder nor subject to any claims for damages of any kind, unless such failure shall have continued for a period of thirty (30) days after Tenant delivers written notice thereof to Landlord; provided, however, if the nature of Landlord's failure is such that more than thirty (30) days are reasonably required in order to cure, Landlord shall not be in default if Landlord commences to cure such default within such thirty (30) day period, and thereafter reasonably seeks to cure such default to completion. The aforementioned periods of time permitted for Landlord to cure shall be extended for any period of time during which Landlord is delayed in, or prevented from, curing due to fire or other casualty, strikes, lock-outs or other labor troubles, shortages of equipment or materials, governmental requirements, power shortages or outages, acts or omissions by Tenant or other Persons, and other causes beyond Landlord's reasonable control. If Landlord shall fail to cure within the times permitted for cure herein, Landlord shall be subject to such remedies as may be available to Tenant (subject to the other provisions of this Lease); provided, however, in recognition that Landlord must receive timely payments of Rent and operate the Property, Tenant shall have no right of self-help to perform repairs or any other obligation of Landlord, and shall have no right to withhold, set-off, or abate Rent, nor claim an actual or constructive eviction or disturbance of Tenant's use or possession of the Premises, unless, until and only to the extent that Tenant shall have obtained a valid judgment by a court of competent jurisdiction. ARTICLE 25 CAPTIONS, DEFINITIONS AND SEVERABILITY The captions of the Articles and Paragraphs of this Lease are for convenience of reference only and shall not be considered or referred to in resolving questions of interpretation. If any term or provision of this Lease shall be found invalid, void, illegal, or unenforceable with respect to any particular Person by a court of competent jurisdiction, it shall not affect, impair or invalidate any other terms of provisions hereof, or its enforceability with respect to any other Person, the parties hereto agreeing that they would have entered into the remaining portion of this Lease notwithstanding the omission of the portion or portions adjudged invalid, void, illegal, or unenforceable with respect to such Person. (A) "Building" shall mean the structure identified in Article I of this Lease. (B) "Default Rate" shall mean eighteen percent (18%) per annum, or the highest rate permitted by applicable Law, whichever shall be less. (C) "Holder" shall mean the holder of any Mortgage (including without limitation the beneficiary of a deed of trust) at the time in question, and where such Mortgage is a ground lease, such term shall refer to the ground lessor. (D) "Holidays" shall mean all federally observed holidays, including New Year's Day, President's Day, Memorial Day, Independence Day, Labor Day, Veterans' Day, Thanksgiving Day, Christmas Day and, to the 17 21 extent of utilities or services provided by union members engaged at the Property, such other holiday observed by such unions. (E) "Landlord" and "Tenant" shall be applicable to one or more Persons as the case may be, and the singular shall include the plural, and the neuter shall include the masculine and feminine; and if there by more than one, the obligations thereof shall be joint and several. For purposes of any provisions indemnifying or limiting the liability of Landlord, the term "Landlord" shall include Landlord's present and future partners, beneficiaries, trustees, officers, directors, employees, shareholders, principals, agents, affiliates, successors and assigns, and the word "Tenant" shall include Tenant's assignees, subtenants, concessionaires, licensees and other Transferees (as defined in Article 21(A)) or as the context may require. (F) "Law" shall mean all federal, state, county and local governmental and municipal laws, statutes, ordinances, rules, regulations, codes, decrees, orders and other such requirements, applicable equitable remedies and decisions by courts in cases where such decisions are considered binding precedents in the state in which the Property is located, and decisions of federal courts applying the Laws of such State. (G) "Letter of Credit" shall mean a letter of credit, in the form attached to this Lease, in the amount of $300,000.00. If, at the end of this Lease, no Default has occurred or is continuing, the Letter of Credit shall be returned to the Tenant. (H) "Mortgage" shall mean all mortgages, deeds of trust, ground leases and other such encumbrances now or hereafter placed upon the Property or Building, or any part thereof, and all renewals, modifications, consolidations, replacements or extensions thereof, and all indebtedness nor or hereafter secured thereby and all interest thereon. (I) "Normal Business Hours" shall mean Monday through Friday, 8:00 a.m. to 6:00 p.m., excluding Holidays, subject to reasonable revision from time to time by Landlord. (J) "Operating Expenses" shall mean all expenses, costs and amounts (other than Taxes) of every kind and nature which Landlord shall pay during any calendar year any portion of which occurs during the Term, because of or in connection with the ownership, management, repair, maintenance, restoration and operation of the Property including, without limitation, any amounts paid for: (a) utilities for the Property, including but not limited to electricity, power, gas, steam, oil or other fuel, water, sewer, lighting, heating and ventilating, (b) permits, licenses and certificates necessary to operate, manage and lease the Property, (c) insurance applicable to the Property, not limited to the amount of coverage Landlord is required to provide under this Landlord, (d) supplies, tools, equipment and materials used in the operation, repair and maintenance of the Property, (e) accounting, legal, inspection, consulting, concierge and other services, (f) any equipment rental (or installment equipment purchase or equipment financing agreements), or management agreements (including the cost of any management fee actually paid thereunder and the fair rental value of any office space provided thereunder, up to customary and reasonable amounts), (g) wages, salaries and other compensation and benefits (including the fair value of any parking privileges provided) for all persons engaged in the operation, maintenance or security of the Property, and employer's Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits, (h) payments under any easement, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs in any planned development, and (i) operation, repair, and maintenance of all Systems and Equipment and components thereof (including replacement of components), janitorial service, alarm and security service, window cleaning, trash removal, elevator maintenance, cleaning of walks, parking facilities and building walls, removal of ice and snow, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities, maintenance and replacement of shrubs, trees, grass, sod and other landscaped items, irrigation systems, drainage facilities, fences, curbs and walkways, re-paving and re-striping parking facilities, and roof repairs. If the Property is not fully occupied during all or a portion of any calendar year, Landlord may, in accordance with sound accounting and management practices, determine the amount of variable Operating Expenses (i.e., those items which vary according to occupancy levels) that would have been paid had the Property been fully occupied, and the amount so determined shall be deemed to have been the amount of variable Operating Expenses for such year. If Landlord makes such an adjustment, Landlord shall make a comparable adjustment for the Base Year. Notwithstanding the foregoing, Operating Expenses shall not, however, include: 18 22 (i) depreciation, interest and amortization on Mortgages, and other debt costs or ground lease payments, if any; legal fees in connection with leasing, tenant disputes or enforcement of leases; real estate brokers' leasing commissions; improvements or alterations to tenant spaces; the cost of providing any service directly to and paid directly by, any tenant; any costs expressly excluded from Operating Expenses elsewhere in this Lease; costs of any items to the extent Landlord receives reimbursement from insurance proceeds or from a third party (such proceeds to be deducted from Operating Expenses in the year in which received); and (ii) capital expenditures, except those: (a) made primarily to reduce Operating Expenses, or to comply with any Laws or other governmental requirements, or (b) for replacements (as opposed to additions or new improvements) of non-structural items located in the common areas of the Property required to keep such areas in good condition; provided, all such permitted capital expenditures (together with reasonable financing charges) shall be amortized for purposes of this Lease over the shorter of: (i) their useful lives, (ii) the period during which the reasonably estimated savings in Operating Expenses equals the expenditures, or (iii) three (3) years. (K) "Person" shall mean an individual, trust, partnership, joint venture, association, corporation, and any other entity. (L) "Property" shall mean the Building, and any common or public areas or facilities, easements, corridors, lobbies, sidewalks, loading areas, driveways, landscaped areas, skywalk, parking garages and lots, and any and all other structures or facilities operated or maintained in connection with or for the benefit of the Building, and all parcels or tracts of land on which all or any portion of the Building or any of the other foregoing items are located, and any fixtures, machinery, equipment, apparatus, Systems and Equipment, furniture and other personal property located thereon or therein and used in connection therewith, whether title is held by Landlord or its affiliates. Possession of areas necessary for utilities, services, safety and operation of the Property, including the Systems and Equipment (as defined in this Article), fire stairways, perimeter walls, space between the finished ceiling of the Premises and the slab of the floor or roof of the Property thereabove, and the use thereof together with the right to install, maintain, operate, repair and replace the Systems and Equipment, including any of the same in, through, under or above the Premises in locations that will not materially interfere with Tenant's use of the Premises, are hereby excepted and reserved by Landlord, and not demised to Tenant. (M) "Rent" shall have the meaning given in Article 3(F). (N) "Systems and Equipment" shall mean any plant, machinery, transformers, duct work, cable wires, and other equipment, facilities, and systems designed to supply heat, ventilation, and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life/safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment for the Property. (O) "Taxes" shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges, or other impositions of every kind and nature, whether general, special, ordinary or extraordinary including, without limitation, real estate taxes, general and special assessments, transit taxes, water and sewer rents, taxes based upon the receipt of rent including gross receipts or sales taxes applicable to the receipt of rent or service or value added taxes (unless required to be paid by Tenant under Article 17), personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, Systems and Equipment, appurtenances, furniture and other personal property used in connection with the Property which are payable during any calendar year, any portion of which occurs during the Term (without regard to any different fiscal year used by such government or municipal authority) because of or in connection with the ownership, leasing and operation of the Property. Notwithstanding the foregoing, there shall be excluded from Taxes all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes and other taxes to the extent applicable to Landlord's general or net income (as opposed to rents, receipts or income attributable to operations at the Property). If the method of taxation of real estate prevailing at the time of execution hereof shall be, or has been, altered so as to cause the whole or any part of the Taxes now, hereafter or heretofore levied, assessed or imposed on real estate to be levied, assessed or imposed on Landlord, wholly or partially, as a capital levy or otherwise, or on or measured by the rents received therefrom, then such new or altered taxes attributable to the Property shall be included within the term "Taxes," except that the same shall not include any enhancement of said tax attributable to 19 23 other income of Landlord. Any expenses incurred by Landlord in attempting to protest, reduce or minimize Taxes shall be included in Taxes in the calendar year such expenses are paid. Tax refunds shall be deducted from Taxes in the year they are received by Landlord, but if such refund shall relate to Taxes paid in a prior year of the Term, and the Lease shall have expired, Landlord shall mail Tenant's Prorata Share of such net refund (after deducting expenses and attorneys' fees and up to the amount Tenant paid towards Taxes during such year), to Tenant's last known address. If Taxes for the Base Year are adjusted as the result of protest or by means of agreement, Tenant shall pay Landlord within thirty (30) days after written notice any additional amount required by such adjustment for any such years or portions thereof that have theretofore occurred. If Taxes for any period during the Term or any extension thereof shall be increased after payment thereof by Landlord, for any reason including without limitation error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant's Prorata Share of such increased Taxes. Tenant shall pay increased Taxes whether Taxes are increased as a result of increases in the assessment or valuation of the Property (whether based on a sale, change in ownership or refinancing of the Property or otherwise), increases in the tax rates, reduction or elimination of any rollbacks or other deductions available under current law, scheduled reductions of any tax abatement, or the elimination, invalidity or withdrawal of any tax abatement, or for any other cause whatsoever. Notwithstanding the foregoing, if any Taxes shall be paid based on assessments or bills by a governmental or municipal authority using a fiscal year other than a calendar year, Landlord may elect to average the assessments or bills for the subject calendar year, based on the number of months of such calendar year included in each such assessment or bill. (P) "Tenant's Prorata Share" of Taxes and Operating Expenses shall be the percentage set forth in the Basic Lease Information. If, after the Commencement Date, the Rentable Area of the Premises or the Building changes, Tenant's Prorata Share shall be appropriately adjusted. ARTICLE 26 CONVEYANCE BY LANDLORD AND LIABILITY In case Landlord or any successor owner of the Property or the Building shall convey or otherwise dispose of any portion thereof in which the Premises is located to another Person (and nothing herein shall be construed to restrict or prevent such conveyance or disposition), such other Person shall thereupon be and become landlord hereunder and shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by Landlord which first arise on or after the date of conveyance, including the return of any Security Deposit, and Tenant shall attorn to such other Person, and Landlord or such successor owner shall, from and after the date of conveyance, be free of all liabilities and obligations hereunder not then incurred. The liability of Landlord to Tenant for any default by Landlord under this Lease or arising in connection herewith or with Landlord's operation, management, leasing, repair, renovation, alteration, or any other matter relating to the Property or the Premises, shall be limited to the interest of Landlord in the Property (and the rental proceeds thereof). Tenant agrees to look solely to Landlord's interest in the Property (and the rental proceeds thereof) for the recovery of any judgment against Landlord, and Landlord shall not be personally liable for any such judgment or deficiency after execution thereon. The limitations of liability contained in this Article shall apply equally and inure to the benefit of Landlord's present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future general or limited partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have any liability for the performance of Landlord's obligations under this Lease. Notwithstanding the foregoing to the contrary, Landlord shall have personal liability for insured claims, beyond Landlord's interest in the Property (and rental proceeds thereof), to the extent of Landlord's liability insurance coverage available for such claims. ARTICLE 27 INDEMNIFICATION (A) Tenant, as a material part of the consideration to be rendered to Landlord, waives any and all claims against Landlord for damages by reason of any death of or injury to any person or persons, including Tenant, Tenant's agents, servants, and employees, or third persons in or about the Premises or the Property or any injury to property of any kind whatsoever and to whomsoever belonging, including property of Tenant, arising at any time and from any cause other than by reason of the gross negligence or willful misconduct of Landlord, its employees or agents, while in, upon, or in any way connected with the Premises, the Property or the area adjacent thereto. 20 24 (B) Except to the extent arising from the gross negligence or willful misconduct of Landlord, its employees or agents, Tenant shall defend, indemnify and hold harmless Landlord from and against any and all claims, demands, liabilities, damages, judgments, orders, decrees, actions, proceedings, fines, penalties, costs and expenses, including without limitation, court costs and attorneys' fees arising from or relating to any loss of life, damage or injury to person, property or business occurring in or from the Premises, or caused by or in connection with any violation of this Lease or use of the Premises or Property by, or any other act or omission of, Tenant, any other occupant of the Premises, or any of their respective agents, employees, contractors or guests. Without limiting the generality of the foregoing, Tenant specifically acknowledges that the indemnity undertaking herein shall apply to claims in connection with or arising out of any "Work" as described in Article 8, the installation, maintenance, use or removal of any "Lines" located in or serving the Premises as described in Article 29, and the transportation, use, storage, maintenance, generation, manufacturing, handling, disposal, release, or discharge of any "Hazardous Material" as described in Article 30 (whether or not any of such matters shall have been theretofore approved by Landlord), except to the extent that any of the same arises from the intentional or grossly negligent acts of Landlord or Landlord's agents or employees. (C) The foregoing indemnity obligation of Tenant shall include all reasonable costs and expenses incurred by Landlord from the first notice that any claim or demand is to be made or may be made. The provisions of this Article 27 shall survive the termination of this Lease with respect to any damage, injury or death occurring prior to such termination. ARTICLE 28 SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS The parties acknowledge that safety and security devices, services and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts, or ensure safety of persons or property. The risk that any safety or security device, service or program may not be effective, or may malfunction, or be circumvented by a criminal, is assumed by Tenant with respect to Tenant's property and interests, and Tenant shall obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses, as further described in Article 11. Tenant agrees to cooperate in any reasonable safety or security program developed by Landlord or required by Law. ARTICLE 29 COMMUNICATIONS AND COMPUTER LINES (A) Tenant may install, maintain, replace, remove or use any communications or computer wires, cables and related devices (collectively, the "Lines") at the Property in or serving the Premises, provided: (a) Tenant shall obtain Landlord's prior written consent, use an experienced and qualified contractor approved in writing by Landlord, and comply with all of the other provisions of Article 8, (b) any such installation, maintenance, replacement, removal or use shall comply with all Laws applicable thereto and good work practices, and shall not interfere with the use of any then existing Lines at the Property, (c) an acceptable number of spare Lines and space for additional Lines shall be maintained for existing and future occupants of the Property, as determined in Landlord's reasonable opinion, (d) if Tenant at any time uses any equipment that may create an electromagnetic field exceeding the normal insulation ratings of ordinary twisted pair riser cable or cause a radiation higher than normal background radiation, the Lines therefor (including riser cables) shall be appropriately insulated (at Tenant's sole cost and expense) to prevent such excessive electromagnetic fields or radiation, (e) as a condition to permitting the installation of new Lines, Landlord may require that Tenant remove existing Lines located in or serving the Premises, (f) Tenant's rights shall be subject to the rights of any regulated telephone company, and (g) Tenant shall pay all costs in connection therewith. Landlord reserves the right to require that Tenant remove any Lines located in or serving the Premises which (i) are installed in violation of these provisions, or (ii) are at any time in violation of any Laws or (iii) represent a dangerous or potentially dangerous condition (whether such Lines were installed by Tenant or any other party), within three (3) days after written notice. (B) Landlord may (but shall not have the obligation to): (i) install new Lines at the Property, (ii) create additional space for Lines at the Property, and (iii) reasonably direct, monitor and/or supervise the installation, maintenance, replacement and removal of, the allocation and periodic re-allocation of available space (if 21 25 any) for, and the allocation of excess capacity (if any) on, any Lines now or hereafter installed at the Property by Landlord, Tenant or any other party (but Landlord shall have no right to monitor or control the information transmitted through such Lines). Such rights shall not be in limitation of other rights that may be available to Landlord by Law or otherwise. If Landlord exercises any such rights, Landlord may charge Tenant for the costs attributable to Tenant, or may include those costs and all other costs in Operating Expenses (including, without limitation, costs for acquiring and installing Lines and risers to accommodate new Lines and spare Lines, any associated computerized system and software for maintaining records of Line connections, and the fees of any consulting engineers and other experts); provided, any capital expenditures included in Operating Expenses hereunder shall be amortized (together with reasonable finance charges) over the period of time prescribed in Article 25. (C) Notwithstanding anything to the contrary contained in Article 13, Landlord reserves the right to require that Tenant remove any or all Lines installed by or for Tenant within or serving the Premises upon termination of this Lease, provided Landlord notified Tenant prior to or within thirty (30) days following such termination. Any Lines not required to be removed pursuant to this Article shall, at Landlord's option, become the property of Landlord (without payment by Landlord). If Tenant fails to remove such Lines as required by Landlord, or violates any other provision of this Article, Landlord may, after twenty (20) days' written notice to Tenant, remove such Lines or remedy such other violation, at Tenant's expense (without limiting Landlord's other remedies available under this Lease or applicable Law). Tenant shall not, without the prior written consent of Landlord in each instance, grant to any third party a security interest or lien in or on the Lines, and any such security interest or lien granted without Landlord's written consent shall be null and void. Except to the extent arising from the gross negligence or willful misconduct of Landlord, its agents or employees, Landlord shall have no liability for damages arising from, and Landlord does not warrant that the Tenant's use of any Lines will be free from, the following (collectively called "Line Problems"): (i) any eavesdropping or wire-tapping by unauthorized parties, (ii) any failure of any Lines to satisfy Tenant's requirements, or (iii) any shortages, failures, variations, interruptions, disconnections, loss or damage caused by the installation, maintenance, replacement, use or removal of Lines by or for other tenants or occupants at the Property, by any failure of the environmental conditions or the power supply for the Property to conform to any requirements for the Lines or any associated equipment, or any other problems associated with any Lines by any other cause. Under no circumstances shall any Line Problems be deemed an actual or constructive eviction of Tenant, render Landlord liable to Tenant for abatement of Rent, or relieve Tenant from performance of Tenant's obligations under this Lease. In no event shall Landlord be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems. ARTICLE 30 HAZARDOUS MATERIALS (A) Tenant shall not transport, use, store, maintain, generate, manufacture, handle, dispose, release or discharge any "Hazardous Material" (as defined below) upon or about the Property, nor permit Tenant's employees, agents, contractors, and other occupants of the Premises to engage in such activities upon or about the Property. However, the foregoing provisions shall not prohibit the transportation to and from, and use, storage, maintenance and handling within, the Premises of substances customarily used in offices (or such other business or activity expressly permitted to be undertaken in the Premises under Article 6), provided: (i) such substances shall be used and maintained only in such quantities as are reasonably necessary for such permitted use of the Premises, strictly in accordance with applicable Law and the manufacturers' instructions therefor, (ii) such substances shall not be disposed of, released or discharged on the Property, and shall be transported to and from the Premises in compliance with all applicable Laws and as Landlord shall reasonably require, (iii) if any applicable Law or Landlord's trash removal contractor requires that any such substances be disposed of separately from ordinary trash, Tenant shall make arrangements at Tenant's expense for such disposal directly with a qualified and licensed disposal company at a lawful disposal site (subject to scheduling and approval by Landlord), and shall ensure that disposal occurs frequently enough to prevent unnecessary storage of such substances in the Premises, and (iv) any remaining such substances shall be completely, properly and lawfully removed from the Property upon expiration or earlier termination of this Lease. (B) Tenant shall promptly notify Landlord of: (i) any enforcement, cleanup or other regulatory action taken or threatened by any governmental or regulatory authority with respect to the presence of any Hazardous Material on the Premises or the migration thereof from or to other property, (ii) any demands or claims made or threatened by any party against Tenant or the Premises relating to any loss or injury resulting from any Hazardous 22 26 Material on or from the Premises, and (iii) any matters where Tenant is required by Law to give a notice to any governmental or regulatory authority respecting any Hazardous Material on the Premises. Landlord shall have the right (but not the obligation) to join and participate, as a party, in any legal proceedings or actions affecting the Premises initiated in connection with any environmental, health or safety Law. At such times as Landlord may reasonably request, Tenant shall provide Landlord with a written list identifying any Hazardous Material then used, stored, or maintained upon the Premises, the use and approximate quantity of each such material, a copy of any material safety data sheet ("MSDS") issued by the manufacturer thereof, written information concerning the removal, transportation and disposal of the same, and such other information as Landlord may reasonably require or as may be required by Law. The term "Hazardous Material" for purposes hereof shall mean any chemical, substance, material or waste or component thereof which is now or hereafter listed, defined or regulated as a hazardous or toxic chemical, substance, material or waste or component thereof by any federal, state or local governing or regulatory body having jurisdiction, or which would trigger any employee or community "right-to-know" requirements adopted by any such body, or for which any such body has adopted any requirements for the preparation or distribution of an MSDS. (C) If any Hazardous Material is released, discharged or disposed of by Tenant or any other occupant of the Premises, or their employees, agents or contractors, on or about the Property in violation of the foregoing provisions, Tenant shall immediately, properly and in compliance with applicable Laws clean up and remove the Hazardous Material from the Property and any other affected property and clean or replace any affected personal property (whether or not owned by Landlord), at Tenant's expense. Such clean up and removal work shall be subject to Landlord's prior written approval and direction (except in emergencies), and shall include, without limitation, any testing, investigation, and the preparation and implementation of any remedial action plan required by any governmental body having jurisdiction or reasonably required by Landlord. If Tenant shall fail to comply with the provisions of this Article within five (5) days after written notice by Landlord, or such shorter time as may be required by Law or in order to minimize any hazard to Persons or property, Landlord may (but shall not be obligated to) arrange for such compliance directly or as Tenant's agent through contractors or other parties selected by Landlord, at Tenant's expense (without limiting Landlord's other remedies under this Lease or applicable Law). If any Hazardous Material is released, discharged or disposed of on or about the Property and such release, discharge or disposal is not caused by Tenant or other occupants of the Premises, or their employees, agents or contractors, such release, discharge or disposal shall be deemed casualty damage under Article 10 to the extent that the Premises or common areas serving the Premises are affected thereby; in such case, Landlord and Tenant shall have the obligations and rights respecting such casualty damage provided under Article 10. (D) Notwithstanding anything to the contrary, Landlord shall not be obligated to request, review, approve, act upon or provide any information or precautions referred to in this Article 30 and any failure by Landlord to do so shall not be deemed approval or authorization by Landlord of the actions of Tenant. ARTICLE 31 MISCELLANEOUS (A) BINDING. Each of the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, guardians, custodians, successors and assigns, subject to the provisions of Article 21 respecting Transfers. (B) RECORDATION. Neither this Lease nor any memorandum of lease or short form lease shall be recorded by Tenant. (C) GOVERNING LAW. This Lease shall be construed in accordance with the Laws of California. (D) SURVIVAL. All obligations or rights of either party arising during or attributable to the period ending upon expiration or earlier termination of this Lease shall survive such expiration or earlier termination. (E) QUIET ENJOYMENT. Landlord agrees that, if Tenant timely pays the Rent and performs the terms and provisions hereunder, and subject to all other terms and provisions of this Lease, Tenant shall hold and enjoy the Premises during the Term, free of lawful claims by any Person acting by or through Landlord. 23 27 (F) LIGHT/AIR EASEMENTS. This Lease does not grant any legal rights to "light and air" outside the Premises nor any particular view or cityscape visible from the Premises. (G) FORCE MAJEURE. (i) Landlord shall not be chargeable with, liable for, or responsible to Tenant or any other Person for any delay in the performance of any act required hereunder when such delay is caused by fire, earthquake, explosion, flood, hurricane, the elements, acts of any Person, acts of God or the public enemy, action or interference of governmental authorities or agents, failure to obtain governmental permits or approvals, war, invasions, insurrection, rebellion, riots, materials shortages, strikes or lockouts or any other cause of like nature not the fault of Landlord, and any delay due to said causes or any of them shall not be deemed a breach of or default in the performance of this Lease, it being specifically agreed that any time limit for Landlord's performance contained in this Lease shall be extended for the same period of time lost by causes hereinabove set forth. (ii) If the Commencement Date is delayed in accordance with Article 4 for more than one year, Landlord may declare this Lease null and void, and if the Commencement Date is so delayed for more than seven years, this Lease shall thereupon become null and void without further action by either party. ARTICLE 32 [INTENTIONALLY OMITTED] ARTICLE 33 NOTICES Except as expressly provided to the contrary in this Lease, every notice or other communication to be given by either party to the other with respect hereto or to the Premises or Property shall be in writing and shall not be effective for any purposes unless the same shall be served personally or by national air courier service, or United States certified mail, return receipt requested, postage prepaid, addressed, if to Tenant, at the address first set forth in the Lease, until the Commencement Date, and thereafter to the Tenant at the Premises, and if to Landlord, in care of Woodmont Real Estate Services, 1050 Ralston Avenue, Belmont, CA 94002, Attn: Tom Robertson, or such other address or addresses as Landlord may from time to time designate by notice given as above provided. Every notice or other communication hereunder shall be deemed to have been given as of the third business day following the date of such mailing (or as of any earlier date evidenced by a receipt from such national air courier service or United States Postal Service) or immediately if personally delivered. Notices not sent in accordance with the foregoing shall be of no force or effect until received by the foregoing parties at such addresses required herein. ARTICLE 34 REAL ESTATE BROKERS Tenant represents that Tenant has dealt only with Colliers International (whose commission, if any shall be paid by Landlord pursuant to separate agreement) as broker, agent or finder in connection with this Lease and agrees to indemnify and hold Landlord harmless from all damages, judgments, liabilities and expenses (including reasonable attorneys' fees) arising from any claims or demands of any other broker, agent or finder with whom Tenant has dealt for any commission or fee alleged to be due in connection with its participation in the procurement of Tenant or the negotiation with Tenant of this Lease. ARTICLE 35 [INTENTIONALLY OMITTED] ARTICLE 36 ENTIRE AGREEMENT This Lease, together with the Addendum (if any) and Exhibits A through D (which collectively are hereby incorporated where referred to herein and made a part hereof as though fully set forth), contains all the terms and provisions between Landlord and Tenant relating to the matters set forth herein and no prior or contemporaneous 24 28 agreement or understanding pertaining to the same shall be of any force or effect. Without limitation as to the generality of the foregoing, Tenant hereby acknowledges and agrees that Landlord's leasing agents and field personnel are only authorized to show the Premises and negotiate terms and conditions for leases subject to Landlord's final approval, and are not authorized to make any agreements, representations, understandings or obligations binding upon Landlord, respecting the condition of the Premises or Property, suitability of the same for Tenant's business, or any other matter, and no such agreements, representations, understandings or obligations not expressly contained herein or in any contemporaneous agreement shall be of any force or effect. Neither this Lease, nor any Addendum, nor the Exhibits referred to above may be modified, except in writing by both parties. LANDLORD: THE ROBERT DOLLAR BUILDING ASSOCIATES, LTD., A California limited partnership BY: WOODMONT REAL ESTATE SERVICES a California corporation, its authorized agent By: ------------------------------------------ Its: ------------------------------------------ TENANT: STOCKPOINT, INC., a Delaware corporation By: ------------------------------------------ Its: ------------------------------------------ 25 29 CERTIFICATE (IF TENANT IS A CORPORATION) I, , Secretary of Stockpoint, Inc., Tenant, hereby certify that the officer(s) executing the foregoing Lease on behalf of Tenant was/were duly authorized to act in his/their capacities as and , and his/their action(s) are the action of Tenant. (Corporate Seal) ------------------ Secretary 26 30 EXHIBIT A PREMISES A-1 31 EXHIBIT B WORK AGREEMENT 1. Tenant's Work. (a) Any items or work for which Tenant contracts separately (i.e., "Tenant's Work), shall be subject to, Landlord's policies and schedules and shall be conducted in such a way as not to hinder, cause any disharmony with or delay work of improvements in the Building. To this end, Tenant's Work shall conform with a schedule determined by Landlord. Tenant's contractors shall employ only such labor as will not result in jurisdictional disputes or strikes or cause disharmony with other workers employed in the Building. In no event shall work involving the sprinkler, plumbing, mechanical, electrical, power, lighting or fire safety systems of the Building be performed by people other than Landlord's approved subcontractors and all telecommunications and other special electrical equipment shall be installed under the supervision of Landlord's electrical subcontractor. Tenant's Work shall comply with all Laws. (b) Tenant's contractors shall carry (a) workers compensation insurance covering all of their employees in the statutory amount, (b) employer's liability insurance in the amount of at least Two Million Dollars ($2,000,000) per occurrence, and (c) comprehensive general liability insurance of at least Three Million Dollars ($3,000,000) combined single limit for bodily injury, death, or property damage; and the policies therefor shall cover Landlord, San Francisco Property Company-Pacific, Trans-Pacific Partners Company and all of their agents, and Tenant as additional insureds. Builder's all risk insurance coverage shall be carried by Tenant, in amounts sufficient to cover the guaranteed maximum price of Tenant's Work. All insurance carriers hereunder shall be rated at least A and X in Best's Insurance Guide. Tenant shall deliver to Landlord certificates for all such insurance required to be carried by it (or Tenant's contractors) hereunder before the commencement of Tenant's Work, or before any equipment used in connection with Tenant's Work is moved onto the Property, Building or Premises. All policies of insurance required hereunder must require that the carrier give the Landlord and Tenant thirty (30) days advance written notice of any cancellation or reduction in the amounts of insurance. (c) Not less than twenty (20) days prior to the date Tenant desires to commence Tenant's Work, it shall give a written request to Landlord setting forth or accompanied by all of the following: (1) A description and schedule for the work to be performed; (2) The names and addresses of all contractors, subcontractors and material suppliers who will perform Tenant's Work. (3) The approximate number of individuals, itemized by trade, who will be present on the Premises; (4) Copies of all plans and specifications pertaining to that portion of Tenant's Work; (5) Copies of all licenses and permits which may be required in connection with the performance of Tenant's Work; (6) Certificates of insurance indicating compliance with the insurance requirements set forth in Article 11 of the Lease and Paragraph 11(b) above; (7) Payment and performance bonds in an amount not less than Landlord's reasonable estimate of the total cost of such Tenant's Work; and, at Landlord's request, evidence of the availability of funds sufficient to pay for all such work. All of the foregoing shall be subject to Landlord's approval, which approval shall not unreasonably be withheld. B-1 32 (d) Tenant shall be responsible for any hoisting charges incurred in connection with Tenant's Work and for any expenses incurred by Landlord due to inadequate cleanup by those performing Tenant's Work. (e) If, in Landlord's opinion, any supplier, contractor or workman performing Tenant's Work hinders or delays, directly or indirectly, any other work of improvement in the Building or performs any work which may or does impair the quality, integrity or performance of any portion of the Building, Landlord shall give notice to Tenant and immediately thereafter Tenant shall cause such supplier, contractor or workman immediately to remove all of its tools, equipment and materials and to cease working in the Building. As additional Rent under the Lease, Tenant shall reimburse Landlord for any repairs or corrections of Landlord's Work or of any portion of the Building or the cost of any delays caused by or resulting from the actions or omissions of anyone performing Tenant's Work. (f) In no event shall the Commencement Date be postponed due to any delay in completion of Tenant's Work or due to a Tenant Delay. (g) Tenant shall, at Tenant's expense, deliver to Landlord a set of "as-built" plans and specifications for Tenant's Work upon completion thereof. (h) Tenant agrees diligently to commence and pursue to completion the construction of Tenant's Work strictly in accordance with the approved Plans and this Work Agreement. (i) Tenant shall cause all of Tenant's Work to be done in a good and workmanlike manner and in compliance with all Laws and insurers of the Building or the Premises. Tenant shall utilize for all of Tenant's Work only first class workmanship, materials, furnishings and fixtures, using only new equipment and supplies. Landlord may inspect the work of Tenant at reasonable times. If Landlord inspects Tenant's Work and gives Tenant written notice of observed defects, Tenant will correct the defects promptly. Inspection of Tenant's Work by Landlord or Landlord's agents shall not relieve Tenant of the foregoing obligations, and Landlord has no responsibility for determining whether Tenant's Work complies with the approved Plans, environmental requirements, or Rules. (j) Tenant shall indemnify, defend and hold Landlord harmless from and against any claims, demands, losses, damages, injuries, liabilities, expenses, judgments, liens, encumbrances, orders and awards, together with reasonable attorneys' fees and litigation expenses arising out of or in connection with any portion of Tenant's Work performed hereunder, for Tenant's failure to comply with the provisions hereof, and from any failure by Tenant's contractors, subcontractors or employees to comply with the provisions hereof. (k) Each of Tenant's contractors shall guarantee that the portion of Tenant's Work for which they are responsible shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof. Tenant's contractors shall each be responsible for the replacement or repair, without additional charge, of all Tenant's Work done or furnished in accordance with their contracts which shall become defective within one (1) year after completion thereof. The correction of Tenant's Work shall include, without additional charge, all additional expenses and damages in connection with such removal or replacement of all or any part of Tenant's Work and/or the Premises and/or the Property which may be damaged or disturbed thereby. All such warranties or guarantees as to materials or workmanship of or with respect to Tenant's Work shall be contained in the contracts or subcontracts of Tenant's contractors which shall be written such that said warranties or guarantees shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant shall provide Landlord with any assignment or other assurance necessary to effect such rights of direct enforcement. Tenant shall furnish Landlord with copies of all contracts and subcontracts entered into in connection with Tenant's Work promptly after the same are entered. (l) When Tenant's Work is completed, Tenant promptly shall: so notify Landlord; record a Notice of Completion and furnish to Landlord waivers of liens and/or sworn statements, satisfactory to Landlord, from all persons performing labor and/or supplying materials or equipment in connection with Tenant's Work showing that such persons have been compensated in full; deliver to Landlord a detailed breakdown of the final, total costs of Tenant's Work and such supporting data as Landlord reasonably may request; if required by Landlord, assign to Landlord warranties for not less than one year against defects in workmanship, materials and equipment incorporated into Tenant's Work; pay Landlord the sums due Landlord hereunder; and deliver to Landlord a copy of a Certificate of Occupancy or local equivalent covering the Premises, issued by the applicable governmental agency. B-2 33 EXHIBIT C RULES 1. The Landlord reserves the right to exclude from the Building between the hours of 6 p.m. and 8 a.m. Mondays through Fridays and at all hours on Saturdays, Sundays and Holidays, and such other hours as Landlord shall determine from time to time, all persons who have not received clearance as a result of a written request from Tenant or who do not present a pass to the Building signed by the Landlord. The Landlord will furnish passes or at Landlord's option, clearances, to persons for whom any Tenant requests the same in writing. Each Tenant shall be responsible for all persons for whom he requests passes or clearances and shall be liable to the Landlord for all acts of such persons. Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of an invasion, mob riot, public excitement or other circumstances rendering such action advisable in Landlord's opinion, Landlord reserves the right to prevent access to the Building during the continuance of the same by closing the doors or otherwise, for the safety of the Tenants and the protection of the Building and the property in the Building. Notwithstanding anything to the contrary in this paragraph, access to the Property and/or to the passageways, entrances, exits, shipping areas, halls, corridors, elevators or stairways and other areas in the Property may be restricted and access gained by use of a key to the outside doors of the Property, or Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence in the judgment of Landlord shall be construed to prevent such access to persons with whom Tenant deals in the normal course of Tenant's business unless such persons are engaged in activities which are illegal or violate these Rules. No Tenant and no employee or invitee of Tenant shall enter into areas reserved for the exclusive use of Landlord, its employees or invitees. Tenant shall keep doors to corridors and lobbies closed except when persons are entering or leaving. 2. Tenant shall not paint, display, inscribe, maintain or affix any sign, placard, picture, advertisement, name notice, lettering or direction on any part of the outside or inside of the Property, or on any part of the inside of the Premises which can be seen from the outside of the Premises without the prior written consent of Landlord, and then only such name or names or matter and in such color, size, style, character and material as may be first approved by Landlord in writing. Landlord shall prescribe the suite number and identification sign for the Premises (which shall be prepared and installed by Landlord at Tenant's expense). Landlord reserves the right to remove, at Tenant's expense and without prior notice to Tenant, all matter not so installed or approved pursuant to this Rule or as otherwise provided in the Lease. 3. Tenant shall not in any manner use the name of the Property for any purpose other than that of the business address of the Tenant, or use any picture or likeness of the Property, in any letterheads, envelopes, circulars, notices, advertisements, containers or wrapping material without Landlord's express consent in writing. 4. Tenant shall not place anything or allow anything to be placed in the Premises near the glass of any door, partition, wall or window which may be unsightly from outside the Premises, and Tenant shall not place or permit to be placed any article of any kind on any window ledge or on the exterior walls. Blinds, shades, awnings or other forms of inside or outside window ventilators or similar devices shall not be placed in or about the outside windows of the Premises except to the extent, if any, that the character, shape, color, material and make thereof is first approved in writing by Landlord. 5. Furniture, freight and other large or heavy articles, and all other deliveries may be brought into the Property only at times and in the manner designated by Landlord, and always at the Tenant's sole responsibility and risk. Landlord may impose reasonable charges for use of freight elevators after or before normal business hours. All damage done to the Property by moving or maintaining such furniture, freight or articles shall be repaired by Landlord at Tenant's expense. Landlord may inspect items brought into the Property or Premises with respect to weight or dangerous nature. Landlord may require that all furniture, equipment, cartons and similar articles removed from the Premises or the Property be listed and a removal permit therefor first be obtained from Landlord. Tenant shall not take or permit to be taken in or out of other C-1 34 entrances or elevators of the Property, any item normally taken, or which Landlord otherwise reasonably requires to be taken, in or out through service doors or on freight elevators. Tenant shall not allow anything to remain in or obstruct in any way, any lobby, corridor, sidewalk, passageway, entrance, exit, stall, stairway, shipping area or other such area. Tenant shall move all supplies, furniture and equipment as soon as received directly to the Premises, and shall move all such items and waste (other than waste customarily removed by Property employees) that are at any time being taken from the Premises directly to the areas designated for disposal. Any hand-carts used at the Property shall have rubber wheels. 6. Tenant shall not overload any floor or part thereof in the Premises, or Property, including any public corridors or elevators therein by bringing in or removing any large or heavy articles, and Landlord may direct and control the location of safes and all other heavy articles and require supplementary supports at Tenant's expense of such material and dimensions as Landlord may deem necessary to properly distribute the weight. 7. Tenant shall not attach or permit to be attached additional locks or similar devices to any door or window, change existing locks or the mechanism thereof, or make or permit to be made any keys for any door other than those provided by Landlord. If more than two keys for one lock are desired, Landlord will provide them upon payment therefor by Tenant. Tenant, upon termination of its tenancy, shall deliver to the Landlord all keys of offices, rooms and toilet rooms which have been furnished Tenant or which the Tenant shall have had made, and in the event of loss of any keys so furnished shall pay Landlord therefor. 8. If Tenant desires signal, communication, alarm or other utility or similar service connections installed or changed, Tenant shall not install or change the same without the prior written approval of Landlord, and then only under Landlord's direction at Tenant's expense. Tenant shall not install in the Premises any equipment which requires more electrical current than Landlord is required to provide under this Lease without Landlord's prior written approval, and Tenant shall ascertain from Landlord the maximum amount of load or demand for or use of electrical current which can safely be permitted in the Premises, taking into account the capacity of electric wiring in the Property and the Premises and the needs of other tenants of the Property, and shall not in any event connect a greater load than such safe capacity. 9. Tenant shall not obtain for use upon the Premises ice, drinking water, towels, janitorial and other similar services, except from Persons approved by the Landlord. Any Person engaged by Tenant to provide janitorial or other services shall be subject to direction by the manager or security personnel of the Landlord. 10. The toilet rooms, urinals, wash bowls and other such apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this Rule shall be borne by the Tenant who, or whose employees or invitees shall have, caused it. 11. The janitorial closets, utility closets, telephone closets, broom closets, electrical closets, storage closets, and other such closets, rooms and areas shall be used only for the purposes and in the manner designated by Landlord, and may not be used by tenants, or their contractors, agents, employees, or other parties without Landlord's prior written consent. 12. Landlord reserves the right to exclude or expel from the Property any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules. Tenant shall not at any time manufacture, sell, use or give away any spirituous, fermented, intoxicating or alcoholic liquors on the Premises nor permit any of the same to occur (except in connection with occasional social or business events conducted in the Premises which do not violate any Laws or bother or annoy any other tenants). Tenant shall not at any time sell, purchase or give away food in any form by or to any of Tenant's agents or employees or any other parties on the Premises, C-2 35 nor permit any of the same to occur (other than in lunch rooms or kitchens for employees as may be permitted or installed by Landlord, which does not violate any Laws or bother or annoy any other tenant). 13. Tenant shall not make any room-to-room canvass to solicit business or information or to distribute any article or material to or from other tenants or occupants of the Property and shall not exhibit, sell or offer to sell, use, rent or exchange any products or services in or from the Premises unless ordinarily embraced within the Tenant's use of the Premises specified in the Lease. 14. Tenant shall not waste electricity, water, heat or other utilities or services, and agrees to cooperate fully with Landlord to assure the most effective and energy efficient operation of the Property and shall not allow the adjustment (except by Landlord's authorized Property personnel) of any controls. Tenant shall keep corridor doors closed and shall not open any windows, except that windows which are operable may be opened with Landlord's consent. As a condition to claiming any deficiency in the ventilation services provided by Landlord, Tenant shall close any blinds or drapes in the Premises or minimize direct sunlight. 15. Tenant shall conduct no auction, fire or "going out of business sale" or bankruptcy sale in or from the Premises, and such prohibition shall apply to Tenant's creditors. 16. Tenant shall cooperate and comply with any reasonable safety or security programs, including fire drills and air raid drills, and the appointment of "fire wardens" developed by Landlord for the Property, or required by Law. Before leaving the Premises unattended, Tenant shall close and securely lock all doors or other means of entry to the Premises and shut off all lights and water faucets in the Premises (except heat to the extent necessary to prevent the freezing or bursting of pipes). 17. Tenant will comply with all municipal, county, state, federal or other government laws, statutes, codes, regulations and other requirements, including without limitation, environmental, health, safety and police requirements and regulations, respecting the Premises, now or hereinafter in force, at its sole cost, and will not use the Premises or Property for any immoral purposes. 18. Tenant shall not (i) carry on any business, activity or service except those ordinarily embraced within the Permitted Use of the Premises specified in the Lease and more particularly, but without limiting the generality of the foregoing, shall not (ii) install or operate any internal combustion engine, boiler, machinery, refrigerating, heating or air conditioning equipment in or about the Premises, (iii) use the Premises for housing, lodging or sleeping purposes or for the washing of clothes, (iv) place any radio or television antennae other than inside of the Premises, (v) operate or permit to be operated any musical or sound producing instrument or device which may be heard outside the Premises, (vi) use any source of power other than electricity, (vii) operate any electrical or other device from which may emanate electrical or other waves which may interfere with or impair radio, television, microwave, or other broadcasting or reception from or in the Property or elsewhere, (viii) bring or permit any bicycle or other vehicle, or any dog (except a seeing-eye dog in the company of a blind person or except where specifically permitted) or other animal or bird in the Property, (ix) make or permit objectionable noise or odor to emanate from the Premises, (x) do anything in or about the Premises tending to create or maintain a nuisance or do any act tending to injure the reputation of the Property, (xi) throw or permit to be thrown or dropped any article from any window or other opening in the Property, (xii) use or permit upon the Premises anything that will invalidate or increase the rate of insurance on any policies of insurance now or hereafter carried on the Property or violate the certificates of occupancy issued for the Premises or the Property, (xiii) use the Premises for any purpose, or permit upon the Premises anything, that may be dangerous to persons or property (including but not limited to flammable oils, fluids, paints, chemicals, firearms, or any explosive articles or materials) nor (xiv) do or permit anything to be done upon the Premises in any way tending to disturb any other tenant at the Property or the occupants of neighboring property. C-3 EX-10.9 29 CONSULTING AGREEMENT BETWEEN CO. & EQUITY DYNAMICS 1 EXHIBIT 10.9 CONSULTING AGREEMENT This Consulting Agreement (the "Agreement") is entered into as of August 24, 1999 by and between Stockpoint, Inc. a Delaware corporation (the "Company"), and Equity Dynamics, Inc. (the "Consultant"). WHERAS, the Company and Consultant desire to confirm the terms and conditions pertaining to the rendering of services by Consultants for the Company; NOW, THEREFORE, the Company and Consultant agree as follows: 1. Term of the Agreement. The Company hereby retains the services of Consultant hereby agrees to render services as a Consultant for the Company for a one (1) year period commencing on the date hereof and continuing until the date which is one (1) year from the date hereof, subject, however, to prior termination as hereinafter provided in Section 4. 2. Duties and Obligations. a. For the term of the Agreement, Consultants shall provide management and financial consulting and advisory services to the Company and shall at times report to and follow the instructions and wishes of the President or Chief Executive Officer of the Company. b. Consultant agrees that to the best of Consultant's ability and experience Consultant will at all times loyally and conscientiously perform all of the duties and obligations required of and from Consultant pursuant to the express and implicit terms hereof, to the reasonable satisfaction of the Company. c. Consultant agrees to indemnify and hold the Company harmless against any and all loss, liability, damage, claims, demands or suits and related costs and expenses that arise, directly or indirectly, from Consultant's acts or omissions. 2 3. Compensation. In connection wit this Agreement, Consultant agrees to provide a minimum of 20 days per year of consulting services to the Company. To compensate Consultant for Consultant's services during the term of this Agreement, (i) the Company shall pay Consultant aggregate compensation equal to $50,000, $4,167.00 of which shall be paid by the Company to Consultant upon the execution of this Agreement and $4,67 per month thereafter (ii) upon execution of this Agreement the Company will grant Consultant warrants to purchase 125,000 shares of Common Stock, with an exercise price of $6.00 per share, pursuant to the terms of the stock purchase Warrant attached hereto as Exhibit A. In addition, the Company will reimburse Consultant for all out of pocket expenses related to Consultant's activities with the Company. The Consultant will supply the Company with invoices containing out of pocket expense detail. 4. Termination of Agreement. a. This Agreement may be terminated by the Company at any time for any reason, with or without cause by giving sixty (60) days written notice to Consultant: such termination shall be effective sixty (60) days after Consultant's receipt of such written notice. If this Agreement is terminated without Good Cause (as defined herein) by the Company, any unvested options granted to Consultants shall immediately vest and become exercisable upon the effective date of such termination. No additional benefits, aside from options fully vested at the date of termination and any accrued compensation, shall be due upon such termination. b. This Agreement shall terminate if Consultant ceases to function and exist due to bankruptcy or otherwise. c. The Company may terminate this Agreement at any time for Good Cause (as defined herein). For the purposes of the Agreement, "Good Cause" includes but is not limited to, gross misconduct, gross neglect of duties, intentional acts or omission of Consultant of such negative quality that they may be deemed to have material and adverse effects on the Company's business, breach of any representation, warranty agreement or covenant made by Consultant in this Agreement or any act or omission involving fraud, embezzlement, or misappropriation of any property or proprietary information of the Company. d. Consultant may terminate this Agreement by giving sixty (60) days written notice to the Company. 3 5. Working Arrangement. a. Consultant is an independent Consultant and is solely responsible for all taxes, withholdings, and other similar statutory obligations, including, but not limited to Workers' Compensation Insurance; and Consultant will defend, indemnify and hold Company harmless from any and all claims made by any entity on account of an alleged failure by Consultant to satisfy any such tax or withholding obligations. b. Consultant has no authority to act on behalf of or enter into any Contract or incur any liability on behalf of the Company. c. Consultant's performance under this Agreement shall be conducted in full compliance with the highest standards of practice. 6. Miscellaneous. a. Governing Law. This Agreement shall be interpreted, construed, governed and enforced according to the laws of the State of Iowa. b. Arbitration. Any controversy between the parties hereto involving The construction or application of any terms, covenants or conditions to this Agreement, will be submitted to and be settled by final and binding arbitration in New York, New York or such other place as the parties may mutually agree, in accordance with the rules of the American Arbitration Association then in effect, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. c. Amendment. No amendment or modification of the terms or Conditions of this Agreement shall be valid unless in writing and signed by the parties hereto. d. Severalbility. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be construed, if possible, so as to be enforceable under applicable law, else, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. e. Successors and Assigns. The rights and obligations of the Company under this Agreement shall insure to the benefits of and shall be binding upon the successors and assigns of the Company. 4 Consultant shall not be entitled to assign any of his rights or obligations under this Agreement. f. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the employment of Consultant. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above. Stockpoint, Inc.: By: -------------------------- Equity Dynamics, Inc.: By: -------------------------- John Pappajohn President EX-10.10 30 MASTER NOTE DATED 11/28/1997 1 EXHIBIT 10.10 OBLIGOR FILE NAME OBLIGOR # OBLIGATION NUMBER OFFICER # AMOUNT Neural Applications Corporation 32162 $3,000,000.00 - -------------------------------------------------------------------------------- Chicago, Illinois Dated as of November 28, 1997 ----------- ---- MASTER NOTE (CORPORATION, PARTNERSHIP, OR JOINT VENTURE) This Note has been executed by Neural Applications Corporation, a corporation formed under the laws of the State of Delaware ("Borrower"); if more than one entity executes this Note, the term "Borrower" refers to each of them individually and some or all of them collectively, and their obligations hereunder shall be joint and several.* If a land trustee executes this Note, "Borrower" as used in sections 6 and 7 below also includes any beneficiary(ies) of the land trust.** FOR VALUE RECEIVED, on or before November 2, 2002, the scheduled maturity date hereof, Borrower promises to pay to the order of THE NORTHERN TRUST COMPANY, an Illinois banking corporation (hereafter, together with any subsequent holder hereof, called "Lender"), at its main banking office at 50 South LaSalle Street, Chicago, Illinois 60675, or at such other place as Lender may direct, the aggregate unpaid principal balance of each advance (a "Loan" and collectively the "Loans") made by Lender to Borrower hereunder. The total principal amount of Loans outstanding at any one time hereunder shall not exceed Three Million and 00/100 UNITED STATES DOLLARS ($3,000,000.00). Lender is hereby authorized by Borrower at any time and from time to time at Lender's sole option to attach a schedule (grid) to this Note and to endorse thereon notations with respect to each Loan specifying the date and principal amount thereof, the Interim Maturity Date (as defined below) (if applicable), the applicable interest rate and rate option, and the date and amount of each payment of principal and interest made by Borrower with respect to each such Loan. Lender's endorsements as well as its records relating to Loans shall be rebuttably presumptive evidence of the outstanding principal and interest on the Loans, and, in the event of inconsistency, shall prevail over any records of Borrower and any written confirmations of Loans given by Borrower. If Borrower wishes to obtain a Loan under this Note, Borrower shall notify Lender orally or in writing on a banking day. Any such notice shall be irrevocable; if the notice is received after 10:00 AM Chicago time the Loan may not be available until the next banking day. Additional procedures for "Bank Offered Rate" Loans, if available, are set forth below. Each request for a Loan shall be deemed to be a representation and warranty by Borrower to Lender that: (i) no Event of Default or Unmatured Event of Default (in each case as defined below) has occurred and is continuing as of the date of such request or would result from the making of the Loan; and (ii) Borrower's representations and warranties herein are true and correct as of such date as though made on such date. Upon receipt of each Loan request Lender in its sole discretion shall have the right to request that Borrower provide to Lender, prior to Lender's funding of the Loan, a certificate executed by Borrower's President, Treasurer, or Chief Financial Officer (if Borrower is a corporation), or a general partner or joint venturer of Borrower (if Borrower is a partnership or joint venture) to such effect. 1. INTEREST. Borrower agrees to pay interest on the unpaid principal amount from time to time outstanding hereunder at the following rate per year: [CHECK ONE ONLY] [X] (i) The "Prime-Based Rate", which shall mean the Prime Rate plus one percent (1.00%). [N/A] ***(ii) The "Bank Offered Rate", which shall be equal to that rate of interest offered by Lender and accepted by Borrower and fixed for periods of up to one year ("Interest Period(s)") (the last day of any Interest Period being referred to as an "Interim Maturity Date"). Other description_____________________________________________________ _____________________________________________________________________. "Prime Rate" means that rate of interest announced from time to time by Lender called its prime rate, which rate may not at any time be the lowest rate charged by Lender. Changes in the rate of interest on the Loans resulting from a change in the Prime Rate shall take effect on the date set forth in each announcement of a change in the Prime Rate. Without limiting Borrower's obligation to repay all outstanding Loans in full on the scheduled maturity date, each Loan at the Bank Offered Rate shall be due and payable in full on its Interim Maturity Date. After the maturity of any Loan, whether by acceleration or otherwise, such Loan shall bear interest until paid, at a rate equal to two percent (2%) in addition to the rate in effect immediately prior to maturity (but not less than the Prime Rate in effect at maturity). If this Note bears interest at the Bank Offered Rate and Borrower requests a Loan, Lender shall in its sole discretion offer or decline to offer a Bank Offered Rate (and if it offers a Bank Offered Rate, the rate of such Bank Offered Rate shall be in Lender's sole discretion), and Borrower shall irrevocably accept or decline such particular Bank Offered Rate and the related Loan and confirm such acceptance in writing by letter or other written communication dated and sent the date of such borrowing. Any confirmation by Lender of the rate and Interest Period for any Bank Offered Rate Loan shall be conclusive in the absence of manifest error. Without limiting Borrower's obligations under any other document or instrument, Lender may rely without inquiry upon any person whom it reasonably believes to be a party authorized to accept or decline such Bank Offered Rate and the related Loan. Lender has no obligation to make a new Loan to Borrower when a Loan at the Bank Offered Rate matures on its Interim Maturity Date. Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days, including the date a Loan is made and excluding the date a Loan or any portion thereof is paid or prepaid. Interest shall be due and payable as follows: [X] Monthly, on the last day of each month, beginning December 31, 1997, with all accrued but unpaid interest being due and payable in full with the final principal payment due hereunder. [N/A] Quarterly, on the ________ day of each ___________, ____________, ________________, and _____________________ in each year, beginning ____________________, with all accrued but unpaid interest being due and payable in full with the final principal payment due hereunder. [N/A] Other _______________________________________________________________. *Insert "N/A" in any blank in this Note which is not applicable. **Land trustee may not sign upon direction of individual beneficiary(ies) unless Loans are for business purposes. ***Do not use if collateral includes real estate. 2 In addition, if the Bank Offered Rate is available under this Note, interest on any Loan at the Bank Offered Rate, if not otherwise previously due and payable as indicated above, shall be due and payable in full on the last day of each Interest Period. After maturity interest shall be payable on demand. 2. PREPAYMENTS. Borrower may prepay without penalty or premium any principal bearing interest at the Prime-Based Rate. If Borrower prepays any principal bearing interest at the Bank Offered Rate in whole or in part, or if the maturity of any such Bank Offered Rate principal is accelerated, then, to the fullest extent permitted by law Borrower shall also pay Lender for all losses (including but not limited to interest rate margin and any other losses of anticipated profits) and expenses incurred by reason of the liquidation or re-employment of deposits acquired by Lender to make the Loan or maintain principal outstanding at the Bank Offered Rate. Upon Lender's demand in writing specifying such losses and expenses, Borrower shall promptly pay them; Lender's specification shall be deemed correct in the absence of manifest error. Each Loan bearing interest at the Bank Offered Rate shall be conclusively deemed to have been funded by or on behalf of Lender by the purchase of a deposit corresponding in amount to such Loan and in maturity to the Interest Period specified by Lender. 3. REFERENCES TO PREVIOUS NOTES, FACILITY TYPE, COLLATERAL, GUARANTIES, LOAN & OTHER AGREEMENTS. (CHECK AS APPLICABLE) LINE OF CREDIT: This Note has been executed pursuant to a line of credit. At the present time Lender intends to make available to Borrower credit as outlined herein or in any related letter until the maturity day indicated above unless in Lender's sole judgment there has occurred an adverse change in the assets, condition or prospects of Borrower or any guarantor. THE LINE OF CREDIT MAY BE CANCELLED OR REDUCED BY LENDER AT LENDER'S SOLE OPTION WITHOUT PRIOR NOTICE TO BORROWER OR ANY OTHER PERSON OR ENTITY. THE LINE OF CREDIT IS REVOCABLE NOTWITHSTANDING PAYMENT OF ANY FEES OR MAINTENANCE OF ANY ACCOUNT BALANCES, AS AND IF PROVIDED IN ANY ACCOMPANYING LETTER OR OTHER DOCUMENT PERTAINING TO SUCH FEES AND/OR BALANCES. Any such fees and/or balances shall be deemed compensation to Lender for being prepared to respond to Borrower's requests for credit under this Note. [X] This Note amends, restates, renews and replaces in its entirety the note dated October 1, 1997 in the amount of $7,000,000.00, and any previously renewed note(s). Borrower hereby expressly confirms that all collateral and guaranties given for such prior note(s) shall secure or guarantee this Note. All amounts outstanding under such previous note(s) shall be deemed automatically outstanding hereunder. [X] This Note is secured without limitation as provided in the following and all related documents, in each case as amended, modified, renewed, restated or replaced from time to time: [N/A] Security Agreement dated as of _________________________________. [N/A] Mortgage dated as of ____________________________________________ on property all or part of which is commonly known as ___________ _________________________________________________________________ ________________________________________________________________. [X] Pledge Agreement dated as of 2/26/1996. [N/A] Other (describe)_________________________________________________ ________________________________________________________________. [X] Payment of this Note has been unconditionally guaranteed by Robert B. Staib (each individually and all collectively referred to as "guarantor") as provided in separately executed guaranties. [N/A] This Note has been executed pursuant to a __________ Agreement, dated as of the date hereof, as amended, modified, restated, renewed, or replaced from time to time, containing covenants and other terms, to which reference is hereby made. 4. USE OF PROCEEDS. CHECK ONE: [X] Borrower represents and warrants that the proceeds of this Note will be used solely for business purposes, and not for personal, family or household use, within the meaning of Federal Truth-in-Lending and similar state laws and regulations. [N/A] ****Borrower represents that the proceeds of this Note will be used for personal, family or household use. IF THIS OPTION IS CHECKED, THE FIRST LOAN MUST BE IN THE AMOUNT OF $25,001 OR MORE If Loan proceeds will be used to purchase or refinance the purchase of any property describe: N/A N/A Notwithstanding any other provision hereof, if this Note is covered by Regulation Z of the Federal Reserve Board (Truth in Lending) or any like disclosure requirement, this Note shall be secured by collateral referenced herein or in any other document only if disclosed in a related disclosure statement. 5. REPRESENTATIONS. Borrower hereby represents and warrants to Lender that: (a) Borrower and any "Subsidiary" (as defined below) are existing and in good standing under the laws of their state of formation, are duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects of Borrower; the execution, delivery and performance of this Note and all related documents and instruments are within Borrower's powers and have been authorized by all necessary corporate, partnership or joint venture action; (b) the execution, delivery and performance of this Note and all related documents and instruments have received any and all necessary governmental approval, and do not and will not contravene or conflict with any provision of law or of the partnership or joint venture or similar agreement, charter or by-laws of Borrower or any agreement affecting Borrower or its property; and (c) there has been no material adverse change in the business, condition, properties, assets, operations or prospects of Borrower or any guarantor since the date of the latest financial statements provided on behalf of Borrower or any guarantor to Lender prior to the execution of this Note. "Subsidiary" means any corporation, partnership, joint venture, trust, or other legal entity of which Borrower owns directly or indirectly fifty percent (50%) or more of the outstanding voting stock or interest, or of which Borrower has effective control, by contract or otherwise. 6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default": (a) failure to pay, when and as due, any principal, interest or other amounts payable hereunder; failure to comply with or perform any agreement or covenant of Borrower contained herein; or failure to furnish (or caused to be furnished to) Lender when and as requested by Lender (but not more often than once every twelve months) fully completed personal financial statement(s) of any individual guarantor on Lender's then-standard form together with such supporting information as Lender may reasonably request; or (b) any default, event of default, or similar event shall occur or continue under any other instrument, document, note, agreement, or guaranty delivered to Lender in connection with this Note, or any such instrument, document, note, agreement, or guaranty shall not be, or shall cease to be, enforceable in accordance with its terms; or (c) there shall occur any default or event of default, or any event or condition that might become such with notice or the passage of time or both, or any similar event, or any event that requires the prepayment of borrowed money or the acceleration of the maturity thereof, under the terms of any evidence of indebtedness or other agreement issued or assumed or entered into by Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor, or under the terms of any indenture, agreement, or instrument under which any such evidence of indebtedness or other agreement is issued, assumed, secured, or guaranteed, and such event shall continue beyond any applicable period of grace; or (d) any representation, warranty, schedule, certificate, financial statement, report, notice, or other writing furnished by or on behalf of Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor to Lender is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or (e) any guaranty of or pledge of collateral security for this Note shall be repudiated or become unenforceable or incapable of performance; or (f) Borrower or any Subsidiary shall fail to maintain their existence in good standing in their state of formation or shall fail to be duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects or Borrower; or (g) Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor shall die, become incompetent, dissolve, liquidate, merge, consolidate, or cease to be in existence for any reason; or any general partner or joint venturer of Borrower shall withdraw or notify any partner or joint venturer of Borrower of its or his/her intention to withdraw as a partner or joint venturer (or to become a limited partner) of Borrower; or any general or limited partner or joint venturer of Borrower shall fail to make any contribution required by the partnership or joint venture agreement of Borrower as and when due under such agreement; or there shall be any change in the partnership or joint venture agreement of Borrower from that in force on the date hereof which may have a material adverse impact on the ability of Borrower to repay this Note; or (h) any person or entity presently not in control of a corporate, partnership or joint venture Borrower, any corporate general partner or joint venturer of Borrower, or any guarantor, shall obtain control directly or indirectly of Borrower, such a corporate general partner or joint venturer, or any guarantor, whether by purchase or gift of stock or assets, by contract, or otherwise; or (i) any proceeding (judicial or administrative) shall be commenced against Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor, or with respect to any assets of Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor which shall threaten to have a material and adverse effect on the assets, condition or prospects of Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor; or final judgment(s) and/or settlement(s) in an aggregate amount in excess of Ten Thousand and 00/100 UNITED STATES DOLLARS ($10,000.00) in excess of insurance for which the insurer has confirmed coverage in writing, a copy of which writing has been furnished to Lender, shall be entered or agreed to in any suit or action commenced against Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor; or (j) Borrower shall grant or any person (other than Lender) shall obtain a security interest in any collateral for this Note; Borrower or any other person shall perfect (or attempt to perfect) such a security interest; a court shall determine that Lender does not have a first-priority security interest in any of the collateral for this Note enforceable in accordance with the terms of the related documents; or any notice of a federal tax lien against Borrower or any general partner or joint venturer of Borrower shall be filed with any public recorder; or ****If this box is checked and a land trustee is signing the Note, do not take real estate as collateral. 3 (k) there shall be any material loss or depreciation in the value of any collateral for this Note for any reason, or Lender shall otherwise reasonably deem itself insecure; or, unless expressly permitted by the related documents, all or any part of any collateral for this Note or any direct, indirect, legal, equitable or beneficial interest therein is assigned, transferred or sold without Lender's prior written consent; or (l) any bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation, dissolution, or similar proceeding, domestic or foreign, is instituted by or against Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor; or Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor shall take any steps toward, or to authorize, such a proceeding; or (m) Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor shall become insolvent, generally shall fail or be unable to pay its debts as they mature, shall admit in writing its inability to pay its debts as they mature, shall make a general assignment for the benefit of its creditors, shall enter into any composition or similar agreement, or shall suspend the transaction of all or a substantial portion of its usual business. 7. DEFAULT REMEDIES. (a) Upon the occurrence and during the continuance of any Event of Default specified in Section 6(a)-(k), Lender at its option may declare this Note (principal, interest and other amounts) immediately due and payable without notice or demand of any kind. Upon the occurrence of any Event of Default specified in Section 6(l)-(m), this Note (principal, interest and other amounts) shall be immediately and automatically due and payable without action of any kind on the part of Lender. Upon the occurrence and during the continuance of any Event of Default, Lender may exercise any rights and remedies under this Note, any related document or instrument (including without limitation any pertaining to collateral), and at law or in equity. (b) Lender may, by written notice to Borrower, at any time and from time to time, waive any Event of Default or "Unmatured Event of Default" (as defined below), which shall be for such period and subject to such conditions as shall be specified in any such notice. In the case of any such waiver, Lender and Borrower shall be restored to their former position and rights hereunder, and any Event of Default or Unmatured Event of Default so waived shall be deemed to be cured and not continuing; but no such waiver shall extend to or impair any subsequent or other Event of Default or Unmatured Event of Default. No failure to exercise, and no delay in exercising, on the part of Lender of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of Lender herein provided are cumulative and not exclusive of any rights or remedies provided by law. "Unmatured Event of Default" means any event or condition which would become an Event of Default with notice or the passage of time or both. 8. NO INTEREST OVER LEGAL RATE. Borrower does not intend or expect to pay, nor does Lender intend or expect to charge, accept or collect any interest which, when added to any fee or other charge upon the principal which may legally be treated as interest, shall be in excess of the highest lawful rate. If acceleration, prepayment or any other charges upon the principal or any portion thereof, or any other circumstance, result in the computation or earning of interest in excess of the highest lawful rate, then any and all such excess is hereby waived and shall be applied against the remaining principal balance. Without limiting the generality of the foregoing, and notwithstanding anything to the contrary contained herein or otherwise, no deposit of funds shall be required in connection herewith which will, when deducted from the principal amount outstanding hereunder, cause the rate of interest hereunder to exceed the highest lawful rate. 9. PAYMENTS, ETC. All payments hereunder shall be made in immediately available funds, and shall be applied first to accrued interest and then to principal; however, if an Event of Default occurs, Lender may, in its sole discretion, and in such order as it may choose, apply any payment to interest, principal and/or lawful charges and expenses then accrued. Borrower shall receive immediate credit on payments received during Lender's normal banking hours if made in cash, immediately available funds, or by debit to available balances in an account at Lender; otherwise payments shall be credited after clearance through normal banking channels. Borrower authorizes Lender to charge any account of Borrower maintained with Lender for any amounts of principal, interest, taxes, duties, or other charges or amounts due or payable hereunder, with the amount of such payment subject to availability of collected balances in Lender's discretion; unless Borrower instructs otherwise, all Loans shall be credited to an account(s) of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE LOANS HEREUNDER UPON TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED TO RELY SOLELY UPON INSTRUCTIONS, INCLUDING WITHOUT LIMITATION INSTRUCTIONS TO MAKE TRANSFERS TO THIRD PARTIES, REASONABLY BELIEVED BY LENDER TO HAVE BEEN GIVEN BY AN AUTHORIZED PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All payments shall be made without deduction for or on account of any present or future taxes, duties or other charges levied or imposed on this Note or the proceeds, Lender or Borrower by any governmental or political subdivision thereof, Borrower shall upon request of Lender pay all such taxes, duties or other charges in addition to principal and interest, including without limitation all documentary stamp and intangible taxes, but excluding income taxes based solely on Lender's income. 10. SETOFF. At any time and without notice of any kind, any account, deposit or other indebtedness owing by Lender to Borrower, and any securities or other property of Borrower delivered to or left in the possession of Lender or its nominee or bailee, may be set off against and applied in payment of any obligation hereunder, whether due or not. 11. NOTICES. All notices, requests and demands to or upon the respective parties hereto shall be deemed to have been given or made when deposited in the mail, postage prepaid, addressed if to Lender to its main banking office indicated above (Attention: Division Head, Private Banking Division), and if to Borrower to its address set forth below, or to such other address as may be hereafter designated in writing by the respective parties hereto or, as to Borrower, may appear in Lender's records. 12. MISCELLANEOUS. This Note and any document or instrument executed in connection herewith shall be governed by and construed in accordance with the internal law of the State of Illinois, and shall be deemed to have been executed in the State of Illinois. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and the use of one gender shall also denote the other. Captions herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof; references herein to Sections or provisions without reference to the document in which they are contained are references to this Note. This Note shall bind Borrower, its heirs, trustees (including without limitation successor and replacement trustees), executors, personal representatives, successors and assigns, and shall inure to the benefit of Lender, its successors and assigns, except that Borrower may not transfer or assign any of its rights or interest hereunder without the prior written consent of Lender. Borrower agrees to pay upon demand all expenses (including without limitation attorneys' fees, legal costs and expenses, and time charges of attorneys who may be employees of Lender, in each case whether in or out of court, in original or appellate proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof in connection with the enforcement or preservation of its rights hereunder or under any document or instrument executed in connection herewith. Borrower expressly and irrevocably waives notice of dishonor or default as well as presentment, protest, demand and notice of any kind in connection herewith. If there shall be more than one person or entity constituting Borrower, each of them shall be primarily, jointly and severally liable for all obligations hereunder. 13. WAIVER OF JURY TRIAL, ETC. BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE AND ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [X] See Rider attached hereto and incorporated herein by reference. Lender is hereby authorized by Borrower without notice to Borrower to fill in any blank spaces and dates and strike inapplicable terms herein or in any related document to conform to the terms upon which the Loan(s) evidenced hereby are or may be made, for which purpose Lender shall be deemed to have been granted an irrevocable power of attorney coupled with an interest. Address for Notices: 2600 Cross Park Road ---------------------------------------- Neural Applications Corporation Coralville, IA 52241 - ------------------------------------ ---------------------------------------- By: /s/ Robert B. Staib -------------------------------- ---------------------------------------- Robert B. Staib Title: Chairman and CEO Attention: ----------------------------- ----------------------------- 4 RIDER TO MASTER NOTE (FORM 9601) DATED AS OF November 28, 1997 EXECUTED BY Neural Applications Corporation ----------- ---- ------------------------------- (the "Borrower") IN FAVOR OF THE NORTHERN TRUST COMPANY (the "Lender") (COMMITTED LINE OF CREDIT) 1. This Rider is attached to and forms and integral part of the above- referenced Master Note (as amended, the "Note"). Capitalized terms defined in the remainder of the Note and not otherwise defined in this Rider shall have the same meaning in this Rider as in the remainder of the Note. Wherever possible this Rider and the remainder of the Note shall be construed so as to be consistent with each other; however, if and to the extent that the terms of this Rider conflict or are inconsistent with the remainder of the Note, the terms of this Rider shall prevail. Except as modified by this Rider the terms of the remainder of the Note shall apply. 2. The first paragraph of Section 3 ("LINE OF CREDIT") is deleted and the following is substituted. "COMMITTED LINE OF CREDIT: This Note has been executed pursuant to a committed line of credit. By its acceptance of this Rider to this Note, Lender shall be deemed to have agreed to make available to Borrower Loans as outlined herein or in any related letter until the maturity date indicated above unless and until any 'Event of Default' (as defined below) occurs, in which case Lender shall have no obligation whatsoever to make any Loan hereunder or otherwise to extend credit to Borrower. Lender shall have no obligation to give Borrower or any other person or entity prior notice of the existence of any Event of Default or of any decision not to make any Loan or otherwise extend credit to Borrower." Dated as of November 28, 1997. ---------- ---- ------------------------------------------ Type Name --------------------------------- Neural Applications Corporation ------------------------------------------ By: /s/ Robert B. Staib --------------------------------------- Robert B. Staib Title: Chairman and CEO ------------------------------------ EX-10.11 31 MASTER NOTE DATED 9/14/1998 1 EXHIBIT 10.11 OBLIGOR FILE NAME OBLIGOR # OBLIGATION NUMBER OFFICER # AMOUNT NEURAL APPLICATIONS CORPORATION 34786 $2,000,000.00 - -------------------------------------------------------------------------------- Chicago, Illinois Dated as of September 14, 1998 ------------ ---- MASTER NOTE (CORPORATION, PARTNERSHIP, OR JOINT VENTURE) This Note has been executed by Neural Applications Corporation, a corporation formed under the laws of the State of Delaware ("Borrower"); if more than one entity executes this Note, the term "Borrower" refers to each of them individually and some or all of them collectively, and their obligations hereunder shall be joint and several.* If a land trustee executes this Note, "Borrower" as used in sections 6 and 7 below also includes any beneficiary(ies) of the land trust.** FOR VALUE RECEIVED, on or before September 30, 1999, the scheduled maturity date hereof, Borrower promises to pay to the order of THE NORTHERN TRUST COMPANY, an Illinois banking corporation (hereafter, together with any subsequent holder hereof, called "Lender"), at its main banking office at 50 South LaSalle Street, Chicago, Illinois 60675, or at such other place as Lender may direct, the aggregate unpaid principal balance of each advance (a "Loan" and collectively the "Loans") made by Lender to Borrower hereunder. The total principal amount of Loans outstanding at any one time hereunder shall not exceed Two Million UNITED STATES DOLLARS ($2,000,000.00). Lender is hereby authorized by Borrower at any time and from time to time at Lender's sole option to attach a schedule (grid) to this Note and to endorse thereon notations with respect to each Loan specifying the date and principal amount thereof, the Interim Maturity Date (as defined below) (if applicable), the applicable interest rate and rate option, and the date and amount of each payment of principal and interest made by Borrower with respect to each such Loan. Lender's endorsements as well as its records relating to Loans shall be rebuttably presumptive evidence of the outstanding principal and interest on the Loans, and, in the event of inconsistency, shall prevail over any records of Borrower and any written confirmations of Loans given by Borrower. If Borrower wishes to obtain a Loan under this Note, Borrower shall notify Lender orally or in writing on a banking day. Any such notice shall be irrevocable; if the notice is received after 10:00 AM Chicago time the Loan may not be available until the next banking day. Additional procedures for "Bank Offered Rate" Loans, if available, are set forth below. Each request for a Loan shall be deemed to be a representation and warranty by Borrower to Lender that: (i) no Event of Default or Unmatured Event of Default (in each case as defined below) has occurred and is continuing as of the date of such request or would result from the making of the Loan; and (ii) Borrower's representations and warranties herein are true and correct as of such date as though made on such date. Upon receipt of each Loan request Lender in its sole discretion shall have the right to request that Borrower provide to Lender, prior to Lender's funding of the Loan, a certificate executed by Borrower's President, Treasurer, or Chief Financial Officer (if Borrower is a corporation), or a general partner or joint venturer of Borrower (if Borrower is a partnership or joint venture) to such effect. 1. INTEREST. Borrower agrees to pay interest on the unpaid principal amount from time to time outstanding hereunder at the following rate per year: [CHECK ONE ONLY] [XXXX] (i) The "Prime-Based Rate", which shall mean the Prime Rate plus minus one and one-half percent (1.500%). [N/A] ***(ii) The "Bank Offered Rate", which shall be equal to that rate of interest offered by Lender and accepted by Borrower and fixed for periods of up to one year ("Interest Period(s)") (the last day of any Interest Period being referred to as an "Interim Maturity Date"). Other description_____________________________________________________ ______________________________________________________________________ "Prime Rate" means that rate of interest announced from time to time by Lender called its prime rate, which rate may not at any time be the lowest rate charged by Lender. Changes in the rate of interest on the Loans resulting from a change in the Prime Rate shall take effect on the date set forth in each announcement of a change in the Prime Rate. Without limiting Borrower's obligation to repay all outstanding Loans in full on the scheduled maturity date, each Loan at the Bank Offered Rate shall be due and payable in full on its Interim Maturity Date. After the maturity of any Loan, whether by acceleration or otherwise, such Loan shall bear interest until paid, at a rate equal to two percent (2%) in addition to the rate in effect immediately prior to maturity (but not less than the Prime Rate in effect at maturity). If this Note bears interest at the Bank Offered Rate and Borrower requests a Loan, Lender shall in its sole discretion offer or decline to offer a Bank Offered Rate (and if it offers a Bank Offered Rate, the rate of such Bank Offered Rate shall be in Lender's sole discretion), and Borrower shall irrevocably accept or decline such particular Bank Offered Rate and the related Loan and confirm such acceptance in writing by letter or other written communication dated and sent the date of such borrowing. Any confirmation by Lender of the rate and Interest Period for any Bank Offered Rate Loan shall be conclusive in the absence of manifest error. Without limiting Borrower's obligations under any other document or instrument, Lender may rely without inquiry upon any person whom it reasonably believes to be a party authorized to accept or decline such Bank Offered Rate and the related Loan. Lender has no obligation to make a new Loan to Borrower when a Loan at the Bank Offered Rate matures on its Interim Maturity Date. Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days, including the date a Loan is made and excluding the date a Loan or any portion thereof is paid or prepaid. Interest shall be due and payable as follows: [X] Monthly, on the LAST day of each month, beginning September 30, 1998 with all accrued but unpaid interest being due and payable in full with the final principal payment due hereunder. [N/A] Quarterly, on the ________ day of each ___________, ____________, ________________, and _____________________ in each year, beginning ____________________, with all accrued but unpaid interest being due and payable in full with the final principal payment due hereunder. [N/A] Other _______________________________________________________________. *Insert "N/A" in any blank in this Note which is not applicable. **Land trustee may not sign upon direction of individual beneficiary(ies) unless Loans are for business purposes. ***Do not use if collateral includes real estate. 2 In addition, if the Bank Offered Rate is available under this Note, interest on any Loan at the Bank Offered Rate, if not otherwise previously due and payable as indicated above, shall be due and payable in full on the last day of each Interest Period. After maturity interest shall be payable on demand. 2. PREPAYMENTS. Borrower may prepay without penalty or premium any principal bearing interest at the Prime-Based Rate. If Borrower prepays any principal bearing interest at the Bank Offered Rate in whole or in part, or if the maturity of any such Bank Offered Rate principal is accelerated, then, to the fullest extent permitted by law Borrower shall also pay Lender for all losses (including but not limited to interest rate margin and any other losses of anticipated profits) and expenses incurred by reason of the liquidation or re-employment of deposits acquired by Lender to make the Loan or maintain principal outstanding at the Bank Offered Rate. Upon Lender's demand in writing specifying such losses and expenses, Borrower shall promptly pay them; Lender's specification shall be deemed correct in the absence of manifest error. Each Loan bearing interest at the Bank Offered Rate shall be conclusively deemed to have been funded by or on behalf of Lender by the purchase of a deposit corresponding in amount to such Loan and in maturity to the Interest Period specified by Lender. 3. REFERENCES TO PREVIOUS NOTES, FACILITY TYPE, COLLATERAL, GUARANTIES, LOAN & OTHER AGREEMENTS. (CHECK AS APPLICABLE) LINE OF CREDIT: This Note has been executed pursuant to a line of credit. At the present time Lender intends to make available to Borrower credit as outlined herein or in any related letter until the maturity day indicated above unless in Lender's sole judgment there has occurred an adverse change in the assets, condition or prospects of Borrower or any guarantor. THE LINE OF CREDIT MAY BE CANCELLED OR REDUCED BY LENDER AT LENDER'S SOLE OPTION WITHOUT PRIOR NOTICE TO BORROWER OR ANY OTHER PERSON OR ENTITY. THE LINE OF CREDIT IS REVOCABLE NOTWITHSTANDING PAYMENT OF ANY FEES OR MAINTENANCE OF ANY ACCOUNT BALANCES, AS AND IF PROVIDED IN ANY ACCOMPANYING LETTER OR OTHER DOCUMENT PERTAINING TO SUCH FEES AND/OR BALANCES. Any such fees and/or balances shall be deemed compensation to Lender for being prepared to respond to Borrower's requests for credit under this Note. [N/A] This Note amends, restates, renews and replaces in its entirety the note dated _________________ in the amount of $____________, and any previously renewed note(s). Borrower hereby expressly confirms that all collateral and guaranties given for such prior note(s) shall secure or guarantee this Note. All amounts outstanding under such previous note(s) shall be deemed automatically outstanding hereunder. [X] This Note is secured without limitation as provided in the following and all related documents, in each case as amended, modified, renewed, restated or replaced from time to time. [N/A] Security Agreement dated as of _________________________________. [N/A] Mortgage dated as of ____________________________________________ on property all or part of which is commonly known as ___________ _________________________________________________________________ ________________________________________________________________. [X] Pledge Agreement dated as of September 14, 1998. [N/A] Other (describe)_________________________________________________ ________________________________________________________________. [X] Payment of this Note has been unconditionally guaranteed by Robert B. Staib (each individually and all collectively referred to as "guarantor") as provided in separately executed guaranties. [N/A] This Note has been executed pursuant to a __________ Agreement, dated as of the date hereof, as amended, modified, restated, renewed, or replaced from time to time, containing covenants and other terms, to which reference is hereby made. 4. USE OF PROCEEDS. CHECK ONE: [X] Borrower represents and warrants that the proceeds of this Note will be used solely for business purposes, and not for personal, family or household use, within the meaning of Federal Truth-in-Lending and similar state laws and regulations. [N/A] ****Borrower represents that the proceeds of this Note will be used for personal, family or household use. IF THIS OPTION IS CHECKED, THE FIRST LOAN MUST BE IN THE AMOUNT OF $25,001 OR MORE If Loan proceeds will be used to purchase or refinance the purchase of any property describe: _______________________________________________________________________________ _______________________________________________________________________________. Notwithstanding any other provision hereof, if this Note is covered by Regulation Z of the Federal Reserve Board (Truth in Lending) or any like disclosure requirement, this Note shall be secured by collateral referenced herein or in any other document only if disclosed in a related disclosure statement. 5. REPRESENTATIONS. Borrower hereby represents and warrants to Lender that: (a) Borrower and any "Subsidiary" (as defined below) are existing and in good standing under the laws of their state of formation, are duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects of Borrower; the execution, delivery and performance of this Note and all related documents and instruments are within Borrower's powers and have been authorized by all necessary corporate, partnership or joint venture action; (b) the execution, delivery and performance of this Note and all related documents and instruments have received any and all necessary governmental approval, and do not and will not contravene or conflict with any provision of law or of the partnership or joint venture or similar agreement, charter or by-laws of Borrower or any agreement affecting Borrower or its property; and (c) there has been no material adverse change in the business, condition, properties, assets, operations or prospects of Borrower or any guarantor since the date of the latest financial statements provided on behalf of Borrower or any guarantor to Lender prior to the execution of this Note. "Subsidiary" means any corporation, partnership, joint venture, trust, or other legal entity of which Borrower owns directly or indirectly fifty percent (50%) or more of the outstanding voting stock or interest, or of which Borrower has effective control, by contract or otherwise. 6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default": (a) failure to pay, when and as due, any principal, interest or other amounts payable hereunder; failure to comply with or perform any agreement or covenant of Borrower contained herein; or failure to furnish (or caused to be furnished to) Lender when and as requested by Lender (but not more often than once every twelve months) fully completed personal financial statement(s) of any individual guarantor on Lender's then-standard form together with such supporting information as Lender may reasonably request; or (b) any default, event of default, or similar event shall occur or continue under any other instrument, document, note, agreement, or guaranty delivered to Lender in connection with this Note, or any such instrument, document, note, agreement, or guaranty shall not be, or shall cease to be, enforceable in accordance with its terms; or (c) there shall occur any default or event of default, or any event or condition that might become such with notice or the passage of time or both, or any similar event, or any event that requires the prepayment of borrowed money or the acceleration of the maturity thereof, under the terms of any evidence of indebtedness or other agreement issued or assumed or entered into by Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor, or under the terms of any indenture, agreement, or instrument under which any such evidence of indebtedness or other agreement is issued, assumed, secured, or guaranteed, and such event shall continue beyond any applicable period of grace; or (d) any representation, warranty, schedule, certificate, financial statement, report, notice, or other writing furnished by or on behalf of Borrower, any Subsidiary, any general partner or joint venture of Borrower, or any guarantor to Lender is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or (e) any guaranty of or pledge of collateral security for this Note shall be repudiated or become unenforceable or incapable of performance; or (f) Borrower or any Subsidiary shall fail to maintain their existence in good standing in their state of formation or shall fail to be duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects of Borrower; or (g) Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor shall die, become incompetent, dissolve, liquidate, merge, consolidate, or cease to be in existence for any reason; or any general partner or joint venturer of Borrower shall withdraw or notify any partner or joint venturer of Borrower of its or his/her intention to withdraw as a partner or joint venturer (or to become a limited partner) of Borrower; or any general or limited partner or joint venturer of Borrower shall fail to make any contribution required by the partnership or joint venture agreement of Borrower as and when due under such agreement; or there shall be any change in the partnership or joint venture agreement of Borrower from that in force on the date hereof which may have a material adverse impact on the ability of Borrower to repay this Note; or (h) any person or entity presently not in control of a corporate, partnership or joint venture Borrower, any corporate general partner or joint venturer of Borrower, or any guarantor, shall obtain control directly or indirectly of Borrower, such a corporate general partner or joint venturer, or any guarantor, whether by purchase or gift of stock or assets, by contract, or otherwise; or (i) any proceeding (judicial or administrative) shall be commenced against Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor, or with respect to any assets of Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor which shall threaten to have a material and adverse effect on the assets, condition or prospects of Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor; or final judgment(s) and/or settlement(s) in an aggregate amount in excess of Two Hundred Fifty Thousand UNITED STATES DOLLARS ($250,000.00) in excess of insurance for which the insurer has confirmed coverage in writing, a copy of which writing has been furnished to Lender, shall be entered or agreed to in any suit or action commenced against Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor; or (j) Borrower shall grant or any person (other than Lender) shall obtain a security interest in any collateral for this Note; Borrower or any other person shall perfect (or attempt to perfect) such a security interest; a court shall determine that Lender does not have a first-priority security interest in any of the collateral for this Note enforceable in accordance with the terms of the related documents; or any notice of a federal tax lien against Borrower or any general partner or joint venturer of Borrower shall be filed with any public recorder; or ****If this box is checked and a land trustee is signing the Note, do not take real estate as collateral. Page 2 3 (k) there shall be any material loss or depreciation in the value of any collateral for this Note for any reason, or Lender shall otherwise reasonably deem itself insecure; or, unless expressly permitted by the related documents, all or any part of any collateral for this Note or any direct, indirect, legal, equitable or beneficial interest therein is assigned, transferred or sold without Lender's prior written consent; or (l) any bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation, dissolution, or similar proceeding, domestic or foreign, is instituted by or against Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor; or Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor shall take any steps toward, or to authorize, such a proceeding; or (m) Borrower, any Subsidiary, any general partner or joint venturer of Borrower, or any guarantor shall become insolvent, generally shall fail or be unable to pay its debts as they mature, shall admit in writing its inability to pay its debts as they mature, shall make a general assignment for the benefit of its creditors, shall enter into any composition or similar agreement, or shall suspend the transaction of all or a substantial portion of its usual business. 7. DEFAULT REMEDIES. (a) Upon the occurrence and during the continuance of any Event of Default specified in Section 6(a)-(k), Lender at its option may declare this Note (principal, interest and other amounts) immediately due and payable without notice or demand of any kind. Upon the occurrence of any Event of Default specified in Section 6(l)-(m), this Note (principal, interest and other amounts) shall be immediately and automatically due and payable without action of any kind on the part of Lender. Upon the occurrence and during the continuance of any Event of Default, Lender may exercise any rights and remedies under this Note, any related document or instrument (including without limitation any pertaining to collateral), and at law or in equity. (b) Lender may, by written notice to Borrower, at any time and from time to time, waive any Event of Default or "Unmatured Event of Default" (as defined below), which shall be for such period and subject to such conditions as shall be specified in any such notice. In the case of any such waiver, Lender and Borrower shall be restored to their former position and rights hereunder, and any Event of Default or Unmatured Event of Default so waived shall be deemed to be cured and not continuing; but no such waiver shall extend to or impair any subsequent or other Event of Default or Unmatured Event of Default. No failure to exercise, and no delay in exercising, on the part of Lender of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of Lender herein provided are cumulative and not exclusive of any rights or remedies provided by law. "Unmatured Event of Default" means any event or condition which would become an Event of Default with notice or the passage of time or both. 8. NO INTEREST OVER LEGAL RATE. Borrower does not intend or expect to pay, nor does Lender intend or expect to charge, accept or collect any interest which, when added to any fee or other charge upon the principal which may legally be treated as interest, shall be in excess of the highest lawful rate. If acceleration, prepayment or any other charges upon the principal or any portion thereof, or any other circumstance, result in the computation or earning of interest in excess of the highest lawful rate, then any and all such excess is hereby waived and shall be applied against the remaining principal balance. Without limiting the generality of the foregoing, and notwithstanding anything to the contrary contained herein or otherwise, no deposit of funds shall be required in connection herewith which will, when deducted from the principal amount outstanding hereunder, cause the rate of interest hereunder to exceed the highest lawful rate. 9. PAYMENTS, ETC. All payments hereunder shall be made in immediately available funds, and shall be applied first to accrued interest and then to principal; however, if an Event of Default occurs, Lender may, in its sole discretion, and in such order as it may choose, apply any payment to interest, principal and/or lawful charges and expenses then accrued. Borrower shall receive immediate credit on payments received during Lender's normal banking hours if made in cash, immediately available funds, or by debit to available balances in an account at Lender; otherwise payments shall be credited after clearance through normal banking channels. Borrower authorizes Lender to charge any account of Borrower maintained with Lender for any amounts of principal, interest, taxes, duties, or other charges or amounts due or payable hereunder, with the amount of such payment subject to availability of collected balances in Lender's discretion; unless Borrower instructs otherwise, all Loans shall be credited to an account(s) of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE LOANS HEREUNDER UPON TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED TO RELY SOLELY UPON INSTRUCTIONS, INCLUDING WITHOUT LIMITATION INSTRUCTIONS TO MAKE TRANSFERS TO THIRD PARTIES, REASONABLY BELIEVED BY LENDER TO HAVE BEEN GIVEN BY AN AUTHORIZED PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All payments shall be made without deduction for or on account of any present or future taxes, duties or other charges levied or imposed on this Note or the proceeds, Lender or Borrower by any government or political subdivision thereof. Borrower shall upon request of Lender pay all such taxes, duties or other charges in addition to principal and interest, including without limitation all documentary stamp and intangible taxes, but excluding income taxes based solely on Lender's income. 10. SETOFF. At any time and without notice of any kind, any account, deposit or other indebtedness owing by Lender to Borrower, and any securities or other property of Borrower delivered to or left in the possession of Lender or its nominee or bailee, may be set off against and applied in payment of any obligation hereunder, whether due or not. 11. NOTICES. All notices, requests and demands to or upon the respective parties hereto shall be deemed to have been given or made when deposited in the mail, postage prepaid, addressed if to Lender to its main banking office indicated above (Attention: Division Head, Private Banking Division), and if to Borrower to its address set forth below, or to such other address as may be hereafter designated in writing by the respective parties hereto or, as to Borrower, may appear in Lender's records. 12. MISCELLANEOUS This Note and any document or instrument executed in connection herewith shall be governed by and construed in accordance with the internal law of the State of Illinois, and shall be deemed to have been executed in the State of Illinois. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and the use of one gender shall also denote the other. Captions herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof; references herein to Sections or provisions without reference to the document in which they are contained are references to this Note. This Note shall bind Borrower, its heirs, trustees (including without limitation successor and replacement trustees), executors, personal representatives, successors and assigns, and shall inure to the benefit of Lender, its successors and assigns, except that Borrower may not transfer or assign any of its rights or interest hereunder without the prior written consent of Lender. Borrower agrees to pay upon demand all expenses (including without limitation attorneys' fees, legal costs and expenses, and time charges of attorneys who may be employees of Lender, in each case whether in or out of court, in original or appellate proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof in connection with the enforcement or preservation of its rights hereunder or under any document or instrument executed in connection herewith. Borrower expressly and irrevocably waives notice of dishonor or default as well as presentment, protest, demand and notice of any kind in connection herewith. If there shall be more than one person or entity constituting Borrower, each of them shall be primarily, jointly and severally liable for all obligations hereunder. 13. WAIVER OF JURY TRIAL, ETC. BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE AND ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [X] See Rider attached hereto and incorporated herein by reference. Lender is hereby authorized by Borrower without notice to Borrower to fill in any blank spaces and dates and strike inapplicable terms herein or in any related document to conform to the terms upon which the Loan(s) evidenced hereby are or may be made, for which purpose Lender shall be deemed to have been granted an irrevocable power of attorney coupled with an interest. Address for Notices: 2600 Crosspark Road ---------------------------------------- NEURAL APPLICATIONS CORPORATION Corallville, IA 52241 - ------------------------------------ ---------------------------------------- By: /s/ Robert B. Staib --------------------------------- ---------------------------------------- Title: Robert B. Staib Attention: ----------------------------- ----------------------------- Page 3 4 PLEDGE AGREEMENT (Multiple Collateral Options) (Loans to Debtor and/or Third Party) Dated as of September 14, 1998 This Pledge Agreement (as modified from time to time, the "Agreement") has been executed by Robert B. Staib*, an individual ("Debtor"), as debtor, in favor of THE NORTHERN TRUST COMPANY, an Illinois banking corporation, as secured party and pledgee (together with any successor, assign or subsequent holder, "Secured Party"), with its main banking office at 50 South LaSalle Street, Chicago, Illinois 60675. If more than one person or entity executes this Agreement, the term "Debtor" refers to each of them individually and some or all of them collectively, and their obligations hereunder shall be joint and several. If any party comprising "Debtor" is a trustee(s), "Trust Agreement" means the governing trust agreement and/or instruments governing the trust, as modified from time to time, and all related documents and instruments, and "Debtor" also refers to the trustee(s) as such and the trust individually and collectively. In consideration of Secured Party's making loans and extensions of credit and/or considering making loans or extensions of credit, to Debtor and/or Neural Applications Corporation, a Delaware corporation (Debtor and such individuals or entities being collectively referred to as the "Borrower(s)"), and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor agrees as follows: 1. DEFINITIONS. As used in this Agreement: (a) Unless otherwise defined herein, all terms that are defined in the Uniform Commercial Code of the State in which the main banking office of Secured Party is located shall have the same meanings herein as in such Code. (b) "Guarantor" means any person or entity, or any persons or entities severally, now or hereafter guarantying payment or collection of all or any part of the "Liabilities" (as hereinafter defined). (c) "Prime Rate" means that floating rate of interest per year announced from time to time by Secured Party called its prime rate, which at any time may not be the lowest rate charged by Secured Party, computed for the actual number of days elapsed on the basis of a year of 360 days. (d) "Subsidiary" means any corporation, partnership, joint venture, trust, or other legal entity of which Borrower or Debtor owns directly or indirectly 50% or more of the outstanding voting stock or interest, or of which Borrower or Debtor has effective control, by contract or otherwise. 2. PLEDGE. Debtor hereby assigns, pledges, hypothecates, delivers, sets over and transfers to Secured Party and grants to Secured Party a continuing security interest in the following, in each case whether certificated or uncertificated, whether now owned or hereafter acquired, wherever located (any or all of such, the "Collateral"): (a) CHECK AS MANY AS APPLY STOCKS AND/OR BONDS. The securities (stocks and/or bonds) listed on Exhibit A. N/A U.S. GOVERNMENT SECURITIES. The marketable obligations and securities issued, guaranteed or insured by the United States, or for which the full faith and credit of the United States is pledged for the repayment of principal and interest thereof, or marketable obligations issued, guaranteed, or insured by any agency, instrumentality, or corporation of the United States for which the credit of such agency, instrumentality or corporation is pledged for the repayment of principal and interest thereof, as described in Exhibit A attached hereto. N/A SECURITIES ACCOUNT. Account No. in the name of Debtor with (name of securities account firm), now located at (hereafter referred to as the "Bailee"), any successor and/or replacement account, and any and all securities, security entitlements, financial assets, investment property, commodity contracts, money, instruments, documents, goods, chattel paper, accounts, general intangibles, deposit accounts, partnership and limited liability company interests, and other property and rights of any nature now or hereafter held in or constituting part of such account(s)(such account and any successor and/or replacement account, the "Securities Account"). (ALSO EXECUTE DIRECTION LETTER IN FORM OF EXHIBIT B AND UCC FORM) N/A SPECIFIED SECURITIES IN SECURITIES ACCOUNT & RELATED RIGHTS. The securities listed in Exhibit A attached hereto which are presently held in Account No. in the name of Debtor with (name of securities account firm), now located at (hereafter referred to as the "Bailee"), and (without limiting any restrictions set forth herein) as may be held hereafter in any successor and/or replacement account or by Secured Party, together with any and all replacements and substitutions thereof or thereto and Debtor's security entitlements and other rights under and pursuant to such account(s) in connection with such securities, replacements and substitutions (such account and any successor and/or replacement account, the "Securities Account"). (ALSO EXECUTE DIRECTION LETTER IN FORM OF EXHIBIT C AND UCC FORM) N/A PERCENTAGE OF BALANCE IN SECURITIES ACCOUNT & RELATED RIGHTS. percent ( %) (according to market value of principal balance) of the securities held in Account No. in the name of Debtor with *Insert "N/A" in any blank which is not applicable. EXHIBITS REFERRED TO IN THE TEXT WHICH DO NOT PERTAIN TO THE PARTICULAR COLLATERAL PLEDGED NEED NOT BE ATTACHED. Page 1 5 (name of securities account firm), now located at (hereafter referred to as the "Bailee") and (without limiting any restrictions set forth herein) as may be held hereafter in any successor and/or replacement account or by Secured Party, together with any and all replacements and substitutions thereof or thereto and Debtor's security entitlements and other rights under and pursuant to such account(s) in connection with such securities, replacements and substitutions (such account and any successor and/or replacement account, the "Securities Account"). Secured Party shall have the right at any time and from time to time in its sole discretion to designate which securities in the Securities Account or which may be held by Secured Party shall constitute Collateral. (ALSO EXECUTE DIRECTION LETTER IN FORM OF EXHIBIT D AND UCC FORM) N/[A] BANK DEPOSITS. Deposit account and/or certificate of deposit number in the name of Debtor in the amount of $ (the "Deposit") held by Secured Party or [name & address of other institution where deposit is held] (Secured Party or other institution in its capacity as issuer of the Deposit, the "Bailee"), as well as each renewal, replacement and substitution of, interest credited to and all sums due or to become due on, the Deposit (including without limitation any increase in the amount of the Deposit from any source whatsoever). (IF DEPOSIT IS ISSUED BY ANYONE OTHER THAN SECURED PARTY, ALSO EXECUTE DIRECTION LETTER IN FORM OF EXHIBIT E) (IF MORE THAN ONE "DEPOSIT," "SECURITIES ACCOUNT" OR "BAILEE" IS INDICATED, SUCH TERMS AS USED IN THIS AGREEMENT APPLY TO EACH SUCH DEPOSIT, SECURITIES ACCOUNT OR BAILEE.) (b) With respect to any Collateral referred to in (a), but without limiting (a): (i) all stock and bond powers, certificates and instruments; (ii) all replacements, substitutions, interest, cash and stock dividends, warrants, options, and other rights and amounts paid, accrued, received, receivable, or distributed with respect thereto from time to time. (c) With respect to the foregoing, all products and proceeds thereof, including without limitation insurance proceeds and payments under the Securities Investor Protection Act of 1970, as amended. 3. LIABILITIES. The Collateral shall secure the payment and performance of the following (collectively referred to as the "Liability(ies)"): (a) all obligations and liabilities of Borrower or Debtor to Secured Party howsoever created, evidenced or arising, whether direct or indirect, absolute or contingent, now due or to become due, or now existing or hereafter arising, including without limitation future advances and letters of credit issued for the account of or at the request of Borrower or Debtor; (b) any guaranty by Debtor of any obligations of Borrower to Secured Party, and any obligation of Debtor as co-signer, endorser, or the like with respect to any note or other obligation of Borrower; (c) all liabilities and obligations of Debtor under this Agreement or in connection herewith; and (d) all agreements relating to any of the foregoing. This Agreement shall continue and remain in effect notwithstanding that at any particular time there may be no Liabilities outstanding. Notwithstanding the foregoing the Collateral shall not secure any Liabilities subject to Regulation Z of the Federal Reserve Board or any equivalent state disclosure requirement unless disclosed in a disclosure statement pertaining to such Liabilities. 4. REPRESENTATIONS. (a) Debtor hereby represents and warrants to Secured Party that: (i) [APPLICABLE IF DEBTOR IS A CORPORATION, PARTNERSHIP, JOINT VENTURE OR TRUST] Debtor and any Subsidiary are existing and in good standing under the laws of their state of formation, are duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects of Debtor; the execution, delivery and performance of this Agreement and all related documents and instruments are within Debtor's powers (including without limitation, if Debtor is a trust, Debtor's powers as trustee pursuant to the Trust Agreement and applicable law) and have been authorized by all necessary corporate, partnership, joint venture, and/or trust action. (ii) [APPLICABLE IF DEBTOR IS AN INDIVIDUAL] Debtor has capacity to enter into and perform its obligations hereunder. (iii) The execution, delivery and performance of this Agreement have received any and all necessary governmental approval, and do not and will not contravene or conflict with any provision of law or of the partnership or joint venture or similar agreement, charter or by-laws of Debtor or any agreement affecting Debtor or its property, including without limitation (if applicable) the Trust Agreement. (iv) There has been no material adverse change in the business, condition, properties, assets, operations or prospects of Debtor, Borrower or any Guarantor since the date of the latest financial statements provided on behalf of Debtor, Borrower or any Guarantor to Secured Party. (v) Debtor does not do business, nor has it done business during the five (5) years and six months prior to the date of this Agreement, under any name except as shown above. (vi) The Collateral is duly and validly authorized and issued, non-assessable, fully paid and paid for, issued and outstanding, and Debtor is the legal and equitable owner of the Collateral, with the right (including without limitation, if applicable, under the Trust Agreement) to pledge, assign and deliver the Collateral to secure the Liabilities and do or cause to be done all other actions provided for or referenced in this Agreement or any related document or instrument, free and clear of all liens, claims, encumbrances and security interests of any nature except any in favor of Secured Party. (vii) TO THE EXTENT THE COLLATERAL INCLUDES UNCERTIFICATED SECURITIES OR DEPOSITS, DEBTOR HAS REQUESTED THE ISSUER THEREOF TO MARK ITS BOOKS TO REFLECT THIS PLEDGE TO THE SECURED PARTY. (viii) Sale of the Collateral by Secured Party is not prohibited or regulated by any federal or state law or regulation or any agreement binding upon Debtor, including without limitation (if applicable) the Trust Agreement, and requires no registration or filing with, or consent or approval of, any governmental body, regulatory authority or securities exchange. (ix) No financing statement, notice of judgment, or any similar instrument (unless filed on behalf of Secured Party) covering any of the Collateral is on file in any public office. Page 2 6 (b) The request or application by Borrower or Debtor for any Liability secured hereby shall be a representation and warranty by Debtor as of the date of such request or application that: (i) no Event of Default or Unmatured Event of Default (in each case as defined herein) has occurred or is continuing as of such date; and (ii) Debtor's representations and warranties herein are true and correct as of such date as though made on such date. 5. DEPOSITORIES. Without limiting any other provision hereof, Secured Party may at its option from time to time transfer, or cause any Bailee to transfer, the Collateral into a "pledge position" at any depository now or hereafter holding the Collateral, and do or cause to be done, execute (or cause to be executed) such other documents, and take (or cause to be taken) such other actions as Secured Party may deem necessary or appropriate in connection therewith. 6. APPOINTMENT OF SUB-AGENTS; REGISTRATION IN NOMINEE NAME. (a) The Secured Party shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of any certificates or instruments representing or evidencing the Collateral, which may be held (in the discretion of Secured Party) in the name of Secured Party or any nominee or nominees of Secured Party or a sub-agent appointed by Secured Party. In addition, Secured Party shall at all times have the right to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations for any purpose consistent with its performance of this Agreement. (b) For the better perfection of Secured Party's rights in and to the Collateral and to facilitate implementation of such rights, Debtor shall, upon written request of Secured Party, cause all the certificates, notes, documents and other instruments evidencing, representing or otherwise comprising the Collateral to be registered or otherwise put into the name of Secured Party or a nominee or nominees of Secured Party subject only to the revocable voting rights specified herein. (c) Debtor hereby consents and agrees that the issuers of, or any depository, registrar, transfer agent or similar party for any of, the Collateral shall be entitled to accept the provisions hereof as conclusive evidence of the right of Secured Party to effect any transfer pursuant hereto, notwithstanding any notice or direction to the contrary heretofore or hereafter given by Debtor or any other person to any such issuer or any such depository, registrar, transfer agent or similar party. 7. VOTING RIGHTS. Upon the occurrence and during the continuance of an Event of Default, any and all voting or similar rights with respect to the Collateral shall be exercisable only by Secured Party. 8. COVENANTS OF PLEDGOR. Debtor agrees that so long as this Agreement remains in effect, it will: (a) Promptly deliver any cash, securities or other property received with respect to the Collateral, whether as proceeds of the disposition thereof, dividends with respect thereto, or otherwise, to be held by Secured Party as Collateral. NOTWITHSTANDING THE FOREGOING, UNTIL SECURED PARTY NOTIFIES DEBTOR TO THE CONTRARY OR AN EVENT OF DEFAULT (AS DEFINED BELOW) OCCURS, DEBTOR MAY CONTINUE TO RECEIVE REGULAR CASH DIVIDENDS AND INTEREST PAYMENTS ON THE COLLATERAL. (b) Defend the Collateral against the claims and demands of all persons other than Secured Party and promptly pay all taxes, assessments, and charges upon the Collateral, and not sign (or permit to be signed) any documents creating or perfecting a lien upon or a security interest in any of the Collateral except in favor of Secured Party, or otherwise create, suffer, or permit to exist any liens or security interests upon any Collateral other than in favor of Secured Party. (c) Keep at its address for notices set forth under or opposite its signature hereto its records concerning the Collateral, which records shall be of such character as will enable Secured Party to determine at any time the status of the Collateral; furnish to Secured Party such information concerning the Collateral as Secured Party may from time to time reasonably request; and permit Secured Party from time to time to inspect, audit, and make copies of, and extracts from, all records and all other papers in the possession of Debtor pertaining to the Collateral. (d) Make appropriate entries upon its financial statements and its books and records disclosing Secured Party's security interest in the Collateral. (e) Provide to Secured Party from time to time such financial statements of and other information concerning the Collateral, Debtor (including without limitation, if applicable, the trust under the Trust Agreement) and any general partner or joint venturer of Debtor (audited, if requested by Secured Party) as Secured Party shall reasonably request. (f) Except if and to the extent specifically permitted by this Agreement, not sell, transfer, grant an option or similar right with respect to, or otherwise dispose of, or agree to dispose of, any Collateral or any interest therein. 9. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default": (a) failure to pay, when and as due, any principal, interest or other amounts payable hereunder or in connection with any of the Liabilities, or failure to comply with or perform any agreement or covenant of Debtor contained herein; or (b) any default, event of default, or similar event shall occur or continue under any other instrument, document, note, agreement, or guaranty delivered to Secured Party in connection with this Agreement, or any such instrument, document, note, agreement, or guaranty shall not be, or shall cease to be, enforceable in accordance with its terms; or (c) there shall occur any default or event of default, or any event that might become such with notice or the passage of time or both, or any similar event, or any event that requires the prepayment of borrowed money or the acceleration of the maturity thereof, under the terms of any evidence of indebtedness or other agreement issued or assumed or entered into by Borrower, Debtor, any Subsidiary, any general partner or joint venturer of Borrower or Debtor, or any Guarantor, or under the terms of any indenture, agreement, or instrument under which any such evidence of indebtedness or other agreement is issued, assumed, secured, or guaranteed, and such event shall continue beyond any applicable period of grace; or (d) any representation, warranty, schedule, certificate, financial statement, report, notice, or other writing furnished by or on behalf of Borrower, Debtor, any Subsidiary, any general partner or joint venturer of Borrower or Debtor, or any Guarantor to Secured Party is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or (e) any guaranty of or pledge of collateral security for the Liabilities, including without limitation this Agreement, shall be repudiated or become unenforceable or incapable of performance; or Page 3 7 (f) Debtor, Borrower or any Subsidiary shall fail to maintain their existence in good standing in their state of formation or shall fail to be authorized, licensed, or qualified to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects of Borrower or Debtor; or (g) Borrower, Debtor, any general partner or joint venturer of Debtor or Borrower, or any Guarantor shall die, become incompetent, dissolve, liquidate, merge, consolidate, or cease to be in existence for any reason, or any general partner or joint venturer of Debtor or Borrower shall withdraw or notify any partner or joint venturer of Borrower or Debtor of its or his/her intention to withdraw as a partner or joint venturer (or to become a limited partner) of Borrower or Debtor; or any general or limited partner or joint venturer of Debtor or Borrower shall fail to make any contribution required by the partnership or joint venture agreement of Debtor or Borrower as and when due under such agreement; or there shall be any change in the partnership or joint venture agreement of Debtor or Borrower from that in force on the date hereof which may have a material adverse impact on the ability of Borrower to repay the Liabilities; or the trust under the Trust Agreement shall terminate in whole or in part or be the subject of a distribution of other than income; or (h) any person or entity presently not in control of a corporate, partnership or joint venture Debtor or Borrower, any corporate general partner or joint venturer of Debtor or Borrower, or any Guarantor, shall obtain control directly or indirectly of Debtor or Borrower, such a general partner or joint venturer, or any Guarantor, whether by purchase or gift of stock or assets, by contract, or otherwise; or (i) any proceeding (judicial or administrative) shall be commenced against Borrower, Debtor, any Subsidiary, any general partner or joint venturer of Debtor or Borrower, or any Guarantor, or with respect to any assets of Borrower, Debtor, any Subsidiary, any general partner or joint venturer of Borrower or Debtor, or any Guarantor, which shall threaten to have a material and adverse effect on the future operations or financial condition of Borrower, Debtor, any Subsidiary, any general partner or joint venturer of Debtor or Borrower, or any Guarantor; or final judgment(s) and/or settlement(s) in an aggregate amount in excess of Two Hundred Fifty thousand UNITED STATES DOLLARS ($250000 in excess of insurance for which the insurer has confirmed coverage in writing, a copy of which writing has been furnished to Secured Party, shall be entered in any suit or action commenced against Debtor, Borrower, any Subsidiary, any general partner or joint venturer of Debtor or Borrower, or any Guarantor; or (j) Debtor shall grant or any person (other than Secured Party) shall obtain a security interest in any Collateral; Debtor or any other person shall perfect (or attempt to perfect) such a security interest; a court shall determine that Secured Party does not have a first-priority security interest in any of the Collateral enforceable in accordance with the terms hereof; or any notice of a federal tax lien against Borrower or Debtor or any general partner or joint venturer of Borrower or Debtor shall be filed with any public recorder; or (k) there shall be any material loss or depreciation in the value of the Collateral for any reason, or Secured Party shall otherwise reasonably deem itself insecure; or there shall be any levy, judicial seizure, or attachment of any of the Collateral; or (l) any bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation, dissolution, or similar proceeding, domestic or foreign, is instituted by or against Borrower, Debtor, any Subsidiary, any general partner or joint venturer of Borrower or Debtor, or any Guarantor; or Borrower, Debtor, any Subsidiary, any general partner or joint venturer of Borrower, or Debtor, or any Guarantor shall take any steps toward, or to authorize, such a proceeding; or (m) Borrower, Debtor, any Subsidiary, any general partner or joint venturer of Debtor or Borrower, or any Guarantor shall become insolvent, generally shall fail or be unable to pay its (his)(her) debts as they mature, shall admit in writing its (his)(her) inability to pay its (his)(her) debts as they mature, shall make a general assignment for the benefit of its (his)(her) creditors, shall enter into any composition or similar agreement, or shall suspend the transaction of all or a substantial portion of its (his)(her) usual business. 10. DEFAULT REMEDIES. (a) Notwithstanding any provision of any document or instrument evidencing or relating to any Liability: (i) upon the occurrence and during the continuance of any Event of Default specified in Section 9(a)-(k), Secured Party at its option may declare the Liabilities immediately due and payable without notice or demand of any kind; and (ii) upon the occurrence of any Event of Default specified in Section 9(l)-(m), the Liabilities shall be immediately and automatically due and payable without action of any kind on the part of Secured Party. Upon the occurrence and during the continuance of any Event of Default, Secured Party may exercise any rights and remedies under this Agreement, any related document or instrument (including without limitation any pertaining to Collateral), and at law or in equity. (b) If any Event of Default shall have occurred and be continuing, then, in addition to having the right to exercise any rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State where the main banking office of Secured Party or any Collateral is located, Secured Party may, in its sole discretion: (i) without being required to give any prior notice to Debtor apply the cash (if any) then held by it hereunder, toward the Liabilities in such order as Secured Party shall determine in its sole discretion; and (ii) if there shall be no such cash or the cash so applied shall be insufficient to pay all obligations in full, sell the Collateral, or any part thereof, at any public or private sale, for cash, upon credit or for future delivery, as Secured Party shall deem appropriate. The Secured Party shall be authorized at any such sale (to the extent it deems it advisable to do so, in its sole discretion) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral then being sold for their own account for investment and not with a view to the distribution or resale thereof, and upon consummation of any such sale Secured Party shall have the right to assign, transfer and deliver to the purchaser(s) thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Debtor, and Debtor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. To the extent that notice of sale shall be required to be given by law, Secured Party shall give Debtor at least ten days; written notice of Secured Party's intention to make any such public or private sale or sales. Secured Party shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given. Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by Secured Party until the sale price is paid by the purchaser thereof, but Secured Party shall not incur any liability in case any such purchaser shall fail to take up and pay for the Page 4 8 Collateral so sold; in the case of any such failure, such Collateral may be sold again upon like notice. As an alternative to exercising the power of sale herein conferred upon it, Secured Party may proceed by a suit at law or in equity to foreclose this Agreement and to sell the Collateral, or any portion thereof, pursuant to a judgment or decree of a court of competent jurisdiction. The proceeds of sale of Collateral sold pursuant hereto shall be applied by Secured Party in such order as it shall determine. (c) Secured Party may, by written notice to Debtor, at any time and from time to time, waive any Event of Default or "Unmatured Event of Default" (as defined below), which shall be for such period and subject to such conditions as shall be specified in any such notice. In the case of any such waiver, Secured Party and Debtor shall be restored to their former position and rights hereunder, and any Event of Default or Unmatured Event of Default so waived shall be deemed to be cured and not continuing; but no such waiver shall extend to or impair any subsequent or other Event of Default or Unmatured Event of Default. No failure to exercise, and no delay in exercising, on the part of Secured Party of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of Secured Party herein provided are cumulative and not exclusive of any rights or remedies provided by law. "Unmatured Event of Default" means any event or condition which would become an Event of Default with notice or the passage of time or both. 11. POWERS OF SECURED PARTY. Secured Party may, from time to time, at its option (but shall have no duty to): (a) perform any agreement of Debtor hereunder that Debtor shall have failed to perform; (b) take any other action which Secured Party deems necessary or desirable for the preservation of the Collateral or Secured Party's interest therein and the carrying out of this Agreement, including without limiting the generality of the foregoing: (i) any action to collect or realize upon the Collateral; (ii) the discharge of taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral; or (iii) the discharge or keeping current of any obligation of Debtor having effect on the Collateral; or (iv) receiving, endorsing and collecting all checks and other orders for the payment of money made payable to Debtor representing any dividend, interest payment or other distribution payable or distributable in respect of the Collateral or any part thereof, and to give full discharge for the same; (c) file, or cause to be filed, photocopies or carbon copies of any financing statement respecting any right of Secured Party in the Collateral, and any such photocopy or carbon copy of the signature of Debtor on such photocopy or carbon copy shall be deemed an original for purposes of such filing. Debtor hereby authorizes Secured Party to sign financing statements on Debtor's behalf to be filed in all jurisdictions in which such authorization is permitted; and (d) (without limiting any other provision hereof) in its discretion request that any uncertificated securities or deposits constituting Collateral hereunder be delivered to it in definitive form. Upon receipt of such request from Secured Party, Debtor will immediately take all steps (including, without limitation, the payment by Debtor of all costs and expenses of issuance and transfer) required to cause such uncertificated securities or deposits to be issued and delivered in definitive form to Secured Party, together with any and all documents (executed in blank) required to effect the transfer of definitive securities or deposits in definitive form to Secured Party. The parties expressly agree that such securities or deposits when issued in definitive form shall continue to constitute Collateral for purposes of this Agreement. Debtor hereby appoints Secured Party as Debtor's attorney-in-fact, which appointment is and shall be deemed to be irrevocable and coupled with an interest, for purposes of performing acts and signing and delivering any agreement, document, or instrument, on behalf of Debtor in accordance with this Section. Debtor immediately will reimburse Secured Party for all expenses so incurred by Secured Party, together with interest thereon at 3% in addition to the Prime Rate. 12. FURTHER ASSURANCES. Debtor agrees to do (or cause to be done) such further acts and things, and to execute and deliver (or cause to be executed and delivered) such additional conveyances, assignments, agreements, and instruments, as Secured Party may at any time request in connection with the administration or enforcement of this Agreement or related to the Collateral or any part thereof or in order better to assure and confirm unto Secured Party its rights, powers and remedies hereunder. 13. ADDITIONAL PROVISIONS RE SECURITIES ACCOUNT AND DEPOSIT PLEDGE. The following additional provisions pertaining to the Bailee do not limit any of Secured Party's rights or powers under other provisions hereof: (a) Debtor agrees to cause Bailee to hold the Collateral as bailee and agent for Secured Party; Debtor hereby acknowledges that Bailee does and shall hold such property as bailee and agent of Secured Party. Debtor agrees to execute a direction letter to Bailee in the form attached hereto as Exhibit B (whole Securities Account), Exhibit C (specified securities in Securities Account), Exhibit D (percentage of Securities Account, with Secured Party having right to designate specified securities from time to time in its sole discretion), and/or (unless Secured Party is also the issuer of the deposit) Exhibit E (deposit), as applicable. All terms of the direction letter, including without limitation the agreement and acknowledgment of Bailee, are incorporated into this Agreement as agreements of Debtor, and Debtor agrees to cause Bailee to comply with its agreements and obligations under such letter, and to agree to and acknowledge such letter as provided therein. Upon the execution of the direction letter by Debtor, Bailee and Secured Party, as provided therein, the direction letter shall constitute an agreement among Debtor, Bailee and Secured Party. (b) Except as otherwise specified herein or in any direction letter, Bailee shall act or not act with respect to the Collateral solely in accord with entitlement orders and instructions (including without limitation instructions to sell or otherwise dispose of any Collateral, to designate securities as Collateral (if applicable), and to deliver any Collateral to Secured Party) given from time to time by Secured Party. If applicable (see Exhibit D), securities designated by Secured Party shall be and be deemed Collateral, and a security interest as provided in Section 2 above shall be deemed granted therein, but without limiting Secured Party's security interest in the percentage of the Account. Secured Party may exercise any rights and powers hereunder or in connection with this Agreement or the direction letter, including without limitation the agreement and acknowledgement of Bailee, without the consent of Debtor. (c)[APPLICABLE IF THIS AGREEMENT INCLUDES A PLEDGE OF AN ENTIRE SECURITIES ACCOUNT OR A PERCENTAGE OF A SECURITIES ACCOUNT: APPLICABLE ONLY TO SUCH COLLATERAL] Notwithstanding the foregoing, until Secured Party notifies Bailee in writing to the contrary, Bailee shall permit withdrawals from the Securities Account so long as the total market value of the assets in the Securities Account all times equals or exceeds $ N/A (the "Minimum Account Balance") (this figure refers to the entire Securities Account, even if a percentage of the Securities Page 5 9 Account is pledged). Debtor agrees to take all steps, including without limitation placing additional assets in the above-referenced Securities Account, to ensure that the value of the assets in the Securities Account at all times equals or exceeds the Minimum Account Balance as determined by Secured Party. (d) Debtor hereby directs and authorizes Bailee, as agent with respect to the Securities Account, to effect replacements and substitutions of Collateral on behalf of Debtor. Without limiting any other provision hereof, all such replacements and substitutions shall be conclusively deemed to be Collateral and Debtor shall be deemed to have granted a security interest in such items and assigned such items to Secured Party, as more fully provided in Section 2 above. All substitutions and replacements shall be satisfactory to Secured Party in its sole discretion, and (without limiting any other provision hereof or of any direction letter) if Secured Party so requests no substitution or replacement may be made except with the prior consent of Secured Party. 14. OBLIGATIONS UNCONDITIONAL; WAIVER OF DEFENSES. Debtor irrevocably agrees that no fact or circumstance whatsoever which might at law or in equity constitute a discharge or release of, or defense to the obligations of, a guarantor or surety shall limit or affect any obligations of Debtor under this Agreement or any document or instrument executed in connection herewith. Without limiting the generality of the foregoing. (a) Secured Party may at any time and from time to time, without notice to Debtor, take any or all of the following actions without affecting or impairing the liability of Debtor on this Agreement: (i) renew or extend time of payment of the Liabilities; (ii) accept, substitute, release or surrender any security for the Liabilities; and (iii) release any person primarily or secondarily liable on the Liabilities (including without limitation Borrower, any indorser, and any Guarantor). (b) No delay in enforcing payment of the Liabilities, nor any amendment, waiver, change, or modification of any terms of any document or instrument which evidences or is given in connection with the Liabilities, shall release Debtor from any obligation hereunder. The obligations of Debtor under this Agreement are and shall be primary, continuing, unconditional and absolute (notwithstanding that at any time or from time to time all of the Liabilities may have been paid in full), irrespective of the value, genuineness, regularity, validity or enforceability of any documents or instruments respecting or evidencing the Liabilities. In order to hold Debtor liable or exercise rights or remedies hereunder, there shall be no obligation on the part of Secured Party, at any time, to resort for payment to Borrower or any Guarantor or to any other security for the Liabilities. Secured Party shall have the right to enforce this Agreement irrespective of whether or not other proceedings or steps are being taken against any other property securing the Liabilities or any other party primarily or secondarily liable on any of the Liabilities. (c) Debtor irrevocably waives presentment, protest, demand, notice of dishonor or default, notice of acceptance of this Agreement, notice of any loans made, extensions granted or other action taken in reliance hereon, and all demands and notices of any kind in connection with this Agreement or the Liabilities. (d) So long as this Agreement remains in effect or any Liabilities are outstanding, Debtor waives any claim or other right which Debtor might now have or hereafter acquire against Borrower or any other person primarily or contingently liable on the Liabilities (including without limitation any maker, indorser or Guarantor) or that arises from the existence or performance of Debtor's obligations under this Agreement, including without limitation any right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim or remedy of Secured Party against Borrower or any other collateral security for the Liabilities, which Secured Party now has or hereafter acquires, however arising. 15. SECURED PARTY MAY ALSO BE BAILEE OR TRUSTEE. Debtor hereby irrevocably waives, releases and forever relinquishes any claim or right of any nature whatsoever based upon the fact that Bailee or a trustee of any Debtor, Borrower or Guarantor which is a trust is or may be Secured Party itself or a direct or indirect parent, subsidiary or affiliate of Secured Party, and hereby irrevocably consents to any such circumstance. The rights and powers of Secured Party shall not in any way be restricted by reason of any such present or future circumstance 16. NOTICES. All notices, requests and demands to or upon the respective parties hereto shall be deemed to have been given or made when deposited in the mail, postage prepaid, addressed if to Secured Party to its main banking office indicated above (Attention: Division Head, ***), and if to Debtor to its address set forth below, or to such other address as may be hereafter designated in writing by the respective parties hereto or, as to Debtor, may appear in Secured Party's records. ***Private Banking 17. MISCELLANEOUS. This Agreement and any document or instrument executed in connection herewith shall be governed by and construed in accordance with the internal law of the State of Illinois, and shall be deemed to have been executed in such State. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and the use of one gender shall also denote the others. Captions herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof; references herein to Sections or provisions without reference to the document in which they are contained are references to this Agreement. This Agreement shall bind Debtor, its (his) (her) heirs, trustees (including without limitation successor and replacement trustees), executors, personal representatives, successors and assigns, and shall inure to the benefit of Secured Party, its successors and assigns, except that Debtor may not transfer or assign any of its (his) (her) rights or interest hereunder without the prior written consent of Secured Party. Debtor agrees to pay upon demand all expenses (including without limitation attorneys' fees, legal costs and expenses, and time charges of attorneys who may be employees of Secured Party, in each case whether in or out of court, in original or appellate proceedings or in bankruptcy) incurred or paid by Secured Party or any holder hereof in connection with the enforcement or preservation of its rights hereunder or under any document or instrument executed in connection herewith. If there shall be more than one person or entity constituting Debtor, each of them shall be primarily, jointly and severally liable for all obligations hereunder. 18. WAIVER OF JURY TRIAL, ECT. DEBTOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO SECURED PARTY'S SOLE AND ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. DEBTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY WAIVES ANY RIGHT SHE (HE) (IT) MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY SECURED PARTY IN ACCORDANCE WITH THIS Page 6 10 EXHIBIT A TO PLEDGE AGREEMENT Listing of Pledged Stocks and Bonds
- ----------------------------------------------------------------------------------------------------------------------------------- 1. 2. 3. 4. 5. 6. 7. No. of Name of Issuer Class/Series Certificate No. CUSIP No. Units/Shares CUSIP No. Par Value - ----------------------------------------------------------------------------------------------------------------------------------- UAL Common Stock 63500 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
11 PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. N/A See Rider attached hereto and incorporated herein by reference. - -------------------------------------------- Type Name Robert B. Staib ---------------------------------- - -------------------------------------------- By: ----------------------------------------- Title: -------------------------------------- Secured Party is hereby authorized by Debtor without notice to Debtor to fill in any blank spaces and dates and strike inapplicable terms herein or in any related document to conform to the terms of the transaction and/or understanding evidenced hereby, for which purpose Secured Party shall be deemed to have been granted an irrevocable power of attorney coupled with an interest. By: ----------------------------------------- Title: -------------------------------------- Address for notices: - -------------------------------------------- - -------------------------------------------- - -------------------------------------------- Attention: ---------------------------------- Page 7 12 RIDER TO MASTER NOTE (FORM 9601) DATED AS OF September 14, 1998 EXECUTED BY Neural Applications Corporation (the "Borrower") IN FAVOR OF THE NORTHERN TRUST COMPANY (the "Lender") (COMMITTED LINE OF CREDIT) 1. This Rider is attached to and forms an integral part of the above-referenced Master Note (as amended, the "Note"). Capitalized terms defined in the remainder of the Note and not otherwise defined in this Rider shall have the same meaning in this Rider as in the remainder of the Note. Wherever possible this Rider and the remainder of the Note shall be construed so as to be consistent with each other; however, if and to the extent that the terms of this Rider conflict or are inconsistent with the remainder of the Note, the terms of this Rider shall prevail. Except as modified by this Rider the terms of the remainder of the Note shall apply. 2. The first paragraph of Section 3 ("LINE OF CREDIT") is deleted and the following is substituted. "COMMITTED LINE OF CREDIT: This Note has been executed pursuant to a committed line of credit. By its acceptance of this Rider to this Note, Lender shall be deemed to have agreed to make available to Borrower Loans as outlined herein or in any related letter until the maturity date indicated above unless and until any 'Event of Default' (as defined below) occurs, in which case Lender shall have no obligation whatsoever to make any Loan hereunder or otherwise to extend credit to Borrower. Lender shall have no obligation to give Borrower or any other person or entity prior notice of the existence of any Event of Default or any decision not to make any Loan or otherwise extend credit to Borrower." Dated as of September 14, 1998. ------------ ---- -------------------------------------------- Type Name NEURAL APPLICATIONS CORPORATION ---------------------------------- -------------------------------------------- By: Robert B. Staib ----------------------------------------- Title: -------------------------------------- EX-10.12 32 REINMBURSEMENT & SUBORDINATION AGREEMENT 8/1/1997 1 EXHIBIT 10.12 REIMBURSEMENT AND SUBORDINATION AGREEMENT This Reimbursement and Subordination Agreement (the "Agreement") is made as of August 1, 1997, by and between Robert B. Staib, an individual resident of Iowa ("Staib"), and Neural Applications Corporation, a Delaware corporation (the "Company"). WHEREAS, the Company proposes to issue up to $6,000,000 principal amount of Senior Secured Debentures, subject to increase by not more than $3,000,000 principal amount (the "Debentures"), which are to be secured by an irrevocable standby letter of credit (the "Letter of Credit") from The Northern Trust Company ("Northern Trust") in an amount equal to one hundred seven percent (107%) of the initial principal amount of Debentures. (Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Letter of Credit.) WHEREAS, Northern Trust has requested that Staib guarantee the Letter of Credit by means of a pledge agreement with Northern Trust (the "Pledge Agreement"), which will require Staib to maintain a collateral account containing marketable securities or other collateral to secure the obligation of Northern Trust under the Letter of Credit. WHEREAS, to induce Staib to enter into the Pledge Agreement, the Company has agreed to (a) issue Staib warrants to purchase 500,000 shares of the Company's Common Stock, $.01 par value (the "Common Stock"), (b) make a one-time cash payment of $50,000 and (c) undertake to reimburse Staib to the extent that Northern Trust exercises its remedy under the Pledge Agreement to sell or liquidate all or a part of the Collateral pledged by Staib. NOW THEREFORE, in consideration of the premises, the respective covenants and commitments set forth in this Agreement, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Staib hereby agree as follows: SECTION 1. AGREEMENT TO ENTER INTO PLEDGE AGREEMENT. Staib agrees to enter into the Pledge Agreement. SECTION 2. CONSIDERATION FOR ENTERING INTO PLEDGE AGREEMENT. The Company agrees that: (a) upon execution of the Pledge Agreement it shall promptly thereafter make a one-time cash payment of $50,000 to Staib; and (b) at the Initial Closing it shall grant to Staib warrants to purchase an aggregate of 500,000 shares of the Common Stock, which warrants shall (i) have an exercise price of $8.00 per share, (ii) be immediately exercisable, (iii) expire on September 30, 2002 and (iv) in all other material respects have the same terms 2 as the warrants granted by the Company to Staib in connection with past transactions. SECTION 3. AGREEMENT TO REIMBURSE. The Company further agrees that, in the event that Northern Trust honors a draft on the Letter of Credit by the Trustee, which draft is not reimbursed by the Company to Northern Trust in accordance with the Reimbursement Agreement such that an Event of Default occurs and is continuing under the Reimbursement Agreement, and Northern Trust exercises its remedy under the Pledge Agreement to sell or liquidate all or a part of the Collateral pledged by Staib in order to pay or satisfy the Obligations of the Company under the Reimbursement Agreement, then the Company shall reimburse Staib for Northern Trust's realization of such Collateral in an amount equal to the amount of the sale proceeds realized by Northern Trust from the sale of such Collateral; provided, however, that in the event the proceeds of the sale or liquidation of all or any part of the Collateral continues to be held by Northern Trust in a cash collateral account that is subject to the Pledge Agreement to secure the Company's Obligations under the Reimbursement Agreement, then the Company shall only be obligated to reimburse Staib hereunder after such time as Northern Trust realizes on such cash collateral and then only in the amount of the cash collateral so realized. SECTION 4. SUBORDINATION; LIQUIDATION OF COMPANY. Staib acknowledges and agrees that his rights to reimbursement under Section 3 shall in all events be subordinated to the rights of the holders of the Debentures to receive payments of principal and interest on the Debentures and shall also, in the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, be subordinated to the rights of the holders of the Company's Convertible Series A Voting Preferred Stock (the "Series A Stock"), Convertible Series B Voting Preferred Stock (the "Series B Stock") and Convertible Series C Voting Preferred Stock (the "Series C Stock") to receive any and all amounts due to such holders under the terms of each such series of stock upon such liquidation, dissolution or winding up of the Company. SECTION 5. AMENDMENTS; NO WAIVER. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by all the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. SECTION 6. BINDING EFFECT; THIRD PARTY BENEFICIARIES. This Agreement shall constitute a valid and binding Agreement between the parties hereto, and the rights and obligations of the parties hereunder shall inure to benefit of, and be binding upon, -2- 3 their respective successors, assigns and legal representatives. The holders of the Debentures, the Series A Stock, the Series B Stock and the Series C Stock are intended to be third party beneficiaries of Section 4 of this Agreement and shall be entitled to enforce their rights under Section 4 by an action at law or in equity. SECTION 7. COMPLETE AGREEMENT. This Agreement contains the complete agreement between the parties and supersede any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way. SECTION 8. CAPTIONS AND HEADINGS. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. SECTION 9. COUNTERPARTS. This Agreement may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same instrument. SECTION 10. GOVERNING LAW. All questions concerning this Agreement shall be governed by and interpreted in accordance with the internal law, not including the law of conflicts, of the State of Iowa. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth in the first paragraph. /s/ Robert B. Staib ------------------------------- Robert B. Staib Neural Applications Corporation By: /s/ Robert A. Squires ---------------------------- Name: ----------------------- Title: ---------------------- -3- EX-10.13 33 INDEMNIFICATION & HOLD HARMLESS AGREEMENT 2/27/96 1 EXHIBIT 10.13 INDEMNIFICATION AND HOLD HARMLESS AGREEMENT This Indemnification and Hold Harmless Agreement is entered into on the 27 day of February, 1996, by and between Neural Applications Corporation, a Delaware corporation with offices located at 2600 Crosspark Road, Coralville, Iowa (hereinafter "Neural") and Robert B. Staib of Coralville, Iowa (hereinafter "Guarantor"). RECITALS 1. On or about February 27, 1996, Neural will be granted a $2,000,000 Line of Credit from The Northern Trust of Chicago, Illinois, through an agreement arranged by Iowa State Bank & Trust Company of Iowa City, Iowa ("Line of Credit"). 2. The Line of Credit to be granted to Neural will be unsecured by Neural but will be given in consideration of Guarantor's personal guarantee ("Guarantee") and Guarantor's pledge of personal assets to secure the Line of Credit. 3. Neural, in consideration of and as an inducement to Guarantor to guarantee and secure Neural's obligations under the Line of Credit to The Northern Trust, has agreed to: A Give to Guarantor an Indemnification and Hold Harmless for any principal, interest, damages, costs, attorney fees, or other expenses that Guarantor may pay or incur as a result of Neural's failure to pay any obligation under the Line of Credit to The Northern Trust. B. Pledge business assets to Guarantor, subject to certain previously existing security agreements, as security for Neural's obligation to indemnify and hold Guarantor harmless. C. Grant to Guarantor a Warrant for 400,000 shares of common stock in Neural. 4. Neural and Guarantor wish to specify the terms and conditions of Neural's agreement to indemnify and hold Guarantor harmless. TERMS AND CONDITIONS In consideration of the foregoing recitals, of the following terms and conditions, and other good and valuable consideration it is agreed as follows: 1. Guarantor shall personally guarantee and pledge collateral to secure Neural's obligations under the Line of Credit from The Northern Trust. 2. Neural agrees to indemnify and hold Guarantor harmless from any and all amounts that Guarantor may pay to The Northern Trust under the terms and conditions of Guarantor's Guarantee of Neural's $2,000,000 Line of Credit. Neural's obligation to indemnify and hold Guarantor harmless includes, but is not limited to, all principal, interest, costs, expenses, attorney fees, court costs, damages or any other amounts paid by Guarantor or realized from any collateral pledged by Guarantor to secure the Guarantee. Guarantor shall have no obligation whatsoever to defend or to resist any request, demand or claim of The Northern Trust to make payment arising from Neural's default or failure to pay and Guarantor may rely upon the representations of The Northern Trust as to any and all amounts claimed to be due under the guarantee as a result of Neural's default of and/or failure to pay its obligations under the Line of Credit. 2 3. Neural shall at all times comply with all of the terms and conditions of the Line of Credit and shall pay all principal, interest and other obligations to The Northern Trust when due and before default. 4. Neural shall pay all obligations due under The Northern Trust Line of Credit upon the earlier to occur of April 1, 1997 or the completion by Neural of its next public financing of equity. 5. This Indemnification and Hold Harmless is secured by Neural's assets as set forth in the Security Agreement of even date herewith. Iowa State Bank & Trust Company, the Iowa Department of Economic Development and Kirkwood Community College have claimed senior security interest in the assets of the company. In the event of default and foreclosure, the secured debt owed to such prior secured parties by Neural shall be paid from the collateral or otherwise before payment is made to Guarantor under this Indemnification and Hold Harmless Agreement or the Security Agreement. 6. Neural represents and Guarantor acknowledges that Neural currently has the following outstanding debts: A. Iowa State Bank & Trust Company as evidenced by notes dated October 26, 1995 and December 29, 1995 in the aggregate principal amount of $3,500,000. Upon the obtaining of the Line of Credit, $500,000 of this debt is to be repaid. B. Iowa Department of Economic Development and the City of Coralville, Iowa, as evidenced by promissory notes dated May 20, 1993 in the aggregate principal amount of $250,000. C. Kirkwood Community College under the Industrial New Job Training Agreement dated June 30, 1994 in the aggregate principal amount not to exceed $200,000. Guarantor acknowledges that he will receive payments from Neural under this Indemnification and Hold Harmless Agreement only to the extent that Neural is current on the described obligations to Iowa State Bank & Trust Company, Iowa Department of Economic Development and the City of Coralville, and Kirkwood Community College. Provided, however, that this priority of payment shall not otherwise limit or impair Neural's obligations to Guarantor hereunder or Guarantor's security interests in Neural's business assets. 7. Guarantor and John Pappajohn have previously guaranteed certain of the outstanding debts and obligations of Neural. The relative priority of the Guarantor and such other guarantor in receiving payments from Neural and the priority of their security interests in Neural's assets shall be established by an Intercreditor Agreement between Guarantor and such other guarantor. 8. No act or omission or commission of the Guarantor, including specifically any failure to exercise any right, remedy or recourse, shall be deemed a waiver or release of the same, such waiver or release to be effective only as set forth in a written document executed by the Guarantor and only to the extent specifically recited therein. A waiver or release with reference to one event shall not be construed as continuing as a bar to or a waiver or release of any subsequent right, remedy or recourse as to any subsequent event. 9. Any and all amounts due to Guarantor from Neural under this Indemnification and Hold Harmless Agreement shall become immediately due and payable upon Guarantor's written demand to Neural specifying the amounts paid or incurred under Guarantor's guarantee of Neural's indebtedness to The Northern Trust. If any amount due under this Indemnification and Hold Harmless Agreement is not paid when due, or is collected or attempted to be collected by the initiation or prosecution of any suit 2 3 before any Bankruptcy Court or any other judicial proceeding, or is placed in the hands of an attorney for collection, then the Guarantor shall be entitled to collect, in addition to all other amounts owing him hereunder, all court costs and reasonable attorney fees incurred by the Guarantor. Neural further agrees to pay Guarantor interest at the rate of 18% per annum on all amounts, damages, expenses or costs paid or incurred by Guarantor as a result of Neural's default of and/or failure to pay its obligations under the Line of Credit. 10. Neural hereby waives demand, presentment for payment, notice of non-payment, protest and all other notice, filing of suit and diligence in collecting under this Indemnification and Hold Harmless Agreement other than the written demand for payment specified in paragraph 9. Neural consents to any extension, rearrangement, renewal or postponement of the time for payment under this Indemnification and Hold Harmless and to any other indulgence with respect thereto without notice, consent or consideration to any of them. 11. This Indemnification and Hold Harmless Agreement shall be binding upon the successors and assigns of the parties. 12. This Indemnification and Hold Harmless Agreement shall be governed by and construed in all respects according to the laws of the state of Iowa. IN WITNESS WHEREOF each party, intending to be legally bound hereby, does duly execute this Indemnification and Hold Harmless. NEURAL APPLICATIONS CORPORATION By /s/ Robert A. Squires -------------------------------- Its President GUARANTOR /s/ Robert B. Staib - ---------------------------------- Robert B. Staib 3 EX-10.14 34 AMENDMENT TO INDEMNIFICATION & HOLD HARMLESS AGRMT 1 EXHIBIT 10.14 AMENDMENT TO INDEMNIFICATION AND HOLD HARMLESS AGREEMENT This Amendment, dated as of August 1, 1997 (the "Amendment"), to Indemnification and Hold Harmless Agreement dated February 27, 1996 (the "Agreement"), is entered into by and between Robert B. Staib, an individual resident of Iowa ("Staib"), and Neural Applications Corporation, a Delaware corporation (the "Company"). WHEREAS, the Company and Staib are parties to the Agreement. (Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Agreement.) WHEREAS, the Company proposes to issue up to 120 Units, subject to increase by not more than 60 additional Units (the "Units"), each consisting of $50,000 principal amount of the Company's Senior Secured Debentures (the "Debentures") and 6,553 shares of the Company's Convertible Series C Voting Preferred Stock (the "Series C Stock"), at a purchase price of $100,000 per Unit. WHEREAS, Staib, as a stockholder of the Company, will benefit from the issuance and sale of the Units. WHEREAS, the Placement Agent and the Financial Advisor to the Company in connection with the issuance and sale of the Units have requested that Staib subordinate his rights under the Agreement to certain rights of the holders of the Debentures, the Company's Convertible Series A Voting Preferred Stock (the "Series A Stock"), the Company's Convertible Series B Voting Preferred Stock (the "Series B Stock") and the Series C Stock. WHEREAS, Staib desires to subordinate his rights under the Agreement as requested. NOW THEREFORE, in consideration of the premises, the respective covenants and commitments set forth in this Amendment, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Staib hereby agree that the Agreement shall be amended as follows: SECTION 1. MODIFIED PROVISIONS. The following provisions of the Agreement shall be modified as described: (a) All references to the "Line of Credit" in the Agreement shall be amended to refer to the $6,000,000 line of credit with The Northern Trust Company ("Northern Trust") as issued on June 18, 1997, which line of credit 2 will automatically renew for $3,000,000 with a maturity of September 30, 2002, conditioned upon the close of the sale of the minimum number of Units offered, as such line of credit may be amended from time to time. (b) Section 4 of the Agreement is hereby amended by deleting "April 1, 1997" and replacing it with "September 30, 2002." SECTION 2. DELETED PROVISIONS. Sections 5, 6 and 7 of the Agreement are hereby deleted. SECTION 3. SUBORDINATION; LIQUIDATION OF COMPANY. Staib hereby acknowledges and agrees that his rights to under the Agreement shall in all events be subordinated to the rights of the holders of the Debentures to receive payments of principal and interest on the Debentures and shall also, in the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, be subordinated to the rights of the holders of the Series A Stock, the Series B Stock and the Series C Stock to receive any and all amounts due to such holders under the terms of each such series of stock upon such liquidation, dissolution or winding up of the Company. SECTION 4. OTHER PROVISIONS. Except as expressly amended hereby, the Agreement is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date set forth in the first paragraph. /S/ Robert B. Staib --------------------------------- Robert B. Staib Neural Applications Corporation By: /S/ Robert A. Squires --------------------------------- Name: ---------------------- Title: --------------------- -2- EX-10.15 35 RESTRUCTURING AGREEMENT 12/3/1999 1 EXHIBIT 10.15 RESTRUCTURING AGREEMENT, Dated as of December 3, 1999 among STOCKPOINT, INC., formerly known as NEURAL APPLICATIONS CORPORATION, as the Borrower, and THE NORTHERN TRUST COMPANY, and IOWA STATE BANK & TRUST 2 RESTRUCTURING AGREEMENT Dated as of December 3, 1999 THIS RESTRUCTURING AGREEMENT, dated as of December 3, 1999 (as it may be amended or modified from time to time, this "Agreement"), is entered into by and among STOCKPOINT, INC., formerly known as NEURAL APPLICATIONS CORPORATION, a corporation organized under the laws of the State of Delaware (the "Borrower"), THE NORTHERN TRUST COMPANY, an Illinois banking corporation ("Northern"), as lead bank (the "Lead Bank") and as a lender to the Borrower, and IOWA STATE BANK & TRUST, as Northern's participant (together with Northern, the "Lenders"). R E C I T A L S : A Northern extended a line of credit (the "November 28, 1997 Line of Credit") to the Borrower in the maximum principal amount of THREE MILLION DOLLARS ($3,000,000), the Borrower's obligations relating to which being evidenced by a promissory note dated as of November 28, 1997 (the "November 28, 1997 Note"), of the Borrower in favor of Northern. B. ISB has purchased a $1,000,000.00 participating interest in the November 28, 1997 Line of Credit. C. Northern issued letters of credit (collectively, the "Letters of Credit") in the maximum aggregate amount of $6,313,000 for the account of the Borrower to support the repayment of certain debentures issued by the Borrower (the "Debentures"), the Borrower's reimbursement obligations relating to which being set forth in accompanying reimbursement agreements (collectively the "L/C Reimbursement Agreements"). D. Iowa State Bank & Trust ("ISB"), an Iowa banking corporation, has purchased a $2,000,000.00 participating interest in Northern's obligations relating to the Letters of Credit. E. Northern extended another line of credit (the "September 14, 1998 Line of Credit") to the Borrower in the maximum principal amount of TWO MILLION DOLLARS ($2,000,000), the Borrower's obligations relating to which being evidenced by a promissory note, dated as of September 14, 1998 (the "September 14, 1998 Note"), of the Borrower in favor of Northern. F. The Borrower's obligations under and in relation to the November 28, 1997 Line of Credit, the Letters of Credit, and the September 14, 1998 Line of Credit were guaranteed by Robert B. Staib and the sole original collateral for these obligations was to be shares of UAL Corporation stock to be pledged by Mr. Staib to secure his obligations under such guarantees. 2 3 Consistent with the foregoing, Mr. Staib ultimately delivered certificates to Northern purporting to represent shares of UAL Corporation stock (the "Purported UAL Stock Certificates"). G. Based on information obtained on December 1, 1998, the Lenders believed and continue to believe that the Purported UAL Stock Certificates are counterfeit. The Borrower states that its senior management (other than Mr. Staib) first learned that the certificates were alleged to be counterfeit on December 3, 1998. Mr. Staib has since become subject to an involuntary bankruptcy petition. These constitute events of default under each promissory note and the L/C Reimbursement Agreements, resulting, inter alia, in the termination of the lines of credit. H. The Borrower, Northern, ISB, and the Lead Bank have entered into restructuring discussions regarding the existing events of default, particularly in light of the Borrower's stated intent to provide for the payment in full of all obligations owing to the Lenders through the consummation of a strategic transaction such as an initial public offering of its common stock, and the parties desire to amend the November 28, 1997 Note, the September 14, 1998 Note, and the L/C Reimbursement Agreements to definitively reflect the terms of such a restructuring, it being understood that the Lead Bank and the Lenders would not have entered into such a restructuring in the absence of the Borrower's intent (and its commitment to use its best efforts) to consummate such a strategic transaction on or before June 30, 2001 and that, consequently, the Lead Bank and the Lenders have materially relied thereupon in entering into this Agreement. Therefore, the parties hereto agree, subject to the satisfaction of the conditions precedent set forth in Section 11, to amend the November 28, 1997 Note, the September 14, 1997 Note, and the L/C Reimbursement Agreements as follows: 1 SECTION ACKNOWLEDGMENTS OF AMOUNTS OWING 1.1 SECTION November 28, 1997 Line of Credit. Pursuant to the November 28, 1997 Note, Northern extended the November 28,1997 Line of Credit. The Borrower acknowledges that the outstanding principal amount of such line of credit, as of the date hereof, is $3,000,000.00 and that the accrued and unpaid interest on such principal amount, as of November 30, 1999, is $218,969.52. The Borrower further acknowledges that the November 27, 1997 Line of Credit has been terminated and is no longer available to it. 1.2 SECTION September 14, 1998 Line of Credit. Pursuant to the September 14, 1998 Note, Northern extended the September 14, 1998 Line of Credit. The Borrower acknowledges that the outstanding principal amount of such line of credit, as of the date hereof, is $1,145,000.00 and that the accrued and unpaid interest on such principal amount, as of November 30, 1999, is $79,412.17. The Borrower further acknowledges that the September 14 1998 Line of Credit has been terminated and is no longer available to it. 3 4 1.3 SECTION Letter of Credit Fees. The Borrower acknowledges that the aggregate face amount of the outstanding Letters of Credit is $6,313,000 and that as of November 30, 1999, it owed an aggregate of $37,060.12 in fees relating to the Letter of Credit. 1.4 SECTION Notes. The November 28, 1997 Note and the September 14, 1998 Note, as amended by the provisions of this Agreement, shall be collectively referred to herein as the "Notes". 2 SECTION INTEREST AND FEES 2.1 SECTION Interest Rates. The unpaid principal amount of each Note from time to time outstanding hereunder shall bear interest at the following rates per year: (a) before maturity, at the Prime Rate (as hereinafter defined); and (b) after maturity, whether by acceleration or otherwise, until paid, at a rate equal to two percent (2%) in addition to the Prime Rate. "Prime Rate" shall mean that rate of interest per year announced from time to time by Northern called its prime rate, which rate at any time may not be the lowest rate charged by Northern. Changes in the rate of interest on the Loans resulting from a change in the Prime Rate shall take effect on the date set forth in each announcement for a change in the Prime Rate. 2.2 SECTION Payment. Absent maturity (whether by acceleration or otherwise), interest and Letter of Credit fees shall be due and payable in arrears on the last day of the calendar month. Consequently, after the payment required pursuant to Section 11.5 hereof, the next regularly scheduled payment of interest and Letter of Credit fees shall relate to the December, 1999 calendar month and shall be due and payable on December 31, 1999. 3 SECTION STATED MATURITY 3.1 SECTION Stated Maturity. The stated maturity of the September 14, 1998 Note shall be extended to June 30, 2001. The stated maturity of the November 28, 1997 Note shall remain November 2, 2002. The stated expiry of the Letters of Credit shall remain November 29, 2002. 4 SECTION WAIVER OF EXISTING DEFAULTS 4.1 SECTION Waiver as to the Borrower Only. Upon the satisfaction of the conditions of Section 11 hereof, and subject to the provisions of Section 12.2 hereof, the Lenders hereby waive, as to the Borrower only (and specifically not as to any guarantor), any and all Events of Defaults or defaults existing as of the date hereof under any of the Notes or the L/C Reimbursement Agreements; provided, however, that such waiver shall under no circumstances 4 5 nullify or otherwise affect the termination of the November 28, 1997 and September 14, 1998 Lines of Credit, acknowledged in Sections 1.1 and 1.2, respectively, of this Agreement. This waiver shall continue only until the earlier to occur of its termination pursuant to Section 12.2 hereof and June 30, 2001. 4.2 SECTION No Waiver as to Robert B Staib. Without limiting the generality of Section 4.1 hereof, the Lenders, in no manner whatsoever, waive any of (but instead expressly reserve any and all) of their rights, claims, powers or remedies against Robert B. Staib under any guaranty or other agreement and/or under applicable law. Specifically, but without limiting the generality of the foregoing, the Lenders expressly reserve the right to exercise, in their sole and absolute discretion (including at times as they determine advisable in their sole and absolute discretion), any and all of such rights, claims, powers or remedies against Mr. Staib, whether in the context of his pending involuntary bankruptcy case or otherwise, all as if the Lenders had not entered into this Agreement (including, without limitation, as if the Lenders had not extended the waiver of defaults set forth in Section 4.1 hereof). 5 SECTION PAYMENTS AND PREPAYMENTS 5 6 5.1 SECTION Mandatory Prepayment and/or Cash Collateralization; Strategic Transaction. If, at any time on or before June 30, 2001, the Borrower shall enter into or otherwise consummate one of the following (each, a "Strategic Transaction"): (i) an initial public offering of common stock of or other equity security of Borrower; (ii) a sale of substantially, all of Borrower's assets; (iii) any other strategic transaction (including a merger or a joint venture) involving substantially all of borrower's assets or a major component of Borrower's business; provided, however, that the sale of the stock in or any assets of Neural, Inc., a wholly owned subsidiary of the Borrower, as it is constituted as of the date hereof, shall not constitute a Strategic Transaction and with respect to Neural, Inc. (as it is constituted as of the date hereof), the Borrower without being in violation of this Agreement, may either sell the stock of Neural, Inc. or cause the assets of Neural, Inc. to be sold after sufficiently providing for the liabilities of Neural, Inc. to be satisfied or assumed by the purchaser and use the net proceeds realized from such a transaction to be used in the operation of the Borrower's business, including first towards the satisfaction of the Bridge Financing, so long as such net proceeds do not exceed Three Million Dollars ($3,000,000), and such net proceeds (whether or not they exceed $3,000,000) shall be treated as provided in Section 10.6(c) hereof. Consistent with the foregoing, any transaction involving Neural, Inc. where, prior to or in connection with such transaction, Neural Inc. is reconstituted in any manner from its assets, liabilities, and business operations as of the date hereof (as a result of the transfer of assets from the Borrower or otherwise) shall constitute a Strategic Transaction within the meaning of this Agreement. Contemporaneously with the consummation of a Strategic Transaction, (a) the Notes (and all interest and expenses owing in connection therewith) automatically shall be immediately due and owing and shall be paid in full in cash, (b) the Borrower shall pay in full the Debentures or to obtain the cancellation of the Letters of Credit (whether through procuring replacement letters of credit (or otherwise), and (c) in the event that the Borrower is unable either to pay in full the Debentures or to obtain replacement letters of credit, the Borrower shall provide the Lead Bank with cash collateral equal to 120% of the outstanding amount of the Letters of Credit. 6 SECTION BRIDGE FINANCING 6.1 SECTION Bridge Financing. The Borrower has informed the Lenders that it will seek from individuals and/or financial institutions other than the Lenders (the "Bridge Lenders") a line of credit in the amount of $2.5 million at an interest rate not to exceed the greater of (a) the Prime Rate and (b) LIBOR plus 1.75% per annum to be secured by a first priority security interest and lien in, to, and on substantially all of the Borrower's assets and the assets of its subsidiary, Neural, Inc. (the "Bridge Financing") and that one of the conditions precedent to the Bridge Financing may be that the Lead Bank and the Lenders acknowledge that all obligations of the Borrower in favor of the Lead Bank or the Lenders are unsecured as of the date hereof and that they have no contractual right to prevent the Borrower from granting the security interests and liens in favor of the Bridge Lenders contemplated by the Bridge Financing. The Lead Bank and the Lenders hereby commit to deliver such an acknowledgment directly to the Bridge Lenders upon the satisfaction of the conditions of Section 11 hereof. 6 7 7 SECTION AGREEMENT AS TO PRE-CLOSING DATE PROFESSIONAL FEES AND EXPENSES OF THE LENDERS 7.1 SECTION Pre-Closing Fees and Expenses. The Lenders estimate the aggregate amount of professional fees and expenses as of the date of the execution of this Agreement for which they are entitled to receive reimbursement from the Borrower to be $240,644.51. Notwithstanding any other provision of this Agreement to the contrary, the Lenders agree that they shall limit the amount of professional fees and expenses for which they will seek reimbursement from the Borrower for the period from November 30, 1998 to and through the date of the execution and delivery of this Agreement to an aggregate of $204,547.83, and the Borrower agrees that it shall reimburse the Lead Bank in such an aggregate amount of $204,547.83 on the earlier to occur of: (i) the consummation of a Strategic Transaction and (ii) June 30, 2001. However, consistent with the provisions of Section 4.2 hereof, the Lead Bank and the Lenders in no manner limit (but instead expressly reserve) their right to collect the balance of any such fees and expenses (as well as any other fees and expenses, whether arising in connection with the Notes, any other Loan Document, or any guaranty) from Robert B. Staib, including the right to assert a claim therefor in his pending involuntary bankruptcy case or in any subsequent proceeding. 8 SECTION UNDERTAKING TO DELIVER COVENANT NOT TO SUE AND COMPLETE RELEASE 8.1 SECTION Covenant Not to Sue and Complete Release. Upon the payment in full of all of the Borrowers' obligations under the Notes (as limited as to the Borrower only by Section 7.1 hereof) and the L/C Reimbursement Agreements, and subject to the provisions of Section 4.2 hereof and the last sentence of Section 7.1 hereof, (a) the Lead Bank and the Lenders shall deliver to the Borrower a covenant not to sue relating to the Notes and the Letters of Credit substantially in the form of Exhibit A hereto, and (b) the Borrower contemporaneously shall deliver to the Lead Bank and the Lenders a complete release substantially in the form of Exhibit B hereto. 9 SECTION REPRESENTATIONS AND WARRANTIES To induce the Lenders, the Issuer and the Lead Bank to enter into this Agreement, the Borrower represents and warrants unto the Lead Bank, and each Lender that: 9.1 SECTION Organization. The Borrower is a corporation existing and in good standing under the laws of the state indicated in the heading; any Subsidiary is a corporation or partnership duly existing and in good standing under the laws of the state of its formation as indicated on Schedule 9.5; the Borrower and any Subsidiary are duly qualified, in good standing and authorized to do business in each other jurisdiction where, because of the nature of their activities or properties, such qualification is required and where the failure to be so qualified may have a Material Adverse Effect; and the Borrower and any Subsidiary have the power and authority to own their properties and to carry on their businesses as now being conducted. 7 8 9.2 SECTION Authorization; No Conflict. The execution and delivery of this Agreement is within the Borrower's corporate powers, has been authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required) and do not and will not contravene or conflict with any provision of law applicable to the Borrower or of the charter or by-laws of the Borrower or any Subsidiary or of any agreement binding upon the Borrower or any Subsidiary. 9.3 SECTION Taxes. Except in the case of state and local tax returns for the fiscal year ended December 31, 1998 the Borrower and any Subsidiary have filed or caused to be filed all federal, state and local tax returns which, to the knowledge of the Borrower or any Subsidiary, are required to be filed, and have paid or have caused to be paid all taxes as shown on such returns or on any assessment received by them, to the extent that such taxes have become due (except for current taxes not delinquent and taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been provided on the books of the Borrower or the appropriate Subsidiary, and as to which no foreclosure, distraint, sale or similar proceedings have been commenced). Specifically, the Borrower is current in the filing of all of its federal income tax returns, including for the calendar year ending December 31, 1998. The Borrower and any Subsidiary have set up reserves which are adequate for the payment of additional taxes for years which have not been audited by the respective tax authorities. 9.4 SECTION Litigation and Contingent Liabilities. No litigation (including derivative actions), arbitration proceedings or governmental proceedings are pending or threatened against the Borrower which would (singly or in the aggregate), if adversely determined, have a Material Adverse Effect, except as set forth (including estimates of the dollar amounts involved) on Schedule 9.4 hereto. 9.5 SECTION Subsidiaries. Attached hereto as Schedule 9.5 is a correct and complete list of all Subsidiaries and Affiliates of the Borrower. 9.6 SECTION ERISA/Health. The Borrower does not maintain a Plan, but only administers a 401(k) plan for its employees. The Borrower maintains a self-funded health insurance plan, which represents a scheduled contingent liability of no more than $100,000. Each of the foregoing complies in all material respects with all applicable requirements of law and regulations. 9.7 SECTION Strategic Transaction Acknowledgment. The Borrower understands and acknowledges that the Lead Bank and the Lenders would not have entered into the restructuring set forth in this Agreement in the absence of the Borrower's stated intent to use its best efforts to consummate a Strategic Transaction on or before June 30, 2001 and that, consequently, the Lead Bank and the Lenders have materially relied thereupon in entering into this Agreement; provided, however, that the failure to actually consummate a Strategic Transaction on or before such date shall not constitute an Event of Default. 8 9 10 SECTION COVENANTS Until all Letters of Credit have expired or have been earlier terminated and all Obligations (other than those of the Obligations which survive any termination of this Agreement) are paid and fulfilled in full, the Borrower agrees that it shall, and shall cause any Subsidiary to, comply with the following covenants, unless the Lead Bank consents otherwise in writing: 10.1 SECTION Corporate Existence, Mergers, Etc. The Borrower and any Subsidiary shall preserve and maintain its corporate existence, rights, franchises, licenses and privileges, and will not liquidate, dissolve, or merge, or consolidate with or into any other corporation, or sell, lease, transfer or otherwise dispose of all or a substantial part of its assets, except that: (a) Any Subsidiary may merge or consolidate with or into the Borrower or any one or more wholly-owned Subsidiaries; and (b) Any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to the Borrower or one or more wholly-owned Subsidiaries. 10.2 SECTION Reports, Certificates and Other Information. The Borrower shall furnish to the Lead Bank and each Lender: (a) Interim Reports. Within 30 days after the end of each month of each fiscal year of the Borrower, a copy of an unaudited financial statement of the Borrower and any Subsidiary prepared on a consolidated basis, signed by an authorized officer of the Borrower and consisting of at least (i) a balance sheet as at the close of such month, (ii) a statement of earnings, for such month, for the period from the beginning of such fiscal year to the close of such month and for the comparable periods in the preceding fiscal year, (iii) a statement of cash flows for such month and for the period from the beginning of such fiscal year to the close of such month, and (iv) a statement of cash flows, prepared and delivered weekly, that provides results of the actual cash flow for the preceding calendar week and further provides a rolling 90 day cash flow forecast. (b) Audit Report. Within 90 days after the end of each fiscal year of the Borrower, a copy of an annual audit report of the Borrower and any Subsidiary prepared on a consolidated basis and in conformity with generally accepted accounting principles applied on a consistent basis, duly certified by independent certified public accountants of recognized standing satisfactory to the Lenders, accompanied by an opinion and a certificate from such accountants containing a computation of, and showing compliance with, any financial restriction contained in this Agreement, and to the effect that, in making the examination necessary for the signing of such annual audit report by such accountants, they have not become aware of any Event of Default or any Unmatured Event of Default, or if they have become aware of any such event, describing it. 9 10 (c) Compliance Certificates. Contemporaneously with the furnishing of a copy of each annual audit report and of each interim report provided for in this Section, a certificate in the form of Exhibit C dated the date of such annual report or such interim report and signed by any one of the President, the Chief Financial Officer or the Treasurer of the Borrower, to the effect that no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it, and showing compliance with the financial restrictions set forth in Sections 10.4 and 10.11. (d) Notice of Default, Litigation and ERISA Matters. Promptly and in any event within three days after learning of the occurrence of any of the following, written notice to the Lead Bank and each Lender describing the same and the steps being taken by the Borrower or any Subsidiary affected in respect thereof: (i) the occurrence of an Event of Default or an Unmatured Event of Default; (ii) the institution of, or any adverse determination in, any litigation, arbitration or governmental proceeding which is material to the Borrower or any Subsidiary on a consolidated basis; (iii) the occurrence of a Reportable Event under, or the institution of steps by the Borrower or any Subsidiary to withdraw from, or the institution of any steps to terminate, any Plan; or (iv) any change in the Borrower's status as a "C corporation" for federal income tax purposes. (e) Subsidiaries. Promptly from time to time a written report of any changes in the list of its Subsidiaries and Affiliates set forth on Schedule 9.5. (f) Strategic Transaction. Except as provided in the succeeding sentence of this Section 10.2(f), promptly provide, on a continuing basis, all information relating to any possible Strategic Transaction (including, without limitation, any possible initial public offering of common stock), including, without limitation, copies of any and all valuations of the Borrower's assets or business operations undertaken in connection therewith and/or any and all securities law filings made or to be made in connection therewith. The Borrower does not need to provide such information to the extent that it does not relate to an initial public offering of common stock and further relates to a unsolicited proposal made to the Borrower by an entity that the Borrower reasonably believes does not have the financial ability to consummate such a proposal. (g) Other Information. From time to time such other information, financial or otherwise, as the Lenders may reasonably request. 10.3 SECTION Inspection. Upon not less than 48 hours' prior notice (which may be oral and need not be written) to the Borrower from the Lead Bank (except if an Event of Default shall have occurred and be continuing, in which case prior notice to the Borrower shall not be required), the Borrower and any Subsidiary shall permit the Lead Bank and each Lender and their respective representatives at any time during normal business hours to inspect the properties of the Borrower and such Subsidiary and to inspect and make copies of their books and records. 10 11 10.4 SECTION Financial Requirements. The Borrower and any Subsidiary shall continue to pay all of their respective operating expenses (including (a) interest owning on the debentures, (b) interest, letters of credit fees, and other fees and expenses owing to Lenders, and (c) fees and expenses of completing the Borrower's certified audit for 1998 fiscal year) as they come due in the ordinary course. 10.5 SECTION Indebtedness, Liens and Taxes. The Borrower and any Subsidiary shall: (a) Indebtedness. Not incur, permit to remain outstanding, assume or in any way become committed for indebtedness in respect of borrowed money, except (i) indebtedness existing on the date of this Agreement shown on the financial statements furnished to the Lenders before this Agreement was signed, including any extensions or renewals thereof so long as the principal amount of such indebtedness is not increased by such extension or renewal; (ii) the Bridge Financing; and (iii) indebtedness incurred after the date hereof in the nature of Capitalized Lease Liabilities and/or purchase money debt, provided that the aggregate amount thereof outstanding at any one time does not exceed (a) $750,000 in calendar 1999, (b) $1,500,000 in calendar 2000, and (c) $1,500,000 through June 30, 2001 (assuming a total year limitation of $2,500,000) for the Borrower and all Subsidiaries and otherwise does not have a Material Adverse Effect on the Borrower and its business operations at any time. (b) Liens. Not create, suffer or permit to exist any lien or encumbrance of any kind or nature upon any of their assets now or hereafter owned or acquired, or acquire or agree to acquire any property or assets of any character under any conditional sale agreement or other title retention agreement, but this Section 10.5(b) shall not be deemed to apply to liens, encumbrances and security interests listed on Schedule 10.5(b) hereto, including, without limitation, (ii) liens in favor of the Bridge Lenders to secure the Bridge Financing. (c) Taxes. (i) Not change, or permit any change to occur in, the Borrower's status as a " C corporation" for federal income tax purposes; and (ii) pay and discharge all taxes, assessments and governmental charges or levies imposed upon them, upon their income or profits or upon any properties belonging to them, prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies when due, except that no such tax, assessment, charge, levy or claim need be paid which is being contested in good faith by appropriate proceedings and as to which adequate reserves shall have been established, and as to which no foreclosure, distraint, sale or similar proceedings have commenced which, if not stayed or terminated, would have a Material Adverse Effect. (d) Keep Well Agreements. Not assume, guarantee, indorse or otherwise become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services, or otherwise) with respect to the obligation of any other Person, except 11 12 for the indorsement of negotiable instruments for deposit or collection in the ordinary course of business. 10.6 SECTION Capital Structure and Dividends; Ownership of Subsidiaries. (a) Capital Structure and Dividends. Other than in the context of a Strategic Transaction or as provided in subsection (c) hereof, neither the Borrower nor any Subsidiary shall purchase or redeem, or obligate itself to purchase or redeem, any shares of the Borrower's capital stock, of any class, issued and outstanding from time to time; or declare or pay any dividend (other than dividends payable in its own common stock or to the Borrower) or make any other distribution in respect of such shares other than to the Borrower. (b) Ownership of Subsidiaries. Except as provided in subsection (c) hereof, the Borrower shall continue to own, directly or indirectly, the same (or greater) percentage of the stock of each Subsidiary that it held on the date of this Agreement, and no Subsidiary shall issue any additional securities other than to the Borrower. (c) Neural, Inc. The Borrower may enter into any equity or sale transaction involving Neural, Inc., its wholly owned subsidiary, as it is presently constituted so long as it is with a third party on arm's length terms. In the event that the consideration paid by such third party as part of an equity transaction is required by the terms of the definitive agreements relating thereto ("Neural Agreement") to remain in Neural, Inc. for operational and capital expenditure purposes, there shall be no violation of the provisions of this Agreement. In the event that the consideration paid by such third party is not required pursuant to the provisions of the Neural Agreement to remain in Neural, Inc. for such purposes, but instead may be distributed to the Borrower, such amount (up to the amount then owing to the Bridge Lenders) shall be distributed to the Bridge Lenders for application against the amounts outstanding under the Bridge Financing, with the balance, if any, of such amount in excess of $500,000 being set aside by the Borrower and not used for any purpose (operational or otherwise) pending an agreement between the Borrower and the Lead Bank, on behalf of the Lenders, regarding the disposition thereof. 10.7 SECTION Maintenance of Properties. The Borrower and any Subsidiary shall maintain, or cause to be maintained, in a manner consistent with their past practices, all their properties (whether owned or held under lease) in good repair, working order and condition, and from time to time make, or cause to be made, in a manner consistent with their past practices, all needed and appropriate repairs, renewals, replacements, additions, betterments and improvements thereto, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. 10.8 SECTION Insurance. The Borrower and any Subsidiary shall maintain insurance with responsible companies in such amounts and against such risks as is reasonably required by the 12 13 Lenders and, at a minimum, insurance on their business, fixed assets, inventory and other properties, workmen's compensation or similar insurance as required by law, and adequate public liability (including product liability) insurance against claims for personal injury, death or property damage arising out of its products, facilities or operations, as is usually carried by similar businesses conducting operations in similar areas. 10.9 SECTION Compliance With Law. The Borrower and any Subsidiary shall comply in all respects with all applicable laws, rules, regulations and orders, except where the failure to so comply would not have a Material Adverse Effect. 10.10 SECTION Environmental Covenant. The Borrower will, and will cause each of its Subsidiaries to use and operate all of its facilities and properties (including handling all Hazardous Materials) in material compliance with all Environmental Laws. 10.11 SECTION Capital Expenditures. Neither the Borrower nor any Subsidiary shall purchase or otherwise acquire (including, without limitation, acquisition by way of capitalized lease), or commit to purchase or otherwise acquire, any fixed asset if, after giving effect to such purchase or other acquisition, the aggregate cost of all fixed assets purchased or otherwise acquired by the Borrower and its Subsidiaries on a consolidated basis in any one fiscal year of the Borrower would exceed the projected capital expenditures of the Borrower and its Subsidiaries for the following calendar years (or portion of calendar years): (a) $1,000,000 in calendar year 1999, (b) $2,500,000 in calendar year 2000, and (c) $2,500,000 through June 30, 2001 (assuming a total year limitation of $3,500,000). 10.12 SECTION Remuneration. Except as provided in the immediately two succeeding sentences, neither the Borrower nor any Subsidiary shall pay salaries or other remuneration to officers or employees who are stockholders (or, in the case of a stockholder which is a trust, officers or employees who are grantors and/or beneficiaries of such trust, as appropriate) of the Borrower or any Subsidiary. The Borrower may continue to pay the salaries of employees or officers (other than Robert Staib or Barbara Staib) who are direct or indirect stockholders and who are William Staib, Robert Squires, William McNally, Scott Porter, or any other member of senior management set forth on Schedule 10.12 hereof (a "Senior Manager") so long as such compensation is not at a rate or in an amount in excess of that which is in effect on the date of this Agreement of which the Lenders have been advised in writing. The Borrower may continue to grant any employee or officer who is not a Senior Manager, or any employee or officer who is a Senior Manager whose name appears on Schedule 10.12 hereof (after satisfying the Lead Bank as to the market necessity therefor) such compensation packages as the Borrower reasonably believes are necessary to maintain compensation at market levels. Specifically, (a) no compensation shall be paid to Robert Staib or Barbara Staib, (b) no amount shall be payable by the Borrower to Iowa Jet Services (presently scheduled in the amount of $99,280.50) (the "Iowa Jet Receivable") unless and until the later of the following occurs: (i) the Borrower's liability for such amount is established pursuant to a final and nonappealable order or judgment of a court of competent jurisdiction and (ii) all other property of the bankruptcy estate of Iowa Jet Services has been liquidated, and (c) no amount shall be paid to Robert Staib or Barbara Staib in 13 14 reimbursement of any expenses, including, without limitation, the scheduled $59,170.08 in travel expenses. Nothing set forth herein shall be deemed to impair in any manner ISB's rights and interests, as a secured creditor of Iowa Jet Services, in the Iowa Jet Receivable. 10.13 SECTION Further Assurances. The Borrower agrees that, from time to time at its own expense, the Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, as reasonably determined by the Lead Bank, in order to perfect, preserve and protect any lien or security interest granted or purported to be granted by any Collateral Document or to enable the Lead Bank to exercise and enforce its rights and remedies thereunder with respect to any collateral. 11 SECTION CONDITIONS TO EFFECTIVENESS OF AGREEMENT This Agreement and the amendment of the November 28, 1997 Note, the September 14, 1998 Note, and the L/C Reimbursement Agreements provided for herein shall become effective as of the date hereof upon satisfaction of the following conditions precedent: 11.1 SECTION Letters of Credit. There shall have been no demand for payment made under any of the Letters of Credit. 11.2 SECTION Agreement. Each party hereto shall have received a counterpart of this Agreement which has been executed by all of the parties hereto. 11.3 SECTION Documentation. The Lead Bank shall have received all of the following, each duly executed and dated the closing date hereof or such earlier date as is provided for herein or in an Exhibit hereto or is satisfactory to the Lead Bank, in form and substance satisfactory to the Lead Bank and its counsel, at the expense of the Borrower, and in such number of signed counterparts as the Lead Bank may request (except for the Notes, of which only the originals shall be signed): (a) Borrower Resolution. A copy of a resolution of the Board of Directors of the Borrower authorizing or ratifying the execution, delivery and performance, respectively, of this Agreement, the Notes and all other Loan Documents to be executed by the Borrower, certified by the Secretary of the Borrower. (b) Borrower Articles of Incorporation and By-laws. A certificate of the Secretary of the Borrower to the effect that true and correct copies of the articles of incorporation and the by-laws of the Borrower the in effect are attached as exhibits to such certificate. (c) Borrower Certificate of Incumbency. A certificate of the Secretary of the Borrower certifying the names of the officer or officers of the Borrower authorized to sign this Agreement, the Notes and the other Loan Documents to be executed by the 14 15 Borrower, together with a sample of the true signature of each such officer (the Lead Bank and each Lender may conclusively rely on such certificate until formally advised by a like certificate of any changes therein). (d) Opinion of Counsel to the Borrower. An opinion of counsel to the Borrower to such effect as the Lead Bank may reasonably require. (e) Insurance Policies. Certified copies of all liability, casualty, and "at risk" insurance policies of the Borrower. (f) Stockpoint/Staib Agreement. A copy of the Stockpoint/Staib Agreement (as such term is defined in Section 12.3 hereof) substantially in the form of Exhibit D hereto, which has been fully executed by the parties thereto. (g) Miscellaneous. Such other documents and certificates as the Lead Bank may reasonably request. 11.4 SECTION Bridge Financing. The Lead Bank shall have received copies of the executed agreements and other documents relating to the Bridge Financing. 11.5 SECTION Payment of Accrued Interest and Letter of Credit Fees. The Lead Bank, on behalf of the Lenders, shall have received payment in full of all accrued and unpaid interest on the Notes and unpaid Letter of Credit Fees as of November 30, 1999, which aggregate $335,441.81. 11.6 SECTION Robert B. Staib. The Lenders shall have entered into such agreement relating to Robert B. Staib substantially in the form of Exhibit E hereto (the "Robert Staib/Lender Agreement"), which agreement will not be subject to bankruptcy court approval, whether to be obtained before or after closing. 12 SECTION DEFAULT 12.1 SECTION Events of Default. Each of the following occurrences is hereby defined as an "Event of Default" under each of the Notes and the L/C Reimbursement Agreements (unless waived in writing by the Lead Bank on behalf of the Lenders in its sole and absolute discretion): (a) Nonpayment. The Borrower shall fail to make any payment required pursuant to Section 5.1 hereof when and as due and, with respect to any payment other than a payment required pursuant to Section 5.1 hereof, the Borrower shall fail to make any payment of principal, interest, Letter of Credit fees or other amounts payable under either Note (as amended hereby) when and as due, which shall not be cured within three (3) business days of the required date of such payment; or 15 16 (b) Loan Documents Not Enforceable, etc. Any Loan Document shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legal, valid, binding and enforceable obligation of the Borrower or any other party thereto (other than the Lead Bank or any Lender); or the Borrower or any other party to a Loan Document (other than the Lead Bank or any Lender), or any Affiliate of the Borrower or such other party, shall, directly or indirectly, contest in any manner the effectiveness, validity, binding nature or enforceability of any Loan Document; or (c) Cross-Default. There shall occur any default or event of default, or any event which might become such with notice or the passage of time or both, or any similar event, or any event which requires the prepayment of borrowed money or the acceleration of the maturity thereof (other than the Debentures), under the terms of any evidence of indebtedness or other agreement issued or assumed or entered into by the Borrower, any Subsidiary, or under the terms of any indenture, agreement or instrument under which any such evidence of indebtedness or other agreement is issued, assumed, secured or guaranteed (except for any such event which is being contested in good faith and by appropriate proceedings, and as to which adequate reserves shall have been established, and which involves indebtedness other than for borrowed money), and such event shall continue beyond any applicable period of grace. Consistent with the foregoing, a cross-default with respect to the Debentures shall occur only upon the expiration of any applicable cure period with respect to a payment obligation thereunder and no cross-default shall be deemed to occur with respect to the CEBA or Kirkwood debt so long as the Borrower is undertaking appropriate measures to either pay such indebtedness in full or otherwise ensure that any attempted collection of either such indebtedness will not have a Material Adverse Effect; or (d) Dissolutions, etc. The Borrower shall fail to comply with any provision concerning its existence or that of any Subsidiary or any prohibition against dissolution, liquidation, merger, consolidation or sale of assets; or (e) Warranties. Any representation, warranty, schedule, certificate, financial statement, report, notice or other writing furnished to the Lead Bank or any Lender by or on behalf of the Borrower or any other party to a Loan Document (other than any Lender or the Lead Bank) is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or (f) Change in Control. Other than with respect to a Strategic Transaction, any Person presently not in control of the Borrower shall obtain control directly or indirectly of the Borrower, whether by purchase or gift of stock or assets, by contract, or otherwise; or (g) ERISA. Any Reportable Event shall occur under ERISA in respect of any Plan; or 16 17 (h) Litigation. Any judgment or order for the payment of money in excess of $250,000 or judgments in any number and of any individual amount that, in the aggregate, exceed $500,000 shall be rendered against the Borrower or any Subsidiary and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (ii) there shall be any period of 20 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (i) Noncompliance with this Agreement or Other Loan Document. The Borrower or any other party to a Loan Document (other than any Lender or the Lead Bank) shall fail to comply with any provision hereof or of any other Loan Document, which failure does not otherwise constitute an Event of Default, and such failure shall continue for ten days after written notice thereof to the Borrower by the Lead Bank; or (j) Letters of Credit. Any demand for payment shall have been made under any of the Letters of Credit; or (k) Robert Staib/Lender Agreement. The Robert Staib/Lender Agreement shall have been subsequently repudiated by Mr. Staib in any manner or otherwise vitiated in any respect, whether by an order of the bankruptcy court or otherwise; (l) Bankruptcy. Any bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation, dissolution, or similar proceeding, domestic or foreign, is instituted by or against the Borrower or any Subsidiary and, if instituted against the Borrower or any Subsidiary, is consented to or acquiesced in by the Borrower or such Subsidiary or remains for 45 days undismissed; or the Borrower, any Subsidiary shall take any step toward, or to authorize, such a proceeding; or (m) Insolvency. The Borrower or any Subsidiary shall become insolvent (as defined in 11 U.S.C. ss. 101(32)(A)(1994)), generally shall fail or be unable to pay its debts as they mature (other than the trade debts set forth on Schedule 12.1(m) hereto, which the Borrower disputes), shall admit in writing its inability to pay its debts as they mature, shall make a general assignment for the benefit of its creditors, shall enter into any composition or similar agreement, or shall suspend the transaction of all or a substantial portion of its usual business. 12.2 SECTION Remedies. Upon the occurrence of any Event of Default set forth in subsections (a)-(k) of Section 12.1 and during the continuance thereof and in addition to any other rights under the Notes or the L/C Reimbursement Agreements, the waiver of existing defaults set forth in Section 4.1 hereof as to the Borrower only shall automatically terminate (all without action of any kind on the part of the Lead Bank or the Lenders), and the Lead Bank, upon the direction of the Lenders (which direction the Lenders may or may not give in each such instance and at such time(s) as they determine in their sole and absolute discretion), shall (i) 17 18 declare the Notes and any other amounts owed to the Lead Bank and the Lenders to be immediately due and payable whereupon the Notes and any other amounts owed to the Lead Bank and the Lenders shall forthwith become due and payable, (ii) require the Borrower to supply the Lead Bank with cash collateral to secure the Borrower's reimbursement obligations with respect to (a) the undrawn face amount of any issued and unexpired Letters of Credit and (b) any unreimbursed amount in respect of amounts drawn under any Letters of Credit (whether expired or unexpired). Upon the occurrence of any Event of Default set forth in subsections (l)-(m) of Section 12.1, the waiver of existing defaults set forth in Section 4.1 hereof as to the Borrower only shall automatically terminate (all without action of any kind on the part of the Lead Bank or the Lenders), and (i) the Notes and any other amounts owed to the Lead Bank and the Lenders shall be immediately and automatically due and payable and (ii) the cash collateral referred to in clause (ii) of the immediately preceding sentence shall be immediately and automatically due to the Lead Bank, all without action of any kind on the part of the Lead Bank or the Lenders. The Borrower expressly waives presentment, demand, notice or protest of any kind in connection herewith. The Lead Bank shall promptly give the Borrower notice of any such declaration, but failure to do so shall not impair the effect of such declaration. No delay or omission on the part of the Lead Bank or any of the Lenders in exercising any power or right hereunder or under any Note shall impair such right or power or be construed to be a waiver of any Event of Default or any acquiescence therein, nor shall any single or partial exercise of any power or right hereunder preclude other or further exercise thereof, or the exercise of any other power or right. 12.3 SECTION Stockpoint/Staib Agreement. The Borrower and Robert Staib are expected to enter into a settlement agreement (substantially in the form of Exhibit D hereto) (the "Stockpoint/Staib Agreement"), whereby, in consideration of the resolution of potential claims that the Borrower may or may not be able to assert against Robert Staib, (a) Mr. Staib will transfer (or agree to the cancellation of) certain (if not all) of the stock options and/or certain (but not all) of the stock he presently holds or controls in the Borrower, but (b) Mr. Staib will be permitted to retain and/or dispose of prior to the consummation of any Strategic Transaction certain of the stock he presently holds or controls in the Borrower. Stockpoint acknowledges that the Lenders are not agreeing to be parties to the Stockpoint/Staib Agreement and that the Lenders shall have no liability in connection therewith. The Lead Bank and the Lenders acknowledge that the execution and delivery of the Stockpoint/Staib Agreement, so long as such execution and delivery occurs prior to the closing hereunder, shall constitute neither an Event of Default under the Notes or this Agreement nor a default under the Robert Staib/Lender Agreement. 13 SECTION DEFINITIONS 13.1 SECTION Definitions. The definitions are set forth in Schedule I hereof. 18 19 14 SECTION MISCELLANEOUS 14.1 SECTION Waivers, Amendments, Etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Lenders. No failure or delay on the part of the Lead Bank, any Lender or the holder of any Note in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Lead Bank, any Lender or the holder of any Note under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. 14.2 SECTION Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing (except as otherwise specifically provided in this Agreement) or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth below its signature hereto or set forth in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted and the party giving such notice shall have received (including either through telephonic communication initiated by it or telephonic communication received by it) telephonic, machine, or other confirmation that such notice has been received by the intended recipient. 14.3 SECTION Nonwaiver; Cumulative Remedies. No failure to exercise, and no delay in exercising, on the part of the Lead Bank or any Lender, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of the Lead Bank and the Lenders herein provided are cumulative and not exclusive of any rights or remedies provided by law. 14.4 SECTION Survival of Agreements. All agreements, representations and warranties made herein shall survive the delivery of this Agreement. The obligations of the Borrower under Sections 14.9 survive any termination of this Agreement, the payment in full of all Obligations (or, in the case of the Borrower, all other Obligations), and the expiration or earlier termination of all Letters of Credit. 14.5 SECTION Effectiveness and Successors. This Agreement shall, upon execution and delivery by the Borrower, the Lenders and the Lead Bank in Chicago, Illinois, become effective and shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Lead Bank 19 20 and their respective successors and assigns, except that the Borrower may not transfer or assign any of its rights or interest hereunder without the prior written consent of the Lenders. Consistent with, but in no manner in limitation of, the foregoing, in the event that Robert Staib shall satisfy in full all of his obligations to the Lead Bank under his guarantees (including, without limitation, the payment in full of all indebtedness owing under the Notes), Mr. Staib shall be bound by the provisions of this Agreement (including, without limitation, the provisions of Section 4.1 hereof). 14.6 SECTION Captions. Captions in this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. References herein to Sections or provisions without reference to the document in which they are contained are references to this Agreement. 14.7 SECTION Singular and Plural. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and the use of one gender shall also denote the other where appropriate. 14.8 SECTION Counterparts. This Agreement may be executed by the parties on any number of separate counterparts, and by each party on separate counterparts; each counterpart shall be deemed an original instrument; and all of the counterparts taken together shall be deemed to constitute one and the same instrument. 14.9 SECTION Payment of Costs and Expenses. Other than with respect to the professional fees and expenses of the Lead Bank and the Lenders relating to the period prior to the execution and delivery of this Agreement (which are addressed in Section 7.1 hereof), the Borrower's obligations under the Notes and/or the L/C Reimbursement Agreements to reimburse the Lead Bank and the Lenders for their respective expenses remain unchanged. The aggregate limit set forth in Section 7.1 hereof in no manner applies or otherwise limits the rights of the Lead Bank and each Lender to be reimbursed for such fees and expenses, which, for expenses incurred from the date hereof to such date, shall be due and payable on the earlier to occur of the date of the consummation of a Strategic Transaction (or other acceleration of the Obligations pursuant to any of the other provisions hereof) and June 30, 2001 and which, for expenses incurred after such date, shall be due and payable on demand. 14.10 SECTION Confidentiality. The Lenders shall hold all non-public information (which has been identified as such by the Borrower) obtained pursuant to the requirements of this Agreement in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure to any of their examiners, insurers, Affiliates, outside auditors, counsel and other professional advisors in connection with this Agreement or as reasonably required by any bona fide transferee, participant or assignee or as required or requested by any governmental agency or representative thereof or pursuant to legal process. 20 21 14.11 SECTION Construction. This Agreement, the Notes (as amended by this Agreement), the Loan Documents and any other document or instrument executed in connection herewith shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of Illinois, and shall be deemed to have been executed in the State of Illinois. 14.12 SECTION Reaffirmation of the Provisions of the Loan Documents. Except as amended hereby, the provisions of the Notes and the L/C Reimbursement Agreements remain unchanged, and the Borrower hereby reaffirms its obligations thereunder. Consistent with the foregoing, any conflict between the provisions of the Notes and/or the L/C Reimbursement Agreements prior to the date hereof, on the one hand, and the provisions of this Agreement, on the other hand, shall be governed by the provisions of this Agreement. 14.13 SECTION Relationship between this Agreement and Participation Agreement. Iowa State Bank's execution and delivery of this Agreement shall be deemed to satisfy any consent requirement under any of the existing participation agreements (the "Participation Agreements") between Iowa State Bank and Northern. Except as provided in the preceding sentence, the provisions of the Participation Agreement shall remain unchanged and any conflict between the provisions of the Participation Agreement and this Agreement shall be governed by the provisions of the Participation Agreement. 14.14 SECTION Submission to Jurisdiction; Venue; Waiver of Right to Jury Trial. THE BORROWER IRREVOCABLY AGREES THAT ALL SUITS, ACTIONS OR OTHER PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH, SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN CHICAGO, ILLINOIS. THE BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT AGAINST ANY PARTY IN ACCORDANCE WITH THIS SECTION, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. * * * * * * 21 22 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. STOCKPOINT, INC., formerly known as NEURAL APPLICATIONS CORPORATION By: /s/ William E. Staib Its: Chief Executive Officer Address: 2600 Cross Park Coralville, IA 52241 Attention: William E. Staib Facsimile: 319-626-5001 THE NORTHERN TRUST COMPANY By: /s/ [illegible] Its: Vice President Address: 50 South LaSalle Street Chicago, Illinois 60675 Attention: David Gozdecki, Vice President Credit Policy Division Facsimile: 312/630-6105 Telephone: 312/444-5829 IOWA STATE BANK & TRUST By: /s/ [illegible] Its: Senior Vice President Address: Attn: Facsimile: 22 23 SCHEDULE I DEFINITIONS General. The following terms when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agreement" is defined in the preamble. "Authorized Officer" means, relative to the Borrower, those of its officers whose signatures and incumbency shall have been certified to the Lead Bank and the Lenders pursuant to subsection (f) of Section 6.2. "Borrower" is defined in the preamble. "Bridge Financing" is defined in Section 6.1 hereof. "Bridge Lenders" is defined in Section 6.1 hereof. "Capitalized Lease Liabilities" means all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with generally accepted accounting principles, would be classified as capitalized leases, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with generally accepted accounting principles. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "Debentures" is defined in Recital C. 24 "Environmental Laws" means all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment. "ERISA" means the federal Employee Retirement Income Security Act of 1974, as amended. "Event of Default" is defined in Section 12.1. "Hazardous Material" means (a) any "hazardous substance", as defined by CERCLA; (b) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended; (c) any petroleum product; or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended. "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "Iowa Jet Receivable" is defined in Section 10.12. "ISB" is defined in Recital D. "Issuer" means Northern in its capacity as the issuer of any Letter of Credit. "Lead Bank" means Northern in its lead bank capacity or any of its successors in that regard. "Lenders" is defined in the preamble. "Letters of Credit" is defined in Recital C. "L/C Reimbursement Agreements" is defined in Recital C. 25 "Loan Documents" means this Agreement, the Notes, the L/C Reimbursement Agreements, and each other document or agreement executed and delivered in connection with this Agreement or any of the transactions contemplated by this Agreement by the Borrower or any other Person directly or indirectly obligated with respect to any of the Obligations. "Material Adverse Effect" means a material and adverse effect on the business, assets, liabilities, financial condition, operations or business prospects of the Borrower and its Subsidiaries taken as a whole or on the ability of the Borrower to perform its obligations under this Agreement, the Notes or the other Loan Documents to which the Borrower is a party or on the value of any of the collateral securing any of the Obligations or on the ability of the Lead Bank to realize on any such collateral. "Northern" is defined in the preamble. "November 28, 1997 Line of Credit" is defined in Recital A. "November 28, 1997 Note" is defined in Recital A. "Notes" is defined in Section 1.4 hereof. "Obligations" means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement, the Note, each other Loan Document to which the Borrower is a party, and the Letters of Credit. "PBGC" means the Pension Benefit Guaranty Corporation and its successors and assigns. "Person" means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Plan" means an employee benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code as to which the Borrower or any Subsidiary may have any liability. "Prime Rate" is defined in Section 2.1. "Purported UAL Stock Certificates" is defined in Recital F. "Release" means a "release", as such term is defined in CERCLA. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such Section, with respect to a Plan, excluding, however, such events which, singly or in the aggregate, do not and will not have a Material Adverse Effect. 26 "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as in effect from time to time. "Robert Staib Agreement" is defined in Section 11.6 hereof. "Senior Manager" is defined in Section 10.12 hereof. "September 14, 1998 Line of Credit" is defined in Recital E. "September 14, 1998 Note" is defined in Recital E. "Strategic Transaction" is defined in Section 5.1 hereof. "Subsidiary" means any corporation, partnership, joint venture, limited liability company, trust, or other legal entity of which the Borrower owns directly or indirectly 50% or more of the outstanding voting stock or interest, or of which the Borrower has effective control, by contract or otherwise. "Unfunded Liabilities" means (a) in the case of single employer Plans, the amount (if any) by which the present value of all vested nonforfeitable benefits under such Plan exceeds the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan; and (b) in the case of multi-employer plans, the withdrawal liability of the Borrower and its Subsidiaries. "Unmatured Event of Default" means an event or condition which would become an Event of Default with notice or the passage of time or both. Except as and unless otherwise specifically provided herein, all accounting terms in this Agreement shall have the meanings given to them by generally accepted accounting principles and shall be applied, and all reports required by this Agreement shall be prepared, in a manner consistent with the financial statements referred to in Section 10.2(a). Applicability of Subsidiary and Affiliate References. Terms hereof pertaining to any Subsidiary or Affiliate shall apply to the Borrower only during such times as the Borrower has any Subsidiary or Affiliate. 27 SCHEDULE 9.4 SCHEDULE OF LITIGATION LIABILITIES OF THE BORROWER List of pending litigation, arbitration proceedings or governmental proceedings pending or threatened: None. 28 SCHEDULE 9.5 SUBSIDIARIES AND AFFILIATES 1. Neural, Inc., a Delaware corporation, a wholly owned subsidiary. 2. Ethos Corporation, a California corporation, a wholly owned subsidiary. 29 SCHEDULE 10.5(b) SCHEDULE OF LIENS AND ENCUMBRANCES ON PROPERTY OF THE BORROWER 1. Kirkwood Community College (unpaid balance $146,243) 2. Iowa Department of Economic Development and City of Coralville, Iowa (unpaid balance $150,000) 3. New Resources, Inc. (unpaid balance $36,368) 4. Berthel Fischer Company (unpaid balance $10,411) 5. Bridge Lender/Norwest Bank Iowa, National Association (unpaid balance of $2,500,000) 30 SCHEDULE 10.12 SCHEDULE OF SENIOR MANAGERS William E. Staib Scott D. Porter William E. McNally Robert Squires 31 SCHEDULE 12.1(m)
SCHEDULE OF TRADE CREDITORS WHOSE CLAIMS ARE IN THE PROCESS OF BEING RESOLVED North Star Steel $237,799 Belle Plaine Air Services $ 39,340 Arnold Communications Public Relations $ 84,264
32 EXHIBIT A FORM OF COVENANT NOT TO SUE This Covenant Not to Sue is from The Northern Trust Company ("Northern") and Iowa State Bank, & Trust ("ISBT") to and in favor of Stockpoint, Inc., formerly known as Neural Applications Corporation ("Stockpoint"). W I T N E S S E T H: WHEREAS, Stockpoint, Northern, and ISBT have entered into a certain Restructuring Agreement, dated as of , 1999 (the "Restructuring Agreement"); and WHEREAS, under the Restructuring Agreement, Northern and ISBT agreed, upon the satisfaction of the conditions of Section 8.1 thereof, to not seek the imposition of personal liability on Stockpoint with respect to the Obligations (including, without limitation, the Notes and Stockpoint's reimbursement obligations under the Letter of Credit) (all as such terms are defined in the Restructuring Agreement); NOW, THEREFORE, each of Northern and ISBT hereby does agree as follows: 14.15 SECTION Modified Covenant Not to Sue. In consideration of the receipt of $ and the release referred to in Section 8.1 of the Restructuring Agreement, Northern and ISBT, severally, for themselves and their successors and assigns, hereby agree not to seek the imposition of personal liability on Stockpoint, its successors and assigns and each of the former, current and future shareholders, directors, officers, employees, agents, attorneys, trustees and representatives, their respective heirs, legal representatives, successors and assigns, of Stockpoint, for any and all claims, counterclaims, demands, liens, agreements, contracts, covenants, suits, actions, causes of action, obligations, controversies, debts, compensation, losses, costs, expenses, attorneys' fees, damages, judgments, orders and liabilities of whatever kind, type, nature, character or description, in law, equity or otherwise, whether now known or unknown, contingent or vested, liquidated or unliquidated, suspected or unsuspected, and whether or not sealed or hidden, which have existed, or which do exist as of the date hereof, or which may now or hereafter exist, pertaining to or arising out of the Obligations (including, without limitation, the Notes and Stockpoint's reimbursement obligations under the Letter of Credit); provided, however, that (i) the Obligations are not canceled, discharged or deemed paid hereby, (ii) each of Northern and ISBT reserves the right to implead Stockpoint in any action in which a claim is made against either of Northern or ISBT; moreover, each of Northern and ISBT reserves its rights to contribution and indemnity in any action in which either is a party, and (iii) if any court of competent jurisdiction shall at any time determine that any payment or other transfer made pursuant to or in connection with the Obligations constitutes a fraudulent transfer or preference under applicable law or otherwise, or shall otherwise avoid such transfer, and shall require, whether by order, judgment, declaration or otherwise, either of Northern or ISBT or any designee thereof to reconvey any such transfer or any material part thereof, or to pay an amount, 33 representing the value of all or any material part thereof, to Stockpoint or to any trustee, receiver of custodian for any thereof, then, any rule of law or equity or agreement of the parties to the contrary notwithstanding, immediately and without any notice or action by either Northern or ISBT or any designee thereof or any other party, this Covenant Not to Sue and each and every other relief, indulgence or relinquishment of rights by Northern and/or ISBT set forth in this Section A shall be void ab initio, and each of Northern and ISBT shall be entitled to enforce its rights with respect to the Obligations, including without limitation, its rights and claims under and in connection with the Notes and the Letter of Credit, all as if this Covenant Not to Sue had never been executed and delivered (except that any pertinent statute of limitations shall be deemed to have been tolled during the period from the date of the execution and delivery of this Covenant Not to Sue to and through the date that is 30 days after any such avoidance determination becomes final and nonapplicable). 14.16 SECTION No Release of Third Parties. In executing and delivering this Covenant Not to Sue, each of Northern and ISBT does not hereby release or discharge in any manner whatsoever any other person or entity (including, in particular, Robert Staib) which is or may be liable to it in respect to any matter relating directly or indirectly to the aforementioned claims, and each of Northern and ISBT hereby expressly reserves all of its claims, rights, powers, and remedies against all such other persons and entities (including, in particular, Robert Staib). 14.17 SECTION Binding Effect. This Covenant Not to Sue shall be binding upon the successors and assigns of Northern and ISBT and shall inure to the benefit of the heirs, legal representatives, successors and assigns of Stockpoint. Consistent with Section B hereof, there are no intended third party beneficiaries of this Covenant Not to Sue. 14.18 SECTION Execution in Counterparts. This Covenant Not to Sue may be executed in any number of counterparts each of which shall be deemed an original and all of which shall be deemed for all purposes, one agreement. 14.19 SECTION Choice of Law. To the extent not governed by federal law, this Covenant Not to Sue shall be deemed to be a contract made under the laws of the State of Illinois ad for all purposes shall be governed by and construed in accordance with the laws of that state (except the choice of law rules thereof) in all respects, including, without limitation, mattes of construction, validity and performance. 34 14.20 SECTION No Amendment. This Covenant Not to Sue may not be amended, modified, altered or waived. Dated: , 2000 ------------- THE NORTHERN TRUST COMPANY IOWA STATE BANK & TRUST By: By: --------------------------------- ---------------------------------- Its: Its: -------------------------- --------------------------------- Agreed to and Accepted this day of , 200 . By: STOCKPOINT, INC., formerly known as Neural Applications Corporation By: ------------------------------- Its: ------------------------- 35 EXHIBIT B FORM OF RELEASE This Release is from Stockpoint, Inc., formerly known as Neural Applications Corporation, a Delaware corporation ("Stockpoint"), to and in favor of The Northern Trust Company, an Illinois banking corporation ("Northern") and Iowa State Bank & Trust ("ISBT"). W I T N E S S E T H: WHEREAS, Stockpoint, Northern and ISBT have entered into a certain Restructuring Agreement, dated as of November __, 1999 (the "Restructuring Agreement"); and WHEREAS, under the Restructuring Agreement, Stockpoint agreed, upon the satisfaction of the conditions of Section 8.1 thereof, to release each of Northern and ISBT from any claim pertaining to or in any other manner relating to the Obligations (including, without limitation, the Notes and the Letters of Credit) (all such terms are defined in the Restructuring Agreement and used herein with the same meaning), Stockpoint or its business operations, or Robert Staib; NOW, THEREFORE, Stockpoint does hereby agree as follows: 14.21 SECTION Release. In consideration of Northern and ISBT entering into the Restructuring Agreement, and for other consideration, Stockpoint, for itself and its legal representatives, subsidiaries, affiliates, successors and assigns, hereby knowingly and voluntarily, absolutely, finally and forever releases, acquits and discharges each of Northern and ISBT, their successors and assigns, and each of their respective former, current, and future affiliated corporations (including parents and subsidiaries) and their respective successors and assigns and each of the former, current and future shareholders, directors, officers, employees, agents, attorneys, trustees and representatives, their respective heirs, legal representatives, successors and assigns, of each of Northern and ISBT (collectively, the "Released Parties"), from any and all claims counterclaims, demands, liens, agreements, contracts, covenants, suits, actions, causes of action, obligations, controversies, debts, compensation, losses, costs, expenses, attorneys' fees, damages, judgments, orders and liabilities of whatever kind, type, nature, character or description, in law, equity or otherwise, whether now known or unknown, contingent or vested, liquidated or unliquidated, suspected or unsuspected, and whether or not sealed or hidden, which have existed, or which do exist as of the date hereof, or which may now or hereafter exist, pertaining to, arising out of, or in any manner relating to the Obligations (including, without limitation, the Notes and the Letters of Credit), Stockpoint generally (including its business operations), or Robert Staib. 14.22 SECTION Unwind Provision. Northern and ISBT each has this date executed a Covenant Not to Sue in favor of Stockpoint. If such Covenant Not to Sue is determined to be void ab initio, and if, as a matter of applicable law, this Release shall be void ab initio as a result thereof, then Stockpoint shall be entitled to enforce its rights, if any, as though the Release had not been executed. 36 14.23 SECTION Certain Representations and Warranties. Stockpoint represents and warrants that (i) it has had the opportunity to obtain advice of counsel of its own choosing in the negotiations for and preparation of this Release, that its authorized officers have read this Release, that its authorized officers have had this Release fully explained to them on behalf of Stockpoint by such counsel (if consulted) and that it (through its authorized officers) is fully aware of its contents and legal effects, and (ii) except as herein provided, it has not assigned any claims, counterclaims, demands, liens, agreements, contracts, covenants, suits, actions, causes of action, obligations, controversies, debts, compensation, losses, costs, expenses, attorneys' fees, damages, judgments, orders or liabilities that are the subject matter of this Release to any other person or entity. 14.24 SECTION Binding Effect. This Release shall be binding upon the heirs, legal representatives, successors and assigns of Stockpoint and shall inure to the benefit of the Released Parties (including, without limitation, each of Northern and ISBT and their respective successors and assigns). 14.25 SECTION Execution in Counterparts. This Release may be executed in any number of counterparts each of which shall be deemed an original and all of which shall be deemed for all purposes, one agreement. 14.26 SECTION Choice of Law. To the extent not governed by federal law, this Release shall be deemed to be a contract made under the laws of the State of Illinois and for all purposes shall be governed by and construed in accordance with the laws of that state (except the choice of law rules thereof) in all respects, including, without limitation, matters of construction, validity and performance. 37 14.27 SECTION No Amendment. This Release may not be amended, modified, altered and waived. Dated: , 200 -------------- - STOCKPOINT, INC., formerly known as Neural Applications Corporation, a Delaware corporation By: ------------------------------- Its: ----------------------- Agreed to and Accepted this day of 200 ---- - By: THE NORTHERN TRUST COMPANY By: -------------------------------- Its: -------------------------- By: IOWA STATE BANK & TRUST By: -------------------------------- Its: -------------------------- 38 EXHIBIT C - FORM OF COMPLIANCE CERTIFICATE COMPLIANCE CERTIFICATE To: The Northern Trust Company, as Lead Bank under the Credit Agreement referred to below 50 South LaSalle Street Chicago, Illinois 60675 Attention: Reference is made to the Restructuring Agreement, dated as of November , 1999 (herein, as it may be amended, supplemented, restated or otherwise modified from time to time, called the "Restructuring Agreement"), among Stockpoint, Inc., formerly known as Neural Applications Corporation (the "Borrower"), the financial institutions parties thereto and The Northern Trust Company, as Lead Bank. Terms used but not otherwise defined herein are used herein as defined in the Restructuring Agreement. The Borrower hereby certifies, represents and warrants, as of the date hereof: (i) no Event of Default or Unnatural Event of Default has occurred and is continuing and (ii) the Borrower is in compliance with the financial restrictions set forth in Sections 10.5 and 10.11 of the Restructuring Agreement. Very truly yours, STOCKPOINT, INC. By: ------------------------------ Its: ----------------------- EX-10.16 36 S&P COMSTOCK INFO. DISTRIBUTION LICENSE AGREEMENT 1 EXHIBIT 10.16 S&P COMSTOCK INFORMATION DISTRIBUTION LICENSE AGREEMENT AGREEMENT, made as of September 23, 1999, by and between S&P ComStock, Inc. a corporation having offices at 600 Mamaroneck Avenue, Harrison, New York 10528, and Stockpoint, Inc. ("Distributor"), having an office at 2600 Crosspark Road, Coralville, Iowa 52241. WHEREAS, S&P ComStock, Inc. gathers, formats and distributes an information service comprised of certain securities and commodities prices and other data which is known as the S&P ComStock Service ("ComStock") and WHEREAS, S&P ComStock, Inc. is licensed to distribute information from various Stock Exchanges, Commodity Exchanges, and other sources (collectively, "Sources") as part of S&P ComStock; and WHEREAS, the parties desire that certain information from S&P ComStock ("the ComStock Information") as specified in Exhibit A (Part 1), attached hereto, be licensed to Distributor for use by Distributor as described fully in Exhibit B attached hereto (collectively, the "Distributor Service"). NOW, THEREFORE, the parties mutually agree as follows: 1. Distribution License. (a) Distributor is hereby granted for the term of this Agreement a nonexclusive, nontransferable right and license to distribute electronically the ComStock Information via the Distributor Service solely for access by Internet users of the Distributor Service (such users referred to herein as "Subscribers"), provided that the ComStock Information is supplied to the Subscribers by means (such as data encryption, or packet transmission-digitizing) which prevent unauthorized reception, use or retransmission and further provided that Distributor has executed in advance any and all necessary documents with the various Sources, which documents have been accepted and approved by the Sources. Notice of such Sources' acceptance and approval must be supplied to S&P ComStock, Inc. prior to Distributor's use or distribution of the ComStock Information. (b) Distributor agrees and understands that it shall directly provide the ComStock Information to Subscribers as specifically set forth in Exhibit B. Distributor also agrees and understands that it shall not otherwise sublicense, transfer, or assign its rights hereunder nor permit the redistribution of the ComStock Information without the express prior authorization of S&P ComStock, Inc. pursuant to a separate agreement or by mutually agreeable amendment executed and attached hereto. 2. ComStock Equipment. (a) During the term of this Agreement, S&P ComStock, Inc. shall provide Distributor the equipment listed in Exhibit C, attached hereto ("the ComStock Equipment"), for installation only at the site(s) specified therein. Distributor shall not relocate the ComStock Equipment without the written permission of S&P ComStock, Inc. 1 2 (b) S&P ComStock, Inc. shall, at Distributor's expense and request, install, furnish, and maintain necessary modems and/or communications interface equipment. (c) Distributor shall not attach, or permit or cause to be attached, any non-ComStock equipment to the ComStock communications line or the ComStock Equipment without the prior written permission of S&P ComStock, Inc. (d) Distributor shall have no right in or to any of the ComStock Equipment except for the rights of use herein granted. Distributor shall pay all extraordinary costs for repair or replacement of the ComStock Equipment, over and above ordinary maintenance which shall be performed by S&P ComStock, Inc., Such extraordinary maintenance includes electrical work external to the ComStock Equipment, maintenance of accessories or attachments, and repair of damage to the ComStock Equipment resulting from accident, neglect, misuse, failure of electrical power or causes other than ordinary use. Distributor shall promptly return the ComStock Equipment in good condition, ordinary wear and tear excepted, upon termination of this Agreement for any reason. 3. ComStock Information. (a) The furnishing to Distributor of the ComStock Information is conditioned upon strict compliance with the provisions of this Agreement, the applicable policies of the Sources, and with all local, state and federal regulations which might pertain to the use of the ComStock Information. It shall be the sole responsibility of Distributor to confirm with the applicable Sources whether or not all of the ComStock Information may be distributed by Distributor to its Subscribers. S&P ComStock, Inc. may discontinue provision of the ComStock Information hereunder, without notice, whenever the terms of its agreements with the Sources require such discontinuance, or if in its reasonable judgment S&P ComStock, Inc. finds a breach by Distributor of any of the provisions of this Agreement. S&P ComStock shall give Distributor at least thirty (30) days notice before discontinuance. (b) Neither S&P ComStock, Inc., nor any of its affiliates, nor any Sources make any express or implied warranties (including, without limitation, any warranty of merchantability or fitness for a particular purpose or use). Neither S&P ComStock, Inc., any of its affiliates, or any Sources warrant that the ComStock information will be uninterrupted or error-free. Distributor expressly agrees that its use and distribution of the ComStock Information and its use of the ComStock Equipment is at the sole risk of Distributor and its Subscribers. S&P ComStock, Inc., its affiliates, and all Sources involved in creating or providing the ComStock Information will in no way be liable to Distributor or any of its Subscribers for any inaccuracies, errors or omissions, regardless of cause, in the ComStock Information or for any defects or failures in the ComStock Equipment, or for any damages (whether direct or indirect, or consequential, punitive or exemplary) resulting therefrom. The liability of S&P ComStock, Inc. and its affiliates in any and all categories, whether arising from contract, warranty, negligence, or otherwise shall, in the aggregate, in no event exceed one month's ComStock Information Delivery Fee. 2 3 (c) Prior to commencing distribution of real time SPC Information to any Subscriber, Distributor shall enter into a written or electronic subscription agreement with each such Subscriber. The form of any such agreement shall be subject to the prior review and written approval of SPC and shall include provisions to the effect that each Subscriber: (i) agrees that SPC and the Sources shall have no liability for the accuracy or completeness of the SPC Information or for delays, interruptions, or omissions therein; (ii) agrees that its arrangement with Distributor for receipt of the SPC Information is subject to termination in the event that this Agreement between Distributor and SPC is terminated for any reason (iii) acknowledges that the Sources described in the preceding paragraph may have the right to terminate provision of the SPC Information to Subscriber with or without notice and that neither any such Source, SPC nor Distributor shall have any liability in connection therewith. (d) Distributor agrees that it shall not display the ComStock Information in the Distributor Service without a prominent notice indicating that the ComStock Information is being displayed on a minimum fifteen (15) minute delayed basis, where applicable. (e) Distributor also agrees to include S&P Comstock's Terms and Condition of Use, a copy of which is attached hereto as Exhibit E, within the Distributor Service in a manner which alerts Subscribers of the applicability thereof. (f) Distributor shall clearly and prominently identify S&P ComStock as the source of the ComStock Information by display of the S&P ComStock logo (the "Logo") in a manner to be agreed to by the parties. Distributor shall also create a hypertext or other computer link from the Logo to the S&P ComStock site on the World Wide Web. (g) Distributor represents and warrants that it has and will employ adequate security procedures to prevent the unauthorized access to the ComStock Information or corruption of the ComStock Information. (h) Distributor agrees to indemnify and hold S&P ComStock, Inc. and its affiliates harmless from and against any and all losses, damages, liabilities, costs, charges and expenses, including reasonable attorneys' fees, arising out of: (i) any liability of S&P ComStock, Inc. to any Subscriber where Distributor has failed to include the Terms and Conditions of Use in the Distributor Service pursuant to Section 3(d) above; or (ii) any breach or alleged breach on the part of Distributor or any Subscribers with respect to its/their obligations to obtain prior approvals from appropriate Sources and to comply with any applicable conditions, restrictions or limitations imposed by any Source. 3 4 (i) S&P ComStock, Inc. represents that it has the rights and licenses necessary to transmit the ComStock Information to Distributor, and that to the best of S&P ComStock, Inc.'s knowledge, the license granted to Distributor hereunder does not infringe any proprietary right or any third party right at common law or any statutory copyright. (j) S&P ComStock, Inc. shall deliver the ComStock Information to Distributor at the site(s) set forth in Exhibit C or at such other locations as Distributor may designate within the continental United States or Canada. 4. Payments. In consideration for the license granted to Distributor by S&P ComStock, Inc. under this Agreement, Distributor shall make the following payments to S&P ComStock, Inc.: (a) Distributor shall pay to S&P ComStock, Inc. a monthly License Fee and Subscriber Fee, as listed in Exhibit D. Together with the Subscriber Fee payment, Distributor shall provide to S&P ComStock, Inc. on a monthly basis a list identifying the number of web hosting 3rd parties and their respective page views. S&P ComStock, Inc. shall keep such list confidential. (b) Distributor shall be responsible for the payment of any and all applicable fees billed to S&P ComStock, Inc. or directly to Distributor by Sources, which fees result from Distributor's use and distribution of the ComStock Information. Distributor shall also be responsible for payment of any Subscriber's Source fees which must be paid directly by Distributor to the Sources. Distributor shall provide to S&P ComStock, Inc. a copy of its monthly Source fee reports when and as filed with the Sources. (c) Any amounts payable to S&P ComStock, Inc. by Distributor hereunder which are more than thirty (30) days past due shall bear interest at the rate of 1-1/2% per month. (d) S&P ComStock, Inc. may, in its sole discretion and at any time following the initial term of this Agreement, change the per-Subscriber fee payment schedule and/or the ComStock Information Delivery Fee as specified herein after having provided written notice to Distributor at least ninety (90) days in advance of such changes. (e) S&P ComStock, Inc. may audit Distributor's records for the sole purpose of verifying the accuracy of Distributor's reported monthly Subscriber Fee payments as set forth in Paragraph 4(a), above. Distributor will make such records readily available to S&P ComStock, Inc. for inspection during normal working hours on one week's notice. S&P ComStock, Inc. agrees that Distributor's records will be treated as confidential and will not be used for any purpose other than verifying Distributor's compliance with this Agreement. Any such audit shall be at S&P ComStock, Inc.'s expense unless it is determined that S&P ComStock, Inc. has been underpaid by an amount exceeding five percent (5%) of the revenues actually received by S&P ComStock, Inc. in the period covered by the audit; in such case, the expense of the audit shall be borne by Distributor. 5. Information Enhancements; Changes to Data Specification. 4 5 (a) Any additions of new Sources or other enhancements to the ComStock Information which may be made by S&P ComStock, Inc. during the term of this Agreement, while unidentified at this time, will be offered to Distributor under terms and conditions to be negotiated, provided that (i) S&P ComStock, Inc. has the necessary rights to convey such new information to Distributor for redistribution; and (ii) Distributor and S&P ComStock, Inc. execute a separate agreement or an amendment to this Agreement. (b) S&P ComStock, Inc. shall have the right, on at least six (6) months prior written notice, to change the ComStock Data Format Specification, provided that any such change shall be made effective generally by S&P ComStock, Inc. to its customers. Distributor shall be responsible at its own expense for making any modifications to its software necessitated by such change. 6. Term. (a) This Agreement shall take effect upon its execution by an authorized representative of S&P ComStock, Inc. and of Distributor. (b) The term of this Agreement shall be for an initial term of two (2) years commencing on the first day of service operation and shall automatically renew at the end of each term for successive terms, each of the same duration as the initial term, unless it is terminated effective at the end of any term with written notice by either party given to the other at least ninety (90) days prior to the end of the then current term. If S&P ComStock, Inc. increases charges to Distributor pursuant to Paragraph 4(d), above, Distributor shall have the option to terminate this Agreement by written notice to S&P ComStock, Inc. within sixty (60) days of Distributor's receipt of notice of such increases; such termination will become effective no sooner than thirty (30) days from the last day of the month in which notice of termination by Distributor is received by S&P ComStock, Inc. 7. Marketing. Distributor may not use the names "ComStock", "SPC.", or "S&P ComStock, Inc.", which are proprietary to S&P ComStock, Inc., or refer to the ComStock Information in marketing or advertising materials without the prior written consent of S&P ComStock, Inc., such consent not to be unreasonably withheld. Upon S&P ComStock, Inc.'s written request, Distributor shall notify Subscribers by a display in the service itself that S&P ComStock is the source of the quote information and any sales literature discussing ComStock provided quotes shall list S&P ComStock as the provider of the service. 8. Rights to Data Specification; Other Confidential Information. (a) Distributor agrees and acknowledges that the Data Specification is a confidential and proprietary trade secret belonging to ComStock, and nothing in this Agreement conveys any proprietary rights whatsoever with regard to the Data Specification to Distributor. The Data Specification is provided to the Distributor strictly and solely for the purpose of developing internal computer software to receive the ComStock Information. Distributor may not use the Data Specification for any other purpose whatsoever, including, but not limited to, the development of systems for the receipt or transmission of computer data. Distributor may not give, transmit, or provide access to the ComStock Data Specification to any Subscriber or other third party. On any termination of this Agreement, regardless of cause, Distributor shall promptly return the Data Specification to S&P ComStock, Inc. and shall provide a written certification by an officer that no copies have been retained by Distributor. 5 6 (b) In addition to the duties imposed on Distributor pursuant to Paragraph 8(a), above, S&P ComStock, Inc. and Distributor agree to hold confidential any and all of each other's trade secrets, procedures, formulae, financial data, Subscriber lists, and future plans, which may be learned before and during the term of this Agreement. Notwithstanding the foregoing, however, such duty of confidentiality shall not extend to information which is or comes into the public domain, is rightfully obtained from third parties not under a duty of confidentiality, or which is independently developed without reference to the other party's confidential information. (c) The duties of confidentiality imposed herein shall survive any termination of this Agreement. 9. Prevention of Performance. Neither party shall be liable for any failure in performance of this Agreement if such failure is caused by acts of God, war, governmental decree, power failure, judgment or order, strike, or other circumstances, whether or not similar to the foregoing, beyond the reasonable control of the party so affected. Neither party shall have any liability for any default resulting from force majeure, which shall be deemed to include any circumstances beyond its control. Such circumstances shall include, but are not limited to acts of the government, fires, flood, strikes, power failures or communications line or network failures. 10. Right of Termination in the Event of Breach or Bankruptcy; Right to Injunctive Relief. (a) Either party shall have the right to terminate this Agreement for material breach by the other party by giving thirty (30) days prior written notice, such termination to take effect unless the breach is cured or corrected within such notice period. (b) If a receiver is appointed for either party's business or if either party petitions under the Bankruptcy Act and is adjudicated a bankrupt, declared an insolvent, or makes an assignment for the benefit of creditors, then the other party shall, upon thirty (30) days prior written notice, have the right to terminate this Agreement. (c) Upon termination of this Agreement for any reason, Distributor shall cease all use and distribution of any of the ComStock Information. (d) In addition to and notwithstanding the above, if Distributor, or any of its employees, agents or representatives, shall attempt to use or dispose of the ComStock Information or the Data Specification in a manner contrary to the terms of this Agreement, S&P ComStock, Inc. shall have the right, in addition to such other remedies as may be available to it, to injunctive relief enjoining such acts or attempt, it being acknowledged that legal remedies are inadequate. (e) SPC shall have the right to terminate this Agreement upon written notice to Distributor in the event of a sale or transfer of all or substantially all of the assets of Distributor or a sale or transfer of a controlling equity interest in Distributor. 6 7 11. Assignment. This Agreement may not be assigned, sublicensed or otherwise transferred by either party without the written consent, except to a majority owned subsidiary, of the other party, such consent not to be unreasonably withheld, provided, however, that no such consent shall be required with respect to any assignment by S&P ComStock, Inc. to its parent company, or to any S&P ComStock, Inc. affiliate. Any attempted transfer or assignment of this Agreement in violation of this provision shall be null and void. 12. Entire Agreement. This Agreement and its Exhibits embodies the entire agreement between the parties hereto. There are no promises, representations, conditions or terms other than those herein contained. No modification, change or alteration of this Agreement shall be effective unless in writing and signed by the parties hereto. 13. Non-Waiver. The failure of either party to exercise any of its rights under this Agreement for a breach thereof shall not be deemed to be a waiver of such rights nor shall the same be deemed to be a waiver of any subsequent breach. 7 8 14. Notices. All notices under this Agreement shall be given in writing to the parties as follows: To: S&P ComStock, Inc. 600 Mamaroneck Avenue Harrison, New York 10528 Attn.: Mr. Paul Zinone To: Stockpoint, Inc. 2600 Crosspark Road Coralville, Iowa 52241 Attn.: Mr. William Staib 15. Governing Law. This Agreement shall be governed by the laws of the State of New York and the parties agree to select New York jurisdiction for any claims or disputes which may arise hereunder. IN WITNESS WHEREOF, Distributor and S&P ComStock, Inc. have caused this Agreement to be executed by their duly authorized respective officers, as of the day and year above written. S&P COMSTOCK, INC. By: /s/ [illegible] Title: President Date: 9/23/99 DISTRIBUTOR By: /s/ William E. Staib Title: CEO Date: 9/23/1999 8 9 EXHIBITS A. COMSTOCK INFORMATION DEFINITION; AUTHORIZED COUNTRIES B. DESCRIPTION OF DISTRIBUTOR SERVICE C. LISTING OF COMSTOCK EQUIPMENT; DISTRIBUTOR DELIVERY SITES D. SCHEDULES OF SUBSCRIBER FEES E. TERMS AND CONDITIONS OF USE 9 EX-10.17 37 EMPLOYMENT AGREEMENT BETWEEN REGISTRANT & PORTER 1 Exhibit 10.17 EMPLOYMENT AGREEMENT THIS AGREEMENT is entered into on March 1, 2000 (the "Effective Time"), by and between Scott D. Porter, an individual resident of the State of Iowa ("Executive"), and Stockpoint, Inc., a Delaware corporation ("Company"). WHEREAS, Executive has heretofore been employed as the Chief Financial Officer of the Company; and WHEREAS, the Company desires to continue to have the benefit of the Executive's services as a corporate officer of the Company; NOW, THEREFORE, in consideration of the premises, the respective undertakings of the Company and Executive set forth below, the Company and Executive agree as follows: 1. Employment. The Company hereby agrees to employ Executive, and Executive accepts such employment and agrees to perform services for the Company, upon the other terms and conditions set forth in this Agreement. 2. Term. The term of this agreement is one year and renews annually, unless either party provides written notification 90 days prior to the renewal. See section 8 below for Termination definitions and remedies. 3. Positions, Duties and Reporting. 3.01 Service with Company. During the term of this Agreement, Executive agrees to perform such reasonable employment duties consistent with the role of Chief Financial Officer as the Company shall assign to him/her from time to time. 3.02 Performance of Duties. Executive agrees to serve the Company faithfully and to the best of his/her ability and to devote his/her full time, attention, and efforts to the business and affairs of the Company during the term of this Agreement. Executive represents to the Company that he/she is under no contractual commitments inconsistent with his/her obligations set forth in this Agreement, and that during the term of this Agreement, he/she will not render or perform services for any other corporation, firm, entity or person which are inconsistent with the provisions of this Agreement. 3.03 Reporting. This position will report to the President or Chief Executive Officer of the Company. 4. Compensation. 4.01 Base Salary. As base compensation for all services to be rendered by Executive under this Agreement during the first year of the term of this Agreement, the Company shall pay to Executive a base salary at a rate of $105,000 per year, which salary shall be paid on a twice-monthly basis in accordance with the Company's normal payroll procedures and policies. The salary payable to Executive during each subsequent year during the term of this Agreement shall be established by the Company and Executive, but in no event shall the salary for any subsequent year be less than the base salary in effect for the prior year. Upon the completion of an initial public offering of the Company's common stock or another strategic transaction that satisfies the Company's present obligations to the Northern Trust Company in full, the base salary payable to the Executive will be increased to $122,500 per year. 4.02 Participation in Benefit Plans. During the term of this Agreement, Executive shall be entitled to receive such medical and hospitalization insurance and other fringe benefits as are being provided to the Company's other executive level employees from time to time to the extent that Executive's age, position or other factors qualify him/her for such fringe benefits. 4.03 Expenses. The Company will pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by him/her in the performance of his/her duties under this 2 Agreement, subject to the presentment of appropriate vouchers in accordance with the Company's normal policies for expense verification. 4.04 Incentive for completion of an initial public offering. Upon the completion of an initial public offering of the Company's common stock, the Company will also pay Executive an IPO cash bonus of $35,000, which is due and payable, immediately upon the close. 4.05 Annual Incentive Compensation. The Company shall formulate and deliver to Executive by March 31, 2000 with respect to the remainder of fiscal 2000, and by January 1 with respect to each succeeding fiscal year during the term of this Agreement, and the Company and Executive shall use their best efforts to negotiate and agree to, an annual incentive compensation plan for Executive. 5. Confidential Information. Except as permitted or directed by the Company's Board of Directors, during the term of this Agreement or at any time thereafter, Executive shall not divulge, furnish or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret knowledge or information of the Company which Executive has acquired or become acquainted with or will acquire or become acquainted with during the period of his/her employment by the Company, whether developed by himself/herself or by others, concerning any trade secrets, confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, any confidential or secret development or research work of the Company, or any other confidential information or secret aspects of the business of the Company. Executive expressly acknowledges that, in addition to the Company's proprietary software and technical know-how, the Company's customer lists and the form (including, without limitation, payment terms) of the Company's relationships with its customers is not publicly known and that the disclosure or use of such information for any purpose other than for the benefit of the Company could cause substantial damage the Company and would place the Company at a competitive disadvantage. Executive acknowledges that the above-described knowledge or information constitutes a unique and valuable asset of the Company and that any disclosure or other use of such knowledge or information other than the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. The foregoing obligations of confidentiality shall not apply to any knowledge or information which is now published, which subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement by Executive, or which was known to the Executive prior to the term of his/her employment with the Company. Executive agrees to notify any person or entity with which Executive is employed or for which Executive provides services of the requirements of this Section 5 and to notify the Company of the identity of any such person or entity with which Executive is employed during the One year after termination of this Agreement. 6. Employee Solicitation. During employment, and for a period of nine months thereafter, Executive shall not (i) directly or indirectly solicit any employee of the Company or any of Company's affiliates to leave the employ of any such entity or in any way interfere adversely with the relationship between any such employee and any such entity, (ii) directly or indirectly solicit any employee of the Company or any affiliates to work for, render services or provide advice to or supply confidential business information or trade secrets of any such entity to any third person, firm or corporation, or (iii) directly or indirectly solicit any existing customers and potential customers that have an unexpired written proposals under consideration. For purposes of the foregoing, solicitation shall not include solicitation of employees, vendors or customers (i) who first solicit employment or a relationship from Executive, or (ii) who are solicited (A) by advertising in periodicals of general circulation or by general circulation Internet advertising, or (B) by a search or consulting firm on behalf of Executive or Executive's affiliates, so long as Executive or such affiliates did not direct or encourage such firm to solicit such employee, vendor or customer of the Company. If any restriction set forth in this paragraph is held to be unreasonable, then Executive and the Company agree, and hereby submit, to the reduction and limitation of such prohibition to such area or period as shall be deemed reasonable. 7. Patent and Related Matter. 7.01 Disclosure and Assignment. Executive will promptly disclose in writing to the Company complete information concerning each and every invention, discovery, improvement, work of authorship, device, design, apparatus, practice, process, method or product whether patentable or not, made, developed, authored, perfected, devised, conceived or first reduced to practice by Executive, either solely or in collaboration with others, during the term of this Agreement, whether or not during regular working hours, 3 relating to the Business of the Company (hereinafter referred to as "Developments"). Executive, to the extent that he/she has the legal right to do so, hereby acknowledges that any and all of said Developments are the property of the Company and hereby assigns and agrees to assign to the Company any and all of Executive's right, title and interest in and to any and all of such Developments. 7.02 Limitation on Section 7.01. The provisions of section 7.01 shall not apply to any Development meeting the following conditions: (a) such Development was developed entirely on Executive's own time; and (b) such Development was made without the use of any Company equipment, supplies, facility or trade secret information, excluding Executives laptop; and (c) such Development does not relate (I) directly to the Business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; and (d) such Development does not result from any work performed by Executive for the Company. 7.03 Assistance of Executive. Upon request and without further compensation therefor, but at no expense to Executive, and whether during the term of this Agreement or thereafter, Executive will do all lawful acts, including, but not limited to, the execution of papers and lawful oaths and the giving of testimony, that in the opinion of the Company, its successors and assigns, may be necessary or desirable in obtaining, sustaining, reissuing, extending and enforcing United States and foreign patents and/or registrations including, but not limited to, design patents, on any and all of such Developments (other than those described in 7.02), and for perfecting affirming and recording the Company's complete ownership and title thereto, and to cooperate otherwise in all proceedings and matters relating thereto. 7.04 Obligations, Restrictions and Limitations. Executive understands that the Company may enter into agreements or arrangements with agencies of the United States Government, and that the Company may be subject to laws and regulations which impose obligations, restrictions and limitations on it with respect to inventions and patents which may be acquired by it or which may be conceived, authored or developed by employees, consultants or other agents rendering services to it. Executive agrees that he/she shall be bound by all such obligations, restrictions and limitations applicable to any such invention or work of authorship conceived, authored or developed by him/her during the term of this Agreement and shall take any and all further action which may be required to discharge such obligations and to comply with such obligations and to comply with such restrictions and limitations. 8. Termination 8.01 Grounds for Termination. This Agreement may be terminated: (a) by the Company, if Executive dies, or (b) by the Executive, if Executive becomes disabled (as defined below), or (c) by the Company, if the Executive has engaged in conduct constituting cause for his/her termination and the Company notifies Executive in writing of such election, or (d) by the Company without cause upon notice to the Executive in writing of such election, provided that such termination may only occur by unanimous decision of the Board of Directors if there are then three or fewer Directors or by a majority decision of the Board of Directors if there are then four or more Directors. 3 4 (e) by the Executive, if the Executive is constructively terminated, as defined in paragraph 8.01(2) herein and the Executive has notified the Company of his/her election to terminate for Constructive Termination, or (f) by the Executive upon notice to the Company in writing of such election. If this Agreement is terminated pursuant to subsection (a), (b), (c), (e) or (f) of this section 8.01, such termination shall be effective immediately. If this Agreement is terminated pursuant to subsection (d) of this section 8.01, such termination shall be effective thirty (30) days after delivery of the notice of termination. (1) "Cause" Defined. "Cause" means: (a) The Employee has breached the provisions of Section 5, 6 or 7 of this Agreement in any material respect, (b) The Executive has engaged in willful and material misconduct, including willful and material failure to perform the Employee's duties as an officer or employee of the Company and has failed to cure such default within 30 days after receipt of written notice of default from the Company, (c) The Executive has committed fraud, misappropriation or embezzlement in connection with the Company's business, or (d) Executive has been convicted or has pleaded nolo contendere to criminal misconduct that is detrimental to the Company's reputation or that calls into question, in the judgement of the Board, Executive's integrity in fulfilling his/her duties under this Agreement. In the event the Company terminates Executive's employment for "cause" pursuant to subsection 8.01 and Executive objects in writing to the Board's determination that there was proper "cause" for such termination within (30) days after Executive is notified of such termination, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If Executive fails to object to any such determination of "cause" in writing within such thirty (30) day period, he/she shall be deemed to have waived his/her right to object to that determination. If such arbitration determines that there was not proper "cause" for termination, such termination shall be deemed to be a termination pursuant to subsection 8.01(d). (2) "Constructive Termination" defined. Constructive Termination means termination by Executive after written notice to the Company that Executive deems such termination by Executive as a result of Constructive Termination, and only after: (a) A material breach by the Company of a material obligation of the Company under this Agreement after the Executive has given the Company written notice of the breach and the Company has not remedied the breach within 30 days; (b) A failure of the Company to pay when due to the Executive any annual base salary, annual bonus or other earned bonus or awards referred to in this Agreement; (c) The relocation of the Executive's principal place of employment to a location not within a 30 mile radius of such place of employment on the Effective Date; (d) A material reduction by the Company of the Executive's duties or responsibilities; 4 5 (e) The failure of the Company to obtain an agreement reasonably satisfactory to the Executive from any successor to assume and agree to perform this Agreement , or, if the business for which the Executive's services are principally performed is sold or transferred, the failure of the Company to obtain such an agreement from the purchaser or transferee of such business; or (f) The Company becomes insolvent or bankrupt where executive can no longer perform his/her duties as outlined above. In the event the Executive terminates Executive's employment for "Constructive Termination" pursuant to subsection 8.01 and the Company objects in writing to the Executive's determination that there was Constructive Termination within (30) days after Executive has notified the Company of the same, the matter shall be resolved by arbitration in accordance with the provisions of section 10.01. If the Company fails to object to any such determination of "Constructive Termination" in writing within such thirty (30) day period, it shall be deemed to have waived its right to object to that determination. If such arbitration determines that there was not proper "Constructive Termination", such termination shall be deemed to be a termination pursuant to subsection 8.01(c). 8.02 "Disability" Defined. For purposes of this Agreement, the term "disabled" means any mental or physical condition which renders Executive unable to perform the essential functions of his/her positions, with or without reasonable accommodation, for a period of more than ninety (90) days during any consecutive one hundred twenty (120) day period. 8.03 Surrender of Records and Property. Upon termination of his/her employment with the Company, Executive shall deliver promptly to the Company all records, manual, book, blank forms, document, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof, which are the property of the Company or which relate in any way to the business, products, practices or techniques of the Company, and all other property, trade secrets and confidential information of the Company, including, but not limited to, all documents which in whole or case are in his/her possession or under his/her control. 8.04 Wage and Benefit Continuation. If Executive's employment by the Company is terminated pursuant to subsection 8.01 (d) or 8.01(e), the Company shall continue to pay to Executive his/her base salary and shall continue to provide health insurance benefits for Executive for a period 9 months after termination. Notwithstanding anything else in this Section 8.04, Executive shall not be entitled under this Section 8.04 or any other provision of this Agreement to receive any cash compensation pursuant to this Agreement which constitutes an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, or any successor provision or regulations promulgated. If this Agreement is terminated pursuant to subsection 8.01 (a), 8.01 (c), or 8.01 (f), Executive's right to base salary and benefits shall immediately terminate except as may otherwise be required by applicable law. If Executive's employment is terminated by the Company pursuant to subsection 8.01(a), 8.01(b), 8.01(d) or 8.01(e), Executive shall also be entitled to receive any bonus payment that as of the time of termination would have been payable to him/her pursuant to any incentive plan then in effect. 9. Indemnification and Directors & Officers Insurance 9.01 Indemnification. The Company will provide Executive indemnification, exculpation and expense advancement, to the fullest extent of the law, including, without limitation, entering into an indemnification agreement with Executive in at least as beneficial a form to Executive as the Company has entered into with any other officer or director of the Company. 9.02 Directors and Officers Insurance. The Company will provide, at its expense, Directors and Officers (D&O) insurance in an amount deemed appropriate by its Board of Directors and Officers. If the Company shall show any employee as a named insured under such policy, the Executive shall be a named insured under such policy. 5 6 10. Settlement of Disputes. 10.01 Arbitration. Except as provided in section 10.02 any claims or disputes of any nature between the Company and Executive arising from or related to the performance, breach, termination, expiration, application, or meaning of this Agreement or any related matter relating to Executive's employment and the termination of that employment by the Company shall be resolved exclusively by arbitration in Minneapolis, MN, in accordance with the then applicable rules of the American Arbitration Association. Any such arbitration shall be conducted by an arbitrator with said Rules, who has at least ten (10) years experience as an attorney in executive compensation and employment law. The fees of the arbitrator (s) and other cost, including attorney fees, incurred by Executive and the Company in connection with such arbitration shall be paid by the party who is unsuccessful in such arbitration, as determined by the arbitrator. The decision if the arbitrator(s) shall be final and binding upon both parties. Judgement of the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. In the event of submission of any dispute to arbitration, each party shall, not later than thirty (30) days prior to the date set forth hearing, provide to the other party and to the arbitrator(s) a copy of all exhibits upon which the party intends to rely at the hearing and a list of all persons each party intends to call at the hearing. 10.02 Resolution of Certain Claims- Injunctive Relief. Section 10.01 shall have no application to claims by the Company asserting a violation of section 5, 6, 7 or 8.03 or seeking to enforce, by injunction or otherwise, the terms of section 5, 6, 7 or 8.03. Such claims may be maintained by the Company in a lawsuit subject to the terms of section 10.03. Executive agrees that, in addition to, but not to the exclusion of any other available remedy, the Company shall have the right to enforce the provisions of sections 5, 6, 7 and 8.03 by applying for and obtaining temporary and permanent restraining orders injunctions from a court of competent jurisdiction without the necessity of filing a bond therefor and without the necessity of proving actual damages, and the Company shall be entitled to recover from the Employee its reasonable attorneys' fees and costs in enforcing the provisions of Sections 5, 6, 7 and 8.03. 10.03 Venue. Any action at law, suit in equity, or judicial proceeding arising directly or indirectly, or otherwise in connection with, out of, related to or from this Agreement or any provisions hereof shall be litigated only in the courts of the State of Iowa. Executive waives any right the Executive may have to transfer or change the venue of any litigation brought against Executive by the Company. 10.04 Severability. To the extent any provisions of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provisions and if this Agreement shall be unaffected and shall continue in full force and effect. In furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provisions of this Agreement be in excess of that which is valid and enforceable under applicable law, then such provisions shall be construed to cover only that duration, extent or activities which may validly and enforceably be covered. Executive acknowledges the uncertainty of the law in respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. 11 Miscellaneous. 11.01 Governing Law. This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of Iowa. 11.02 Prior Agreements. Except as set forth in Section 1, this Agreement contains the entire agreement of the parties relating to the employment of Executive by the Company and the ancillary matters discussed herein and supersedes all prior agreements and undertakings with respect to such matters, and the parties hereto made no arrangements, representations or warranties relating to such employment or ancillary matters which are not set forth herein. 11.03 Withholding Taxes. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes shall be required pursuant to any law governmental regulation, or ruling or any other amount owed to the Company. 11.04 Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the both Executive and Company. 6 7 11.05 No Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 11.06 Assignment. This Agreement shall not be assignable, in whole or in part, by either party without the written consent of the other party, except that the Company may, without the consent of the Executive, assign its rights and obligations under this Agreement to any corporation, firm or other business entity with or into which the Company may merge or consolidate, or to which the Company may sell or transfer all or substantially all of its assets, or of which 50% or more of the equity investment and of the voting control is owned, directly or indirectly, by, or is under common ownership with, the Company; provided, however, that no such assignment will relieve Company of any of its obligations hereunder. After any such assignee shall thereafter be deemed to be the Company for the purposes of all provisions of this Agreement including section 9. . 11.07 Counterparts. This Agreement may be simultaneously executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but the same instrument. 11.08 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have given when personally delivered or three days after being mailed, if mailed, by first class mail, return receipt requested, or when receipt is acknowledged, if sent by facsimile, telecopy or other electronic transmission device. Notices, demands and communications to Company and the Executive will, unless another address is specified in writing, be sent to the address indicated below: Notices to Company: Notice to Executive: ------------------- -------------------- Stockpoint, Inc. ________________ 2600 Crosspark Road ________________ Coralville, Iowa 52241 ________________ Attn: President 11.09 Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. 11.10 Effect of Termination. It is expressly understood that neither the Company nor the Executive shall have any continuing obligation under this agreement upon termination hereof, except in respect of the matters referenced in Sections 5, 6, 7 and 8.03. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of date set forth herein. Stockpoint, Inc. By:___________________ Its___________________ EXECUTIVE ______________________ Scott D. Porter 7 EX-10.18 38 1ST AMENDMENT TO RESTRUCTURING AGREEMENT 1 EXHIBIT 10.18 FIRST AMENDMENT to RESTRUCTURING AGREEMENT, Dated as of March 29, 2000 among STOCKPOINT, INC., formerly known as NEURAL APPLICATIONS CORPORATION, as the Borrower, and THE NORTHERN TRUST COMPANY, and IOWA STATE BANK & TRUST 2 EXHIBIT 10.18 FIRST AMENDMENT to RESTRUCTURING AGREEMENT Dated as of March 29, 2000 THIS FIRST AMENDMENT TO RESTRUCTURING AGREEMENT, dated as of March 29, 2000 (this "Agreement"), is entered into by and among STOCKPOINT, INC., formerly known as NEURAL APPLICATIONS CORPORATION, a corporation organized under the laws of the State of Delaware (the "Borrower"), THE NORTHERN TRUST COMPANY, an Illinois banking corporation ("Northern"), as lead bank (the "Lead Bank") and as a lender to the Borrower, and IOWA STATE BANK & TRUST, as Northern's participant (together with Northern, the "Lenders"). R E C I T A L S : A. Northern extended a line of credit (the "November 28, 1997 Line of Credit") to the Borrower in the maximum principal amount of THREE MILLION DOLLARS ($3,000,000), the Borrower's obligations relating to which being evidenced by a promissory note dated as of November 28, 1997 (the "November 28, 1997 Note"), of the Borrower in favor of Northern. B. ISB has purchased a $1,000,000.00 participating interest in the November 28, 1997 Line of Credit. C. Northern issued letters of credit (collectively, the "Letters of Credit") in the maximum aggregate amount of $6,313,000 for the account of the Borrower to support the repayment of certain debentures issued by the Borrower (the "Debentures"), the Borrower's reimbursement obligations relating to which being set forth in accompanying reimbursement agreements (collectively the "L/C Reimbursement Agreements"). D. Iowa State Bank & Trust ("ISB"), an Iowa banking corporation, has purchased a $2,000,000.00 participating interest in Northern's obligations relating to the Letters of Credit. E. Northern extended another line of credit (the "September 14, 1998 Line of Credit") to the Borrower in the maximum principal amount of TWO MILLION DOLLARS ($2,000,000), the Borrower's obligations relating to which being evidenced by a promissory note, dated as of September 14, 1998 (the "September 14, 1998 Note"), of the Borrower in favor of Northern. F. The Borrower's obligations under and in relation to the November 28, 1997 Line of Credit, the Letters of Credit, and the September 14, 1998 Line of Credit were guaranteed by Robert B. Staib and the sole original collateral for these obligations was to be shares of UAL Corporation stock to be pledged by Mr. Staib to secure his obligations under such guarantees. 3 Consistent with the foregoing, Mr. Staib ultimately delivered certificates to Northern purporting to represent shares of UAL Corporation stock (the "Purported UAL Stock Certificates"). G. Based on information obtained on December 1, 1998, the Lenders believed and continue to believe that the Purported UAL Stock Certificates are counterfeit. The Borrower states that its senior management (other than Mr. Staib) first learned that the certificates were alleged to be counterfeit on December 3, 1998. Mr. Staib has since become subject to an involuntary bankruptcy petition. These constitute events of default under each promissory note and the L/C Reimbursement Agreements, resulting, inter alia, in the termination of the lines of credit. H. The Borrower, Northern, ISB, and the Lead Bank entered into restructuring discussions regarding the existing events of default, particularly in light of the Borrower's stated intent to provide for the payment in full of all obligations owing to the Lenders through the consummation of a strategic transaction such as an initial public offering of its common stock, and the parties amended the November 28, 1997 Note, the September 14, 1998 Note, and the L/C Reimbursement Agreements to definitively reflect the terms of such a restructuring pursuant to the terms and conditions set forth in that certain Restructuring Agreement (the "Restructuring Agreement"), dated as of December 3, 1999, among the Borrower and the Lenders, it being understood that the Lead Bank and the Lenders would not have entered into such a restructuring in the absence of the Borrower's intent (and its commitment to use its best efforts) to consummate such a strategic transaction on or before June 30, 2001 and that, consequently, the Lead Bank and the Lenders materially relied thereupon in entering into the Restructuring Agreement. I. The parties desire to amend the provisions of the Restructuring Agreement for the limited purpose of (i) increasing the maximum amount of the Bridge Financing (as such term is defined in the Restructuring Agreement) by $500,000 and (ii) permitting the Borrower to incur up to $1,000,000 in unsecured indebtedness for borrowed money from John Pappajohn, one of its present equity holders, or from one of his affiliates. Therefore, the parties hereto agree, subject to the satisfaction of the conditions precedent set forth in Section 3, to amend the Restructuring Agreements as follows: SECTION 1 AMENDMENTS TO RESTRUCTURING AGREEMENT SECTION 1.1 Bridge Financing Increase. Section 6.1 of the Restructuring Agreement is hereby amended to delete the amount "$2.5 million" in the third line thereof and substitute "$3.0 million" therefor. SECTION 1.2 Indebtedness for Borrowed Money. Section 10.5(a) of the Restructuring Agreement is hereby amended to delete the present text in its entirety and substitute the following therefor: -2- 4 (a) Indebtedness. Not incur, permit to remain outstanding, assume or in any way become committed for indebtedness in respect of borrowed money, except (i) indebtedness existing on December 3, 1999 shown on the financial statements furnished to the Lenders before the Restructuring Agreement was originally signed, including any extensions or renewals thereof so long as the principal amount of such indebtedness is not increased by such extension or renewal; (ii) the Bridge Financing; (iii) after March 29, 2000, up to ONE MILLION DOLLARS ($1,000,000) in an unsecured line of credit (the "New Unsecured Line of Credit") to be extended by John Pappajohn, one of the Borrower's equity holders, or one of his affiliates, which, in addition to being unsecured, (A) shall not bear interest at a rate greater than (i) the Prime Rate and (ii) LIBOR plus 1.75%, (B) shall permit the lender thereunder to receive "interest only" payments until maturity, (C) shall have a stated maturity of June 30, 2001, and (D) may be accelerated only upon the occurrence of either a payment default that remains uncured or unwaived for three (3) business days or the consummation of a Strategic Transaction; and (iv) indebtedness incurred after the date hereof in the nature of Capitalized Lease Liabilities and/or purchase money debt, provided that the aggregate amount thereof outstanding at any one time does not exceed (a) $750,000 in calendar 1999, (b) $1,500,000 in calendar 2000, and (c) $1,500,000 through June 30, 2001 (assuming a total year limitation of $2,500,000) for the Borrower and all Subsidiaries and otherwise does not have a Material Adverse Effect on the Borrower and its business operations at any time. SECTION 1.3 Unsecured Line of Credit. Prior to incurring any indebtedness under the New Unsecured Line of Credit, Borrower shall submit executed copies of the agreement and documents relating thereto to the Lead Bank and shall receive the Lead Bank's approval as to the form thereof, which approval shall not be unreasonably withheld if such agreements and documents comply with the provisions set forth in Section 1.2 of this Agreement. SECTION 2 REPRESENTATIONS AND WARRANTIES To induce the Lenders, the Issuer and the Lead Bank to enter into this Agreement, the Borrower represents and warrants unto the Lead Bank, and each Lender that: SECTION 2.1 Organization. The Borrower is a corporation existing and in good standing under the laws of the state indicated in the heading; any Subsidiary is a corporation or partnership duly existing and in good standing under the laws of the state of its formation as indicated on Schedule 2.5; the Borrower and any Subsidiary are duly qualified, in good standing and authorized to do business in each other jurisdiction where, because of the nature of their activities or properties, such qualification is required and where the failure to be so qualified may have a Material Adverse Effect; and the Borrower and any Subsidiary have the power and authority to own their properties and to carry on their businesses as now being conducted. -3- 5 SECTION 2.2 Authorization; No Conflict. The execution and delivery of this Agreement is within the Borrower's corporate powers, has been authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required) and do not and will not contravene or conflict with any provision of law applicable to the Borrower or of the charter or by-laws of the Borrower or any Subsidiary or of any agreement binding upon the Borrower or any Subsidiary. SECTION 2.3 Taxes. Except in the case of state and local tax returns for the fiscal years ended December 31, 1998 and December 31, 1999, respectively, the Borrower and any Subsidiary have filed or caused to be filed all federal, state and local tax returns which, to the knowledge of the Borrower or any Subsidiary, are required to be filed, and have paid or have caused to be paid all taxes as shown on such returns or on any assessment received by them, to the extent that such taxes have become due (except for current taxes not delinquent and taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been provided on the books of the Borrower or the appropriate Subsidiary, and as to which no foreclosure, distraint, sale or similar proceedings have been commenced). Specifically, the Borrower is current in the filing of all of its federal income tax returns, including for the calendar year ending December 31, 1998 and December 31, 1999, respectively. The Borrower and any Subsidiary have set up reserves which are adequate for the payment of additional taxes for years which have not been audited by the respective tax authorities. SECTION 2.4 Litigation and Contingent Liabilities. No litigation (including derivative actions), arbitration proceedings or governmental proceedings are pending or threatened against the Borrower which would (singly or in the aggregate), if adversely determined, have a Material Adverse Effect. SECTION 2.5 Subsidiaries. Attached hereto as Schedule 2.5 is a correct and complete list of all Subsidiaries and Affiliates of the Borrower. SECTION 2.6 ERISA/Health. The Borrower does not maintain a Plan, but only administers a 401(k) plan for its employees. The Borrower maintains a self-funded health insurance plan, which represents a scheduled contingent liability of no more than $100,000. Each of the foregoing complies in all material respects with all applicable requirements of law and regulations. SECTION 2.7 Strategic Transaction Acknowledgment. The Borrower continues to understand and acknowledge that the Lead Bank and the Lenders would not have entered into the restructuring set forth in the Restructuring Agreement (as amended hereby) in the absence of the Borrower's stated intent to use its best efforts to consummate a Strategic Transaction on or before June 30, 2001 and that, consequently, the Lead Bank and the Lenders materially relied thereupon in entering into the original Restructuring Agreement and continue to materially rely thereupon in entering into this Agreement; provided, however, that the failure to actually consummate a Strategic Transaction on or before such date shall not constitute an Event of Default. -4- 6 SECTION 2.8 No Defaults. As of the date hereof, (a) no Event of Default or Unmatured Event of Default has occurred and is continuing and (b) the Borrower is in compliance with the financial restrictions set forth in Sections 10.5 and 10.11 of the Restructuring Agreement (as amended by this Agreement). SECTION 3 CONDITIONS TO EFFECTIVENESS OF AGREEMENT This Agreement and the amendment of the Restructuring Agreement provided for herein shall become effective as of the date hereof upon satisfaction of the following conditions precedent: SECTION 3.1 Letters of Credit. There shall have been no demand for payment made under any of the Letters of Credit. SECTION 3.2 Agreement. Each party hereto shall have received a counterpart of this Agreement which has been executed by all of the parties hereto. SECTION 3.3 Documentation. The Lead Bank shall have received all of the following, each duly executed and dated the closing date hereof or such earlier date as is provided for herein or in an Exhibit hereto or is satisfactory to the Lead Bank, in form and substance satisfactory to the Lead Bank and its counsel, at the expense of the Borrower, and in such number of signed counterparts as the Lead Bank may request: (a) Borrower Resolution. A copy of a resolution of the Board of Directors of the Borrower authorizing or ratifying the execution, delivery and performance, respectively, of this Agreement, to be executed by the Borrower and certified by the Secretary of the Borrower. (b) Borrower Articles of Incorporation and By-laws. A certificate of the Secretary of the Borrower to the effect that true and correct copies of the articles of incorporation and the by-laws of the Borrower then in effect are attached as exhibits to such certificate or that its articles of incorporation and its by-laws are unchanged from the certified copies thereof that were provided by the Borrower at the time of the original execution and delivery of the Restructuring Agreement. (c) Borrower Certificate of Incumbency. A certificate of the Secretary of the Borrower certifying the names of the officer or officers of the Borrower authorized to sign this Agreement, to be executed by the Borrower, together with a sample of the true signature of each such officer (the Lead Bank and each Lender may conclusively rely on such certificate until formally advised by a like certificate of any changes therein). -5- 7 (d) Opinion of Counsel to the Borrower. An opinion or opinions of counsel to the Borrower to such effect as the Lead Bank may reasonably require. (e) Miscellaneous. Such other documents and certificates as the Lead Bank may reasonably request. SECTION 3.4 Bridge Financing. The Lead Bank shall have received copies of the executed agreements and other documents relating to the increase in the maximum amount of the Bridge Financing contemplated hereby. SECTION 3.5 Payment of Accrued Interest and Letter of Credit Fees. The Lead Bank, on behalf of the Lenders, shall have received current payment in full of all accrued and unpaid interest on the Notes and unpaid Letter of Credit Fees. SECTION 3.6 Robert B. Staib. The Lenders shall have entered into an amendment to the Robert Staib/Lender Agreement substantially in the form of Exhibit A hereto (the "Robert Staib/Lender Agreement"), which agreement will not be subject to bankruptcy court approval, whether to be obtained before or after closing. SECTION 4 DEFINITIONS SECTION 4.1 Definitions. Unless otherwise set forth herein, the definitions are set forth in Schedule I of the Restructuring Agreement. SECTION 5 MISCELLANEOUS SECTION 5.1 Effectiveness and Successors. This Agreement shall, upon execution and delivery by the Borrower, the Lenders and the Lead Bank in Chicago, Illinois, become effective and shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Lead Bank and their respective successors and assigns, except that the Borrower may not transfer or assign any of its rights or interest hereunder without the prior written consent of the Lenders. SECTION 5.2 Captions. Captions in this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. References herein to Sections or provisions without reference to the document in which they are contained are references to this Agreement. SECTION 5.3 Singular and Plural. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and the use of one gender shall also denote the other where appropriate. -6- 8 SECTION 5.4 Counterparts. This Agreement may be executed by the parties on any number of separate counterparts, and by each party on separate counterparts; each counterpart shall be deemed an original instrument; and all of the counterparts taken together shall be deemed to constitute one and the same instrument. SECTION 5.5 Payment of Costs and Expenses. Other than with respect to the professional fees and expenses of the Lead Bank and the Lenders relating to the period prior to the execution and delivery of the original Restructuring Agreement (which are addressed in Section 7.1 of the Restructuring Agreement), the Borrower's obligations under the Notes and/or the L/C Reimbursement Agreements to reimburse the Lead Bank and the Lenders for their respective expenses remain unchanged. The aggregate limit set forth in Section 7.1 of the Restructuring Agreement in no manner applies or otherwise limits the rights of the Lead Bank and each Lender to be reimbursed for such fees and expenses (including, without limitation, those relating to the preparation, execution, and delivery of this Agreement and the other matters relating thereto), which, for expenses incurred from December 3, 1999 to such date, shall be due and payable on the earlier to occur of the date of the consummation of a Strategic Transaction (or other acceleration of the Obligations pursuant to any of the other provisions hereof) and June 30, 2001 and which, for expenses incurred after such date, shall be due and payable on demand. SECTION 5.6 Confidentiality. The Lenders shall hold all non-public information (which has been identified as such by the Borrower) obtained pursuant to the requirements of this Agreement in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure to any of their examiners, insurers, Affiliates, outside auditors, counsel and other professional advisors in connection with this Agreement or as reasonably required by any bona fide transferee, participant or assignee or as required or requested by any governmental agency or representative thereof or pursuant to legal process. SECTION 5.7 Construction. This Agreement, the Restructuring Agreement (including as amended by this Agreement), the Notes (as amended by the Restructuring Agreement), the Loan Documents and any other document or instrument executed in connection herewith shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of Illinois, and shall be deemed to have been executed in the State of Illinois. SECTION 5.8 Reaffirmation of the Provisions of the Loan Documents. This Agreement amends the Restructuring Agreement only to the extent expressly set forth herein. Consistent with the foregoing, none of the other provisions of the Restructuring Agreement shall be amended, and the parties reaffirm the Restructuring Agreement, as amended by the provisions of this Agreement, in all respects. Except as amended by the Restructuring Agreement (including as amended by the provisions of this Agreement), the provisions of the Notes and the L/C Reimbursement Agreements remain unchanged, and the Borrower hereby reaffirms its obligations thereunder. Consistent with the foregoing, any conflict between the provisions of the Notes and/or the L/C Reimbursement Agreements prior to December 3, 1999, on the one hand, and the provisions of the Restructuring Agreement (including as amended by the provisions of -7- 9 this Agreement), on the other hand, shall be governed by the provisions of the Restructuring Agreement (including as amended by the provisions of this Agreement). SECTION 5.9 Relationship between this Agreement and Participation Agreement. Iowa State Bank's execution and delivery of this Agreement shall be deemed to satisfy any consent requirement under any of the existing participation agreements (the "Participation Agreements") between Iowa State Bank and Northern. Except as provided in the preceding sentence, the provisions of the Participation Agreement shall remain unchanged and any conflict between the provisions of the Participation Agreement and the Restructuring Agreement (including as amended by the provisions of this Agreement) shall be governed by the provisions of the Participation Agreement. SECTION 5.10 Submission to Jurisdiction; Venue; Waiver of Right to Jury Trial. THE BORROWER IRREVOCABLY AGREES THAT ALL SUITS, ACTIONS OR OTHER PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RESTRUCTURING AGREEMENT (INCLUDING AS AMENDED BY THE PROVISIONS OF THIS AGREEMENT), THE NOTES, THE LOAN DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH, SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN CHICAGO, ILLINOIS. THE BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT AGAINST ANY PARTY IN ACCORDANCE WITH THIS SECTION, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. * * * * * * -8- 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. STOCKPOINT, INC., formerly known as NEURAL APPLICATIONS CORPORATION By: /s/ W.E. Staib ----------------------------------------------- Its: President ---------------------------------------------- Address: 2600 Crosspark Road Coralville, IA 52241 Attention: William E. Staib Facsimile: 319/626-5001 THE NORTHERN TRUST COMPANY By: /s/ David A. Gozdecki ---------------------------------------------- Its: Vice President ---------------------------------------------- Address: 50 South LaSalle Street Chicago, Illinois 60675 Attention: David Gozdecki, Vice President Credit Policy Division Facsimile: 312/630-6105 Telephone: 312/444-5829 IOWA STATE BANK & TRUST By: /s/ Kent L. Jehle ---------------------------------------------- Its: Senior Vice President ---------------------------------------------- Address: P.O. Box 1700 Iowa City, IA 52244 Attn: Kent L. Jehle Facsimile: 319/356-5844 -9- EX-10.19 39 SETTLEMENT AGREEMENT & GENERAL RELEASE 12/3/1999 1 Exhibit 10.19 SETTLEMENT AGREEMENT AND GENERAL RELEASE This Settlement Agreement and General Release (this "Agreement") is made and entered into this third day of December, 1999, by and between Robert B. Staib ("Staib"), a resident of the State of Iowa, and Stockpoint, Inc., a Delaware corporation (the "Company"). WHEREAS, Staib was employed as Chief Executive Officer of the Company until December 3, 1998 when he took a leave of absence, and formally resigned his positions as an officer, director and employee of the Company effective April 12, 1999; WHEREAS, Staib claims entitlement to certain back pay, vacation and severance benefits in connection with his employment ("Employment Related Compensation") as well as reimbursements for expenditures on behalf of the Company ("Reimbursements"); WHEREAS, at various times beginning in November 1994, Staib guaranteed certain bank lines and other debt obligations (the "Loans") of the Company and was obligated to collateralize those guarantees with certain marketable securities (the "Pledged Securities") WHEREAS, in consideration of the guarantees and collateralization by Staib of the Loans, the Company issued to Staib warrants to purchase an aggregate of 500,000 shares of the Company's common stock (the "Common Stock") at a price of $8.00 per share (the "$8.00 Warrants"), warrants to purchase an aggregate of 806,250 shares of the Common Stock at a price of $4.00 per share (the "$4.00 Warrants" and together with the $8.00 Warrants, the "Warrants"), and paid Staib guarantee fees (the "Guarantee Fees"); WHEREAS, the Company now asserts that it has actionable claims against Staib with respect to Pledged Securities and has alleged that (a) the Pledged Securities did not in fact exist, and the Loans and the Warrants were therefore falsely induced, (b) the Warrants are void for lack of consideration, (c) the Company has been damaged by Staib's actions by being unable to obtain additional funds under its Loans necessary to fund its operations and by being forced to incur significant expense to resolve disputes with its lenders and with Staib, and (d) the Company's reputation in its community has been damaged by Staib's actions; WHEREAS, the Company further alleges that it has no obligation to honor any of the Warrants, that it is entitled to refund of the Guarantee Fees, that it has fully paid and has no further obligation to pay any further Employment Related Compensation to Staib, that it has paid all Reimbursements and does not have proper documentation for further Reimbursements and that it has no obligation to pay any sums to entities now, or previously controlled by Staib; WHEREAS, Staib denies the Company's allegations and claims that the Company is obligated to pay the Employment Related Compensation and the Reimbursements, to honor the Warrants, and to issue to Staib $8.00 Warrants to purchase an additional 200,000 shares of Common Stock; 2 WHEREAS, Staib holds 246,000 shares of the Common Stock and 1600 shares of the Company's Series B Preferred Stock (collectively, the "Staib Shares"); WHEREAS, Staib and the Company desire to settle all disputes related to the Loans, the Warrants, Reimbursements and to determine the voting rights and disposition of the Staib Shares and shares issuable upon exercise of the $4.00 Warrants and the $8.00 Warrants in accordance with the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Resignation of Staib. Staib agrees and acknowledges that he voluntarily terminated all services as an employee, officer and director of the Company effective as of the date of his leave of absence (December 3, 1998), confirmed such resignation on April 12, 1999, and does not serve in any capacity as an officer, director or employee of the Company and has not served in any such capacity since December 3, 1998. 2. Surrender and Cancellation of Warrants. Staib and the Company hereby agree that, effective upon execution of this Agreement, (i) all $8.00 Warrants, and (ii) $4.00 Warrants to purchase 306,250 shares of Common Stock shall be and hereby are cancelled and shall be considered null and void. In accordance therewith, Staib hereby agrees to surrender, and is delivering and surrendering to the Company with this Agreement: (a) Staib's $8.00 Warrant to purchase 500,000 shares of Common Stock as evidenced by that certain Warrant Agreement dated as of April 13, 1998; (b) Staib's $4.00 Warrant to purchase 93,750 shares of Common Stock as evidenced by that certain Warrant to Purchase Common Stock of Neural Applications Corporation dated November 15, 1994; (c) Staib's $4.00 Warrant to purchase 78,125 shares of Common Stock as evidenced by that certain Warrant to Purchase Common Stock of Neural Applications Corporation dated May 16, 1995; (d) Staib's $4.00 Warrant to purchase 46,875 shares of Common Stock as evidenced by that certain Warrant to Purchase Common Stock of Neural Applications Corporation dated June 26, 1995; and (e) Staib's $4.00 Warrant to purchase 400,000 shares of the Company's Common Stock as evidenced by that certain Warrant To Purchase 400,000 Shares of Common Stock of Neural Applications Corporation dated February 27, 1996 (the "Warrant Agreement"); provided, however, that the Company shall issue to Staib a new warrant (the "Replacement Warrant") to purchase 312,500 shares of the Company's 3 Common Stock at a purchase price of $4.00 per share having the same terms as the Warrant Agreement and representing the portion of the Warrant Agreement not cancelled in accordance with the foregoing. Staib further agrees and represents that all other rights of Staib to receive warrants to purchase shares of the Common Stock, whether current or prospective, in connection with Staib's personal guarantee of, or pledge of assets as security for, or both, the obligations of the Company, including, without limitation, any further right to receive $8.00 Warrants to purchase 200,000 Shares, are hereby surrendered and cancelled. Staib hereby represents and acknowledges that, after the transactions set forth in this Section 2, Staib shall hold, subject to the terms of the Voting Trust Agreement described in Section 5 (a) $4.00 Warrants to purchase an aggregate of 500,000 shares of Common consisting solely of the Replacement Warrant and that certain Warrant to Purchase Common Stock of Neural Applications Corporation dated June 1, 1996 Stock (collectively, the "Remaining Warrants") representing the right to purchase 187,500 shares of Common Stock, and (b) the Staib Shares (the Staib Shares and such Remaining Warrants being hereafter referred to as the "Remaining Equity Rights"), and hereby further represents and agrees that he shall not hold, or have the right to purchase, acquire or receive, any shares of Common Stock or equity interest in the Company other than the Remaining Equity Rights. Staib hereby agrees to indemnify and hold harmless the Company from and against any claim from Staib, the trust (the "Trust") created by that certain voting trust agreement of even date herewith in accordance with the Voting Trust Agreement described in Section 5, or any direct or indirect transferee or assignee of Staib, that relates to the ownership, beneficially or of record, of any equity securities or rights to acquire equity securities of the Company other than the Remaining Equity Rights. 3. Release of claim to Employment Related Compensation and Reimbursements. Staib agrees that he is not now, and has never been, entitled to any further Employment Related Compensation, including, without limitation, any unpaid salary, bonuses, wages, vacation pay, disability pay, severance pay, or other compensation of any kind. Staib hereby agrees that the Company shall be, and hereby is, released and discharged from any further obligation, liability or claim related to the Employment Related Compensation. 4. Consideration. In consideration of the foregoing, the Company agrees not to contest the validity, enforceability or ownership of the Remaining Equity Rights and acknowledges, reaffirms and otherwise agrees to honor all rights represented by the Remaining Equity Rights, including the Remaining Warrants. The Company further agrees to pay to Staib a total of $60,000 upon the earlier of June 30, 2001 or receipt of the net proceeds from an initial public offering of the Company's stock (by check delivered to Staib within 10 days of receipt of such net proceeds). 5. Voting Trust. Staib hereby agrees to execute a Voting Trust Agreement in substantially the form of Exhibit A attached hereto and to transfer to the trustee of such Voting Trust all of the Staib Shares, and any shares ("Warrant Shares") issuable upon exercise of the Remaining Warrants (so long as such Remaining Warrants are held, directly or indirectly, by Staib). Concurrent with execution of this Agreement, Staib agrees to deliver stock certificates 4 evidencing the Staib Shares to the trustee and further agrees that stock certificates evidencing shares issued upon the exercise of the Remaining Warrants shall be issued in the name of the Voting Trustee. 6. Hold Harmless Agreements. Staib and the Company hereby agree that the Company's obligation under that certain Indemnification and Hold Harmless Agreement dated February 27, 1996 as amended by that certain Amendment to Indemnification and Hold Harmless Agreement dated August 1, 1997 (as so amended, the "Hold Harmless Agreement") and that certain Reimbursement and Subordination Agreement dated August 1, 1997 (the "Reimbursement Agreement") to indemnify Staib, hold Staib harmless and reimburse Staib for amounts that Staib is required to pay The Northern Trust Bank shall apply only if and to the extent that the Company is in default of the Company's obligations to pay principal and interest when due to The Northern Trust Bank and shall not, in any event, include indemnity or reimbursement of amounts arising out of breach of Staib's contractual obligation to pledge collateral to secure such obligations. Staib agrees that, in the event he is obligated to pay any amounts to The Northern Trust Bank and, by virtue of such payment, is subrogated to the rights of The Northern Trust Bank, he will not be entitled to any reimbursement from the Company except to the extent that his subrogated interest would have been payable under the terms of the debt obligations with The Northern Trust Bank. 7. Transfer of Remaining Equity Rights. The Company and Staib acknowledge that the Company intends to make a public offering of certain Company stock (the "Potential Public Offering"). Staib and the Company agree that such Potential Public Offering is in the mutual interest of both parties. In order to facilitate the Potential Public Offering and as further consideration for the settlement agreements set forth herein, Staib and the Company have agreed that, during the term of this Agreement, Staib shall not sell, offer to sell, hypothecate, pledge, dispose of or otherwise transfer the Remaining Equity except as provided in this Section 7. The Company and Staib acknowledge that voting trust certificates will be issued to Staib upon transfer of the Staib Shares and any Warrant Shares to the Voting Trust ("Voting Trust Certificates") and agree that such "Voting Trust Certificates shall be deemed to be "Remaining Equity Rights" for purposes of this Section 7. (a) Potential Public Offering. Staib and the Company acknowledge that Staib contemplates the sale of the Staib Shares to one or more underwriters (the "Underwriters") in the Potential Public Offering, which Underwriters would offer and sell the Staib Shares to the public. Staib and the Company further understand that it is contemplated that all or part of the Warrants will be exercised by Staib and the resulting Warrant Shares sold to the Underwriters, who would offer and sell such Warrant Shares to the Public. Staib agrees to negotiate and sign such reasonable and customary agreements as are necessary to facilitate such a sale on the same terms as shares are sold by the Company in such Potential Public Offering. Staib and the Company agree that the Shares and the Warrants may be delivered to a custodian for delivery and transfer to the Underwriters upon completion of such Potential Public Offering. In any event, Staib's agreement to negotiate the sale of a portion of his Remaining Equity Rights under this Subsection 7(a) shall only extend to the Staib Shares plus Warrants for 200,000 shares of 5 the Company's common stock and any additional Warrant Shares necessary, if at all, to bring the total consideration realized from such sale by Staib to at least $6,000,000. Nothing in this Section 7 shall create an obligation on behalf of the Company or any Underwriter to include any Staib Shares or Warrant Shares in a Potential Public Offering. (b) Transfer to a Permitted Third Party. Staib shall have the right to transfer all or any part of the Remaining Equity Rights to a Permitted Third Party upon the Company's prior written consent, which consent shall not be unreasonably withheld. Withholding of the Company's consent shall not be deemed unreasonable if any Underwriter(s) has indicated in writing that such Underwriter intends in good faith to enter negotiations with Staib in a manner consistent with Subsection 7(a) and otherwise objects in writing to the transfer proposed by Staib. For purposes of this Section 7(b), the term "Permitted Third Party" means: (1) "Permitted Third Party" means any Person that is not (a) related to Staib by blood or by marriage, (b) a Person owned or controlled by Staib, (c) an Affiliate of any Person related to Staib by blood or by marriage or owned or controlled by Staib or (d) a creditor of Staib. (2) "Person" means any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization or any other entity. (3) "Affiliate" means any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such other Person, through the ownership of all or part of any Person; for purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under direct or indirect common control with") means the possession, direct or indirect, of the power to (A) vote 50% or more of the voting securities of such Person or (B) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. (c) Transfer to Creditors. Staib shall have the right, without the prior written consent of the Company, to (i) pledge any Voting Trust Certificate or unexercised Warrant to one or more creditor(s) of Staib or (ii) transfer any Voting Trust Certificate or unexercised Warrant to a trust created to benefit all or part of Staib's creditor's. (d) Notification. Notwithstanding any other provision of this Section 7, no transfer shall be made under this Section 7 unless Staib complies with the provisions of this subsection 7(d) and Section 17 hereunder and the transferee of any Voting Trust Certificate or Warrant (or any trustee of any trust established in accordance with 7(c)) agrees to be bound by the Voting Trust Agreement (to the extent applicable thereto) and the provisions of Section 5, Section 7(a) and Section 7(e) of this Agreement, and provided further that such transfer is in compliance with federal and applicable state securities laws. Written notice of any transfers pursuant to this Section 7 shall be delivered to the Company, to the trustee of the Trust and to the other parties identified in 6 Section 17 hereof prior to the date of transfer. Staib shall provide the Company with all information reasonably requested by it to confirm that this Subsection 7(d) has been satisfied. The Company shall not unreasonably withhold the written consent required by the Voting Trust Agreement to any such transfer. (e) Lockup. In connection with any Potential Public Offering, and except for transfers in accordance with Section 7(a) and 7(c), Staib agrees that he will not, without the prior written consent of the representative (the "Representative") of the Underwriters, sell, offer to sell, contract to sell, hypothecate, pledge, grant any option to sell or otherwise dispose of, or file (or participate in the filing of) a registration statement with the Securities and Exchange Commission (the "Commission") in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder with respect to, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for such capital stock or any voting trust certificate representing beneficial or pecuniary interest in the same, including the Remaining Equity Rights, or publicly announce an intention to effect any such transaction, for a period of at least 180 days, and at the reasonable request of the Representative up to 365 days, after the date of execution of the underwriting agreement related to the Potential Public Offering. Staib agrees that the Representative shall be a third party beneficiary of this provision. (f) Subject to Section 17, the provisions of this Section 7 shall survive termination of this Agreement and until June 30, 2002. 8. Proprietary Information. Staib acknowledges that during his employment with the Company, he was exposed to and acquired confidential, proprietary and trade secret information belonging to the Company and the Company's customers ("Confidential Information"), including, without limitation, designs, processes, formulae, plans, devices and material, directly or indirectly, useful in any aspect of the Company's business, past, current or anticipated products or services, customer and supplier lists, development and research work, business strategies, plans and proposals, financial, employee and personnel data and information and purchasing, accounting, marketing, selling and services information. Staib understands and agrees that such Confidential Information was disclosed to him in confidence and for the sole benefit of the Company. Staib agrees that beginning on the date of this Agreement he and any entity directly or indirectly controlled by Staib will (i) diligently protect the confidentiality of all Confidential Information; (ii) not disclose or communicate any Confidential Information to any third party without the consent of the Company; and (iii) not make use of Confidential Information on his own behalf or on behalf of any third party. Staib agrees that any unauthorized disclosure or use of such Confidential Information to or on behalf of third parties would cause irreparable harm to the confidential status of such information and to the Company, and, therefore, the Company shall be entitled to an injunction prohibiting any such disclosure, use, or threatened disclosure or use. The foregoing obligations of confidentiality shall not apply to any 7 knowledge or information that is now or subsequently becomes generally publicly known, other than as a direct or indirect result of a breach of this Agreement by Staib. 9. Full Compromise and General Release. (a) Staib agrees that the payment and acceptance of the consideration described in Sections 2, 3 and 4 hereof is in full, final, and complete compromise, settlement, and satisfaction of any and all claims relating directly or indirectly to (i) Staib's employment with the Company, (ii) Staib's resignation from employment with the Company, (iii) Staib's personal guarantee of, and pledge of personal assets as collateral for, any Loans, and (iv) any other claims of any nature whatsoever that Staib could have asserted against the Company or any of the "Released Parties" as that term is defined in Section 9(b) arising prior to the date of this Agreement; provided that nothing contained in this Agreement shall relieve the Company of its obligations under the Hold Harmless Agreements as amended by Section 6 of this Agreement. (b) Staib, for and on behalf of himself and his heirs, administrators, executors, successors and assigns, agrees to, and hereby does, release, acquit, and forever discharge the Company and its affiliates, subsidiaries, and related companies, and the current and former directors, officers, members, agents, attorneys, servants, independent contractors and employees of the Company and all of its related entities (the "Released Parties"), from any and all claims, whether direct or indirect, fixed or contingent, known or unknown, which Staib ever had, has, or may claim to have, for, upon, or by reason of any matter, act or thing prior to the date of this Agreement, including, but not limited to, any cause of action Staib could have asserted in any litigation against any of the Released Parties, any cause of action or claim relating to Staib's association with or employment by the Company, and/or any cause of action or claim relating to Staib's decision to resign; provided that nothing contained in this Agreement shall relieve the Company of its obligations under the Hold Harmless Agreements as amended by Section 6 of this Agreement. The General Release of this Section 9 specifically encompasses, but is not limited to, claims that could be brought under Chapter 91A Code of Iowa (1999); Title VII of the Civil Rights Act, 42 U.S.C. ss. 2000e, et seq., as amended by the Civil Rights Act of 1991; the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq. (the "Age Discrimination in Employment Act"); the Americans With Disabilities Act, 42 U.S.C. ss.ss. 12101-12213; the Employee Retirement Income Security Act (ERISA), 29 U.S.C. ss. 1001, et seq.; the Fair Labor Standards Act, 29 U.S.C. ss. 201, et seq.; the National Labor Relations Act, 29 U.S.C. ss. 151, et seq.; the Worker Adjustment Retraining and Notification Act, 29 U.S.C. ss. 2101, et seq.; and any other federal or state statute, or local ordinance, including any attorneys' fees, liquidated damages, punitive damages, costs or disbursements that could be awarded in connection with these or any other statutory claims. The release contained in this Section 9(b) also specifically encompasses any and all claims grounded in contract or tort theories, including, but not limited to, breach of contract; tortious interference with contractual relations; promissory estoppel; breach of the implied covenant of good faith and fair dealing; breach of employee handbooks, manuals or other policies; wrongful discharge; wrongful discharge 8 in violation of public policy; assault; battery; fraud; false imprisonment; invasion of privacy; intentional or negligent misrepresentation; defamation, including libel and slander, discharge defamation and self-defamation; intentional or negligent infliction of emotional distress; negligence; breach of fiduciary duty; negligent hiring, retention or supervision; whistleblower claims; and/or any other contract or tort theory based on either intentional or negligent conduct of any kind, including any attorneys' fees, liquidated damages, punitive damages, costs or disbursements that could be awarded in connection with these or any other common law claims. (c) The Company, for and on behalf of itself and its successors and assigns, agrees to, and hereby does, release, acquit, and forever discharge Staib, from any and all claims, whether direct or indirect, fixed or contingent, known or unknown, which the Company ever had, has, or may claim to have by reason of the issuance of the Warrants, the failure of the collateral relating to the Loans, the Guarantee Fees, any damages relating to its inability to obtain capital under the Loans or incurred in negotiating amendment of the documentation relating to the Loans or this Agreement, including attorney's fees and expenses and fees incurred or assessed by the Company's lenders either before or after the date of this Agreement; provided that nothing contained in this Agreement shall relieve the Staib of his obligations to the Creditors to guarantee and provide collateral with respect to the Loans and nothing in this Agreement shall be deemed to be a surrender of any defense available to the Company with respect to any obligation under the Hold Harmless Agreement or the Reimbursement Agreement. 10. Right to Consider and Rescind. (a) Right to Consider under the Age Discrimination in Employment Act. Staib understands that he has twenty-one (21) days to consider whether he should agree to release his claims, if any, under the Age Discrimination in Employment Act. Staib further understands, however, that he is not required to take the entire 21-day period to decide whether he wishes to release his claims, if any, under the Age Discrimination in Employment Act, and that he may do so on an accelerated basis without prejudice to his own or the Company's rights under this Agreement. (b) Right to Rescind or Revoke under the Age Discrimination in Employment Act. Staib understands that he has the right to rescind the release of his claims, if any, under the Age Discrimination in Employment Act, for any reason, within seven (7) days after he signs this Agreement. Staib understands that the release of his claims, if any, under the Age Discrimination in Employment Act, will not become effective or enforceable unless and until he executes this Agreement and the applicable rescission period has expired. Staib understands that if he wishes to rescind, the rescission must be in writing and must be hand-delivered or mailed to the Company. To be effective, such written notice must be delivered either by hand or by mail, to William McNally, Stockpoint, Inc., Oakdale Research Park, 2600 Crosspark Road, Coralville, IA 52241-3212 (phone number: 319-626-5000), within the 7-day period. If a notice of rescission is delivered by mail, it must be: (i) postmarked within the 7-day period, 9 (ii) properly addressed to William McNally at the above address and (iii) sent by certified mail, return receipt requested. Staib understands that even if he elects to rescind his agreement to release his claims, if any, under the Age Discrimination in Employment Act, this rescission shall have no effect or consequence whatsoever on the release of any other claims Staib released pursuant to this Agreement, as set forth above. Staib further understands that, in the event Staib rescinds his agreement to release his claims, if any, under the Age Discrimination in Employment Act, the Company shall have no further obligation to pay any consideration under section 4 of this Agreement. 11. Confidentiality. The Company, and Staib, for himself and on behalf of any entity that he controls, agree that it is the intent of the parties to maintain the complete confidentiality of the terms of this Agreement and the negotiations leading to this Agreement. Therefore, the parties agree that they will not publicize, and will take all prudent steps to ensure the confidentiality of, this Agreement. Notwithstanding the terms of this Section 11, the parties shall be entitled to disclose the terms of this Agreement to their respective lawyers, tax advisors, accountants, immediate family, creditors, and as otherwise provided in Section 17 or in connection with any legal or administrative proceeding of any kind whatsoever if required by law or on the condition that those to whom such disclosure is made also will be bound by the terms of this Section 11, and the Company shall be entitled to disclose the terms of this Agreement, or to file this Agreement, if required under applicable securities laws in connection with the Potential Public Offering and to disclose the terms of this Agreement to the Representative and the underwriters of the Potential Public Offering as part of their due diligence investigation. Nothing in this Section 11 shall prevent either party from disclosing to anyone the warrants held by Staib upon execution of this agreement and the terms related to such warrants under the applicable warrant agreement, provided that any other information covered by this Section 11, including the terms and conditions of this agreement remain confidential. 12. Complete Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter contained herein. Staib hereby affirms that his rights to compensation and/or benefits from the Company are specified exclusively and completely in this Agreement. Any modification of, or addition to, this Agreement must be in writing signed by Staib and by an authorized representative of the Company. 13. Severability. Staib and the Company agree that should any provision of this Agreement be held invalid or illegal, such illegality shall not invalidate the whole of this Agreement, but rather, the Agreement shall be construed as if it did not contain the illegal part, and the rights and obligations of the parties shall be construed accordingly. 14. Effect on Successors. This Agreement is personal to the parties and may not be assigned by Staib without the written agreement of the Company. This Agreement shall be binding on the Company, its successors and assigns. 10 15. Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Iowa. 16. Knowing and Voluntary Agreement. Staib agrees that he has entered into this Agreement knowingly and voluntarily. Staib further acknowledges that he has had the opportunity to be represented by counsel in connection with the negotiation and preparation of this Agreement and have any terms of this Agreement explained to him. Staib also acknowledges that the Company has recommended that he consult legal counsel to assist him in understanding all terms of this Agreement before executing this Agreement. Staib further affirms that he understands the meaning of the terms of this Agreement and their effect and agrees that the provisions set forth in the Agreement are written in language understandable to Staib. 17. Notice to Certain Parties. The Company acknowledges that Staib is obligated to provide notice to the United States Bankruptcy Court for the Iowa District (the "Court") pursuant to bankruptcy proceeding 98-5481, the office of the United States Attorney for the Northern District of Iowa located in Cedar Rapids, Iowa and to Guarantee Bank & Trust of the surrender of Warrants and claims in this Agreement. Staib agrees to provide notice of this Agreement immediately and to promptly provide any other notice that is subsequently required to be given under this Agreement. In the event that the Court objects to the terms of this Agreement or any actions taken pursuant to this Agreement, this Agreement shall be null and void ab initio and of no further force or effect on the parties but only to the extent provided in Section 13; provided, however, that no objection of the Court with respect to the execution of this Agreement shall be binding on the parties if Staib fails within five business days of the date of this Agreement to provide such notice. 18. Counterparts. This Agreement may be executed in counterparts (including by facsimile signature), each of which shall be deemed an original for all purposes and all of which shall be deemed, collectively, one agreement, but in making proof hereof it shall not be necessary to exhibit more than one such counterpart. IN WITNESS WHEREOF, the parties have executed this Agreement by their signatures below. Dated: December ____, 1999 _______________________________________ Robert Staib STOCKPOINT, INC. By ___________________________________ Its __________________________________ EX-23.1 40 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Stockpoint, Inc. on Form S-1 of our report dated February 8, 2000, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche LLP Cedar Rapids, Iowa March 30, 2000 EX-24.1 41 POWER OF ATTORNEY 1 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints William E. Staib and Scott D. Porter, and each of them, his or her true and lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities to sign a Registration Statement on Form S-1 of Stockpoint, Inc. (the "Company") and any and all amendments thereto, including post-effective amendments (or any other registration statement for the same offering that is to be effective on filing pursuant to Rule 462(b) under the Securities Act) and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and with such state securities commissions and other agencies as necessary; granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or the substitutes for such attorneys-in-fact and agents, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHERE OF, this Power of Attorney has been signed on this 30th day of March, 2000, by the following persons. /s/ Harry O. Hefter - -------------------------------- Chairman of the Board, Harry O. Hefter /s/ David G. Sengpiel - -------------------------------- Director David G. Sengpiel EX-27.1 42 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 2,203,623 0 2,009,852 150,000 0 4,310,676 2,276,193 929,071 6,089,138 6,979,320 10,536,681 0 9,154,949 21,761 (20,603,573) 6,089,138 6,829,869 6,829,869 2,289,881 2,289,881 7,128,401 300,927 1,058,545 (3,947,885) 0 (3,947,885) 780,808 0 0 (3,167,077) (1.67) (1.67)
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