<PAGE>
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1999
Commission File No. 0-21935
----------------
Modem Media . Poppe Tyson, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1464807
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
230 East Avenue
Norwalk, CT 06855
(203) 299-7000
(Address of principal executive offices and zip code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
There were 5,781,536 shares of the Registrant's Class A Common Stock, $.001
par value, and 5,589,395 shares of the Registrant's Class B Common Stock, $.001
par value, outstanding as of October 27, 1999.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998....................................................... 1
Condensed Consolidated Statements of Operations for the three and nine
months ended September 30, 1999 and 1998................................ 2
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998............................................. 3
Notes to Condensed Consolidated Financial Statements..................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................ 16
Item 2. Changes in Securities and Use of Proceeds........................ 16
Item 3. Defaults Upon Senior Securities.................................. 16
Item 4. Submission of Matters to a Vote of Security Holders.............. 16
Item 5. Other Information................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................. 16
Signatures............................................................... 17
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 28,915,000 $ 7,824,000
Short-term investments............................ 14,800,000 --
Accounts receivable, net.......................... 13,803,000 13,619,000
Unbilled revenues................................. 4,182,000 1,261,000
True North note receivable........................ -- 4,500,000
Other current assets.............................. 3,014,000 2,263,000
------------ -----------
Total current assets............................ 64,714,000 29,467,000
Noncurrent assets:
Property and equipment, net....................... 10,642,000 6,826,000
Goodwill, net..................................... 51,196,000 33,139,000
Other assets...................................... 2,561,000 1,854,000
------------ -----------
Total noncurrent assets......................... 64,399,000 41,819,000
------------ -----------
Total assets.................................... $129,113,000 $71,286,000
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 3,441,000 $ 4,522,000
Pre-billed media.................................. 5,551,000 6,914,000
Advance billings.................................. 2,532,000 2,164,000
Deferred revenues................................. 3,259,000 5,484,000
Due to True North................................. -- 1,797,000
Note payable to True North........................ -- 6,000,000
Accrued expenses and other current liabilities.... 12,690,000 8,503,000
------------ -----------
Total current liabilities....................... 27,473,000 35,384,000
Other liabilities................................... 434,000 342,000
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, none issued and outstanding.......... -- --
Common stock, Class A, $.001 par value, 39,351,376
shares authorized, 5,711,536 and 2,424,135 shares
issued........................................... 6,000 2,000
Common stock, Class B, $.001 par value, 5,648,624
shares authorized, 5,589,511 and 5,648,624 shares
issued and outstanding........................... 5,000 6,000
Paid-in capital................................... 111,985,000 47,211,000
Accumulated deficit............................... (10,197,000) (11,613,000)
Treasury stock, 61,068 shares of Class A common
stock, at cost................................... (759,000) --
Accumulated other comprehensive income............ 166,000 (46,000)
------------ -----------
Total stockholders' equity...................... 101,206,000 35,560,000
------------ -----------
Total liabilities and stockholders' equity...... $129,113,000 $71,286,000
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues..................... $21,121,000 $10,930,000 $49,546,000 $30,397,000
Costs and expenses:
Salaries and benefits...... 11,683,000 7,473,000 29,163,000 20,793,000
Office and general......... 5,793,000 4,319,000 14,734,000 10,309,000
Amortization of goodwill... 756,000 461,000 2,065,000 1,308,000
Operating losses of True
North Units Held for
Transfer.................. -- 10,000 -- 13,000
----------- ----------- ----------- -----------
Total costs and
expenses................ 18,232,000 12,263,000 45,962,000 32,423,000
----------- ----------- ----------- -----------
Operating income (loss)...... 2,889,000 (1,333,000) 3,584,000 (2,026,000)
Interest income (expense),
net......................... 565,000 (1,000) 1,406,000 (5,000)
----------- ----------- ----------- -----------
Income (loss) before income
taxes....................... 3,454,000 (1,334,000) 4,990,000 (2,031,000)
Provision (benefit) for
income taxes................ 2,146,000 (208,000) 3,574,000 57,000
----------- ----------- ----------- -----------
Net income (loss)............ $ 1,308,000 $(1,126,000) $ 1,416,000 $(2,088,000)
=========== =========== =========== ===========
Net income (loss) per share:
Basic...................... $ 0.12 $ (0.15) $ 0.13 $ (0.29)
=========== =========== =========== ===========
Diluted.................... $ 0.11 $ (0.15) $ 0.13 $ (0.29)
=========== =========== =========== ===========
Weighted-average number of
common shares outstanding:
Basic...................... 11,170,000 7,263,000 10,569,000 7,263,000
=========== =========== =========== ===========
Diluted.................... 11,812,000 7,263,000 11,172,000 7,263,000
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1999 1998
----------- -----------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ 1,416,000 $(2,088,000)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation...................................... 2,589,000 1,165,000
Amortization of goodwill.......................... 2,065,000 1,308,000
Provision for doubtful accounts................... 240,000 251,000
Loss on disposal of equipment..................... 201,000 155,000
Changes in assets and liabilities:
Accounts receivable.............................. (421,000) (4,487,000)
Unbilled revenues................................ (2,875,000) 57,000
Other current assets............................. (741,000) (677,000)
Accounts payable, accrued expenses and other
current liabilities............................. 3,154,000 4,926,000
Pre-billed media................................. (1,361,000) (340,000)
Advance billings................................. 368,000 (600,000)
Deferred revenues................................ (2,229,000) 1,450,000
Other, net....................................... (2,042,000) (990,000)
Net assets of True North Units Held for
Transfer........................................ -- 129,000
----------- -----------
Net cash provided by operating activities...... 364,000 259,000
Cash flows from investing activities:
Purchase of property and equipment................. (6,285,000) (2,591,000)
Acquisition, net of cash acquired.................. (1,419,000) --
----------- -----------
Net cash used in investing activities.......... (7,704,000) (2,591,000)
Cash flows from financing activities:
Proceeds from initial public offering.............. 43,459,000 --
Purchase of short-term investments................. (14,800,000) --
Funding to True North.............................. (3,297,000) (88,000)
Purchase of treasury stock......................... (759,000) --
Principal payments made under capital lease
obligations....................................... (295,000) (289,000)
Exercise of stock options.......................... 4,207,000 --
Other, net......................................... -- 2,000
----------- -----------
Net cash provided by (used in) financing
activities.................................... 28,515,000 (375,000)
Effect of exchange rates on cash and cash
equivalents......................................... (84,000) --
----------- -----------
Net increase (decrease) in cash and cash
equivalents......................................... 21,091,000 (2,707,000)
Cash and cash equivalents, beginning of the period... 7,824,000 7,056,000
----------- -----------
Cash and cash equivalents, end of the period......... $28,915,000 $ 4,349,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies
Nature of Operations--Modem Media . Poppe Tyson, Inc. ("Modem Media" or the
"Company") is a subsidiary of True North Communications Inc. ("True North") and
a leading builder and marketer of customer-focused e-businesses for world-class
brands. Based on customer-driven insights, the Company identifies e-business
opportunities, and utilizes its conceptual, technological and marketing
expertise to build, distribute and manage unique e-business solutions for its
clients around the globe. Headquartered in Norwalk, CT, the Company has offices
in New York City, San Francisco, Toronto, London, Munich, Tokyo, Hong Kong, and
an affiliate office in Sao Paolo.
Basis of Presentation--The condensed consolidated balance sheet as of
September 30, 1999, the condensed consolidated statements of operations for the
three and nine months ended September 30, 1999, the condensed consolidated
statement of operations for the three months ended September 30, 1998 and the
condensed consolidated statement of cash flows for the nine months ended
September 30, 1999, are unaudited. The unaudited condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments), that are, in the opinion of management, necessary for a
fair presentation of the Company's financial position and results of
operations. The operating results for the three and nine months ended September
30, 1999 and 1998 are not necessarily indicative of the results to be expected
for any other interim period or any future fiscal year.
Reclassifications--Certain reclassifications have been made in the prior
period condensed consolidated financial statements to conform to the current
period presentation.
Income Taxes--The Company accounts for income taxes under the liability
method in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 109, Accounting for Income Taxes. The Company's effective tax rates differ
from the federal statutory rate primarily due to the effect of non-deductible
goodwill amortization, the losses of certain foreign subsidiaries on which the
Company did not recognize a tax benefit and the tax effects of the non-
strategic digital interactive marketing operations that the Company sold back
to True North effective October 1, 1998 (see Note 2).
Cash, Cash Equivalents and Short-Term Investments--The Company considers all
highly liquid investments with a maturity of three months or less at the time
of purchase to be cash equivalents. All investments with a maturity greater
than three months at the time of purchase are accounted for under SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities. As of
September 30, 1999, all of the Company's short-term investments have been
classified as held-to-maturity securities since management has the positive
intent and ability to hold such investments to maturity. Short-term investments
principally consist of commercial paper maturing less than six months from the
date of purchase.
4
<PAGE>
MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net Income (Loss) Per Share--In accordance with SFAS No. 128, Earnings Per
Share, basic net income (loss) per share is computed using the weighted-average
number of common shares outstanding during each period. Diluted net income
(loss) per share gives effect to all potential dilutive securities that were
outstanding during each period. The Company had net losses for the three and
nine months ended September 30, 1998; as a result, none of the options
outstanding during those periods were included in the computations of diluted
net loss per share since they were antidilutive. The following table sets forth
the computation of the weighted-average number of common shares outstanding on
a diluted basis:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1999 1998 1999 1998
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Basic weighted-average number of
common shares outstanding.......... 11,170,000 7,263,000 10,569,000 7,263,000
Potential dilutive effect of stock
options............................ 642,000 -- 603,000 --
---------- --------- ---------- ---------
Diluted weighted-average number of
common shares
outstanding........................ 11,812,000 7,263,000 11,172,000 7,263,000
========== ========= ========== =========
</TABLE>
All historical weighted-average share and per-share amounts have been
restated to reflect a 0.95-for-1 reverse stock split, which occurred on
February 3, 1999 (see Note 3).
2. Acquisitions
On December 31, 1996, True North, through the Company, acquired a 64%
interest in Modem Media Advertising Limited Partnership (the "Modem
Partnership"). In addition to the consideration initially paid, True North was
obligated to make cash payments of up to $19,000,000 and issue $4,000,000 in
shares of True North common stock to the former owners of the Modem Partnership
upon completion of an initial public offering of the Company's common stock.
The acquisition agreement also required additional payments to be made
contingent on the Company meeting certain targeted operating levels prior to
such offering, which payments would thereby reduce the aforementioned
$19,000,000 obligation. Pursuant to the agreement, payments aggregating
$4,413,000 were made to the former owners through December 31, 1998. On
February 10, 1999, the Company completed an initial public offering of its
common stock (see Note 3). As a result, True North paid $14,587,000 in cash and
issued $3,931,000 in True North common stock to the former owners of the Modem
Partnership, thereby resulting in corresponding increases in goodwill recorded
on the books of the Company. Such amounts are being amortized over the
remainder of the original amortization period.
On February 3, 1999, the Company signed a definitive agreement with True
North to purchase the strategic interactive marketing operations of Poppe
Tyson, Inc. effective October 1, 1998 in exchange for (i) the net assets of the
non-strategic digital interactive marketing operations originally contributed
by True North to the Company in 1996 and (ii) 809,514 shares of Class B common
stock of the Company. In conjunction with this transaction, True North forgave
$5,763,000 of intercompany borrowings and transferred $1,624,000 of fixed
assets to the Company.
In June 1999, the Company acquired 100% of the outstanding capital stock of
a builder and marketer of e-businesses in Tokyo, Japan for approximately
$1,400,000 in cash. Pursuant to the acquisition agreement, the Company is
obligated to make additional payments of up to approximately $2,700,000 if the
acquired entity's operating results exceed certain targeted levels annually
through 2002. At the Company's discretion, such payments may be comprised of
cash and/or common stock of the Company. The acquisition has been accounted for
under the purchase method of accounting and, accordingly, the operating results
of the acquired entity have been included in the Company's consolidated
financial statements from the date of its acquisition. The net
5
<PAGE>
MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
assets of the acquired entity were not significant. The excess of purchase
price over the net assets acquired of approximately $1,400,000 is reflected in
the accompanying condensed consolidated balance sheet as of September 30, 1999
and is being amortized over a ten-year period.
3. Equity
Change in Authorized Shares/Reverse Stock Split--On January 11, 1999, the
Company's Board of Directors approved an amendment to the Company's Certificate
of Incorporation to provide for the authorization of an aggregate of 39,351,376
shares of Class A common stock and 5,648,624 shares of Class B common stock. On
that date, the Board of Directors also approved a 0.95-for-1 reverse split of
both classes of the Company's outstanding common stock effective upon
completion of the acquisition of the strategic interactive marketing operations
of Poppe Tyson, Inc., which occurred on February 3, 1999 (see Note 2).
Accordingly, all historical share and per-share amounts have been restated to
reflect the changes in authorized shares and the reverse stock split.
Initial Public Offering--On February 10, 1999, the Company completed an
initial public offering of 2,990,000 shares of its Class A common stock at an
initial public offering price of $16.00 per share. Total net proceeds from the
offering were approximately $42,051,000. The Company used $6,000,000 of these
proceeds to settle an intercompany note payable to True North, and
approximately $7,400,000 to acquire and fund the operations of complementary
businesses in Tokyo, Japan (see Note 2) and Munich, Germany (see Note 9). The
Company expects to use the remaining net proceeds for general corporate
purposes, strategic initiatives, additional international expansion and the
funding of certain international operations that are not expected to be self-
sufficient in the near-term. Pending the use of the net proceeds for the above
purposes, the Company has invested such funds in short-term, interest-bearing,
investment grade obligations that are reflected as cash equivalents and short-
term investments in the accompanying condensed consolidated balance sheet as of
September 30, 1999.
Stockholders and Registration Rights Agreements--In May 1999, the Company
and True North entered into a stockholders' agreement ("Stockholders
Agreement") which stipulates, among other things, that upon the earlier of (i)
the date True North and its affiliates no longer own at least 35% of the
outstanding capital stock of the Company and (ii) June 30, 2000, True North
agrees that it and its affiliates will convert all of their shares of Class B
common stock of the Company into shares of Class A common stock of the Company.
On August 1, 1999, as part of the Stockholders Agreement, the Company and
True North entered into a registration rights agreement that contains
provisions granting the holders of Class B common stock, and certain holders of
Class A common stock, the right to participate in certain registrations of the
Company's common stock, subject to limitations outlined therein. In addition,
the agreement also provides the holders of Class B common stock of the Company
the right to initiate the registration of their securities, subject to certain
timing and other limitations.
Warrants--On August 9, 1999, the Company entered into an agreement to
provide $12,000,000 of services to General Electric Company ("GE") through
September 30, 2000. If GE fails to meet its obligation to purchase such
services prior to September 30, 2000, GE will make a cash payment to the
Company equal to the difference between the $12,000,000 commitment and the
actual amount of services purchased during such period. In conjunction with
GE's commitment to purchase the aforementioned services, the Company granted
General Electric Capital Corporation a warrant to purchase 95,000 shares of the
Company's Class A common stock at $24.32 per share, the average of the high and
low trading prices during the five trading days prior to the grant date. The
warrants vested immediately and expire on August 8, 2004. The fair value of
these warrants, as determined by an independent appraisal expert, will result
in a non-cash charge of $587,100, which
6
<PAGE>
MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
will be reflected as a reduction of revenues ratably as services are provided
over the length of the agreement. Revenues from GE for the three and nine
months ended September 30, 1999 have been reduced by a non-cash charge of
$117,000 in the accompanying condensed consolidated financial statements.
4. Comprehensive Income
The Company reflects its comprehensive income, such as unrealized gains and
losses on the Company's foreign currency translation adjustments, as a separate
component of stockholders' equity as required by SFAS No. 130, Reporting
Comprehensive Income. Total comprehensive income (loss) for the three and nine
months ended September 30, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net income (loss)............. $1,308,000 $(1,126,000) $1,416,000 $(2,088,000)
Foreign currency translation
adjustment................... 212,000 29,000 212,000 45,000
---------- ----------- ---------- -----------
Total comprehensive income
(loss)..................... $1,520,000 $(1,097,000) $1,628,000 $(2,043,000)
========== =========== ========== ===========
</TABLE>
5. Stock Purchase Plan
In February 1999, the Company established an Employee Stock Purchase Plan
(the "Purchase Plan") under which a total of 950,000 shares of Class A common
stock have been made available for sale. The Purchase Plan permits eligible
employees to purchase Class A common stock through payroll deductions, which
may not exceed 15% of an employee's compensation, as defined, subject to
certain limitations. Each offering period under the Purchase Plan lasts twenty-
four months for a participant, the first of which began on February 15, 1999
and terminates on February 14, 2001. During each offering period, there are a
series of consecutive, overlapping purchase periods, each approximately six
months in duration. For employees other than those who elected participation in
the initial purchase period, the purchase price of each share of Class A common
stock under this plan will be equal to 85% of the fair market value per share
of Class A common stock on the first or last day of the purchase period,
whichever is lower. However, for employees who elected participation in the
initial purchase period, the purchase price of each share of Class A common
stock during the first offering period will be equal to 85% of the initial
public offering price or the fair market value on the last day of each purchase
period, whichever is lower, provided that the employees do not withdraw from
the Purchase Plan during the offering period. Employees may modify or end their
participation in the Purchase Plan at any time during an offering period,
subject to certain limitations. Participation ends automatically upon
termination of employment with the Company. The Purchase Plan will terminate in
2009 unless sooner terminated by the Company's Board of Directors.
6. Related Party Transactions
True North Note Receivable--The Company's $4,500,000 note receivable from
True North, reflected as "True North note receivable" in the accompanying
condensed consolidated balance sheet as of December 31, 1998, was repaid by
True North in February 1999.
Due to True North--The Company's outstanding balance under its credit
facility with True North, reflected as "Due to True North" in the accompanying
condensed consolidated balance sheet as of December 31, 1998, was repaid by the
Company in April 1999.
Note Payable to True North--The Company's $6,000,000 note payable to True
North was repaid in February 1999 with a portion of the Company's net proceeds
from its initial public offering (see Note 3).
7
<PAGE>
MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Geographic Information
Information about the Company's operations in different geographic regions
is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
1999 1998 1999 1998
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Domestic................ $ 17,607,000 $ 9,467,000 $42,364,000 $26,752,000
International........... 3,514,000 1,463,000 7,182,000 3,645,000
------------ ----------- ----------- -----------
$ 21,121,000 $10,930,000 $49,546,000 $30,397,000
============ =========== =========== ===========
Income (loss) before
income taxes:
Domestic................ $ 4,077,000 $(1,087,000) $ 6,273,000 $(1,608,000)
International........... (623,000) (237,000) (1,283,000) (410,000)
True North Units Held
for Transfer........... -- (10,000) -- (13,000)
------------ ----------- ----------- -----------
$ 3,454,000 $(1,334,000) $ 4,990,000 $(2,031,000)
============ =========== =========== ===========
Net income (loss):
Domestic................ $ 1,994,000 $ (822,000) $ 2,691,000 $(1,494,000)
International........... (686,000) (251,000) (1,275,000) (465,000)
True North Units Held
for Transfer........... -- (53,000) -- (129,000)
------------ ----------- ----------- -----------
$ 1,308,000 $(1,126,000) $ 1,416,000 $(2,088,000)
============ =========== =========== ===========
</TABLE>
8. Supplemental Cash Flow Data
<TABLE>
<CAPTION>
Three Months
Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest paid............................... $ 29,000 $ 70,000 $106,000 $127,000
Taxes paid.................................. $301,000 $491,000 $837,000 $689,000
</TABLE>
9. Subsequent Event
Effective October 4, 1999, the Company acquired 100% of the outstanding
capital stock of MEX Multimedia Experts GmbH ("MEX"), a developer of
interactive business solutions in Munich, Germany, for approximately
$5,400,000, which was comprised of $3,000,000 in cash and $2,400,000 in Class A
common stock. The acquisition was accounted for under the purchase method of
accounting and, accordingly, the operating results of MEX will be included in
the Company's consolidated financial statements from the date of its
acquisition. The excess of purchase price over the net assets acquired of
approximately $5,500,000 will be amortized over a ten-year period.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements herein constitute "forward-looking statements" within the
meaning of Section 21E(i)(1) of the Securities and Exchange Act of 1934, as
amended. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results of Modem
Media to be materially different from any future results expressed or implied
by these statements. Such factors include, among other things, the following: a
history of operating losses, dependence on a limited number of clients,
variability of operating results, the ability to integrate acquired companies,
the cost and timing of international expansion, the ability to estimate costs
in fixed-fee assignments, the cost and timing of the implementation of the
Modem Media Year 2000 project, the timely response to and correction by third
parties and clients of their Year 2000 issues, the extent to which the
interests of Modem Media's controlling stockholder, True North, conflict with
Modem Media's interests, the ability to manage future growth, dependence on key
management personnel, exclusivity arrangements with clients that may limit the
ability to provide services to others, dependence on technology, dependence on
the continued growth of the Internet, and changes in government regulation. In
light of these and other uncertainties, the forward-looking statements included
in this document should not be regarded as a representation by Modem Media that
its plans and objectives will be achieved.
Overview
Modem Media is a leading builder and marketer of customer-focused e-
businesses for world-class brands. Modem Media enables global marketers to
attract, acquire and retain customers on the Internet by providing superior
marketing strategy, consulting, technology, creative and media services. Modem
Media derives substantially all of its revenues from fees for building,
distributing and managing unique e-business solutions for its clients around
the globe. Modem Media's global office network provides the following services
to its clients:
. Internet business consulting and long-term strategic plans
. website, e-commerce, and e-care platform design and development
. Internet marketing and distribution strategy and execution
. customer relationship optimization strategy and execution
A majority of Modem Media's revenues are derived from fixed-fee assignments.
Modem Media recognizes revenues as services are rendered. Modem Media
reassesses its estimated costs on each project periodically and losses are
accrued, on a project-by-project basis, to the extent costs incurred and
anticipated costs to complete projects exceed anticipated billings. Provisions
for losses on uncompleted contracts are recognized in the period in which such
losses are determined.
Clients generally hire Modem Media on an engagement basis rather than a
retainer basis. Once a project is completed, there can be no assurance that a
client will engage Modem Media for future services. As a result, a client that
generates substantial revenue for Modem Media in one period may not be a
substantial source of revenue in a subsequent period. In addition, Modem
Media's clients generally have the right to terminate their relationships with
Modem Media without penalty and with relatively short or no notice. The
termination of Modem Media's business relationships with any of its significant
clients, or a material reduction in the use of Modem Media's services by any
such clients, could adversely affect Modem Media's business, financial
condition and results of operations.
Salaries and benefits represent the majority of Modem Media's operating
expenses. These expenses include salaries, employee benefits, incentive
compensation and other payroll-related costs. Office and general is comprised
of office rent, utilities, depreciation, amortization of software, professional
and consulting fees, travel, telephone and other related expenses.
9
<PAGE>
Modem Media has experienced operating losses as well as net losses in ten of
the fifteen quarters from January 1, 1996 through September 30, 1999. Although
Modem Media has experienced revenue growth in recent periods, these growth
rates may not be sustainable or indicative of future operating results. In
addition, Modem Media has incurred substantial costs to expand and integrate
its operations and intends to continue to invest heavily in ongoing expansion
and integration efforts as well as infrastructure development. As a result,
there can be no assurance that Modem Media will sustain profitability.
Seasonality and Other Factors Affecting Operating Results
Modem Media's revenues have historically been higher during the second half
of each year as its clients prepare marketing campaigns for products and
services launched in anticipation of fall trade shows and the holiday season.
In the past, Modem Media has experienced revenue declines during the first
quarter of the year from the fourth quarter of the preceding year as clients
reestablish their annual marketing and advertising budgets. Although Modem
Media did not experience this variation in the first quarter of 1999, there can
be no assurance that the variation will not return in future fiscal years.
Modem Media's operating results have fluctuated in the past, and may
continue to fluctuate in the future, as a result of a variety of factors,
including the timing of new projects, material reductions, cancellations or
completions of major projects, the loss of significant clients, the opening or
closing of offices, Modem Media's relative mix of business, changes in Modem
Media's pricing strategies or those of its competitors, employee utilization
rates, changes in personnel and other factors that are outside of Modem Media's
control. In addition, Modem Media has experienced some variation in operating
results throughout the year resulting in part from marketing communications
spending patterns and business cycles of its clients. As a result, period-to-
period comparisons of Modem Media's operating results cannot be relied upon as
indicators of future performance.
During the second quarter of 1999, Modem Media resigned its relationship
with AT&T. Management does not expect the resignation to have a material
adverse impact on the operating results of Modem Media through the end of 1999
or beyond.
Results of Operations
The following table sets forth certain statements of operations data of
Modem Media for the three and nine months ended September 30, 1999 and 1998
included elsewhere in this Quarterly Report on Form 10-Q:
<TABLE>
<CAPTION>
Three Months
Ended Nine Months Ended
September 30, September 30,
--------------- -------------------
1999 1998 1999 1998
------- ------- ---------- -------
(in thousands)
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues................................ $21,121 $10,930 $49,546 $30,397
Salaries and benefits................... 11,683 7,473 29,163 20,793
Office and general...................... 5,793 4,319 14,734 10,309
Amortization of goodwill................ 756 461 2,065 1,308
Operating losses of True North Units
Held for Transfer...................... -- 10 -- 13
------- ------- ------- -------
Operating income (loss)................. 2,889 (1,333) 3,584 (2,026)
Interest income (expense), net.......... 565 (1) 1,406 (5)
Provision (benefit) for income taxes.... 2,146 (208) 3,574 57
------- ------- ------- -------
Net income (loss)....................... $ 1,308 $(1,126) $ 1,416 $(2,088)
======= ======= ======= =======
</TABLE>
10
<PAGE>
The following table sets forth certain items from Modem Media's statements
of operations data as a percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues....................... 100.0% 100.0% 100.0% 100.0%
Salaries and benefits.......... 55.3 68.4 58.9 68.4
Office and general............. 27.4 39.5 29.7 33.9
Amortization of goodwill....... 3.6 4.2 4.2 4.3
Operating losses of True North
Units Held for Transfer....... -- 0.1 -- 0.1
--------- --------- -------- --------
Operating income (loss)........ 13.7 (12.2) 7.2 (6.7)
Interest income (expense),
net........................... 2.7 -- 2.8 --
Provision (benefit) for income
taxes......................... 10.2 (1.9) 7.2 0.2
--------- --------- -------- --------
Net income (loss).............. 6.2% (10.3)% 2.8% (6.9)%
========= ========= ======== ========
</TABLE>
Results of Operations--Three Months Ended September 30, 1999 Compared to Three
Months Ended September 30, 1998
Revenues. Revenues increased $10.2 million, or 93.2%, to $21.1 million for
the three months ended September 30, 1999 from $10.9 million for the three
months ended September 30, 1998. Revenues increased primarily as a result of
increased services provided to existing clients, as well as the addition of new
clients.
Salaries and Benefits. Salaries and benefits increased $4.2 million, or
56.3%, to $11.7 million for the three months ended September 30, 1999 from $7.5
million for the three months ended September 30, 1998. Salaries and benefits
represented 55.3% and 68.4% of revenues for the three months ended September
30, 1999 and 1998, respectively. The dollar increase in salaries and benefits
is attributable to a company-wide increase in headcount to better manage the
growth of its business, service clients and actively pursue new client
business. The decrease of salaries and benefits as a percentage of revenue is
due primarily to higher percentage growth rates in revenue.
Office and General. Office and general increased $1.5 million, or 34.1%, to
$5.8 million for the three months ended September 30, 1999 from $4.3 million
for the three months ended September 30, 1998. Office and general represented
27.4% and 39.5% of revenues for the three months ended September 30, 1999 and
1998, respectively. The dollar increase in office and general is primarily due
to increased occupancy, professional and office support expenses incurred in
connection with international expansion and increases in headcount. The
decrease of office and general as a percentage of revenue is due primarily to
higher percentage growth rates in revenue.
Amortization of Goodwill. Amortization of goodwill increased by $0.3
million, or 64.0%, to $0.8 million for the three months ended September 30,
1999 from $0.5 million for the three months ended September 30, 1998. The
increase is primarily a result of the payment of additional purchase price for
Modem Media Advertising Limited Partnership ("the Modem Partnership") by True
North to the former owners of the Modem Partnership of $18.5 million in
February 1999, as well as Modem Media's acquisition in Japan during June 1999
(see Note 2 of Notes to Condensed Consolidated Financial Statements).
Operating Losses of True North Units Held for Transfer. The non-strategic
digital interactive marketing operations were sold to True North effective
October 1, 1998. Accordingly, the operating results of such entities are not a
part of the Company's operating results for the three months ended September
30, 1999.
Interest Income (Expense), Net. The net increase to $0.6 million during the
three months ended September 30, 1999 is principally attributable to interest
income earned on investments purchased with the proceeds from Modem Media's
initial public offering.
11
<PAGE>
Income Taxes. Modem Media had a provision for income taxes of $2.1 million
on pre-tax income of $3.5 million for the three months ended September 30,
1999, as compared to a benefit for income taxes of $0.2 million on a pre-tax
loss of $1.3 million for the three months ended September 30, 1998. The
effective income tax rate was 62.1% for the three months ended September 30,
1999 as compared to an effective income tax benefit rate of 15.6% for the three
months ended September 30, 1998. The effective tax rates differ from the
federal statutory rate primarily due to the effect of non-deductible goodwill
amortization and losses of certain foreign subsidiaries on which Modem Media
did not recognize tax benefits.
Results of Operations--Nine Months Ended September 30, 1999 Compared to Nine
Months Ended September 30, 1998
Revenues. Revenues increased $19.1 million, or 63.0%, to $49.5 million for
the nine months ended September 30, 1999 from $30.4 million for the nine months
ended September 30, 1998. Revenues increased primarily as a result of increased
services provided to existing clients, as well as the addition of new clients.
Salaries and Benefits. Salaries and benefits increased $8.4 million, or
40.3%, to $29.2 million for the nine months ended September 30, 1999 from $20.8
million for the nine months ended September 30, 1998. Salaries and benefits
represented 58.9% and 68.4% of revenues for the nine months ended September 30,
1999 and 1998, respectively. The dollar increase in salaries and benefits is
attributable to a company-wide increase in headcount to better manage the
growth of its business, service clients and actively pursue new client
business. The decrease of salaries and benefits as a percentage of revenue is
due primarily to higher percentage growth rates in revenue.
Office and General. Office and general increased $4.4 million, or 42.9%, to
$14.7 million for the nine months ended September 30, 1999 from $10.3 million
for the nine months ended September 30, 1998. Office and general represented
29.7% and 33.9% of revenues for the nine months ended September 30, 1999 and
1998, respectively. The dollar increases in office and general were primarily
due to increased occupancy, professional and office support expenses incurred
in connection with international expansion and increases in headcount. The
decrease of office and general as a percentage of revenue is due primarily to
higher percentage growth rates in revenue.
Amortization of Goodwill. Amortization of goodwill increased by $0.8
million, or 57.9%, to $2.1 million for the nine months ended September 30, 1999
from $1.3 million for the nine months ended September 30, 1998. The increase is
a result of the payment of additional purchase price for the Modem Partnership
by True North to the former owners of the Modem Partnership of $3.3 million and
$18.5 million in May 1998 and February 1999, respectively, as well as Modem
Media's acquisition in Japan during June 1999 (see Note 2 of Notes to Condensed
Consolidated Financial Statements).
Operating Losses of True North Units Held for Transfer. The non-strategic
digital interactive marketing operations were sold to True North effective
October 1, 1998. Accordingly, the operating results of such entities are not a
part of the Company's operating results for the nine months ended September 30,
1999.
Interest Income (Expense), Net. The net increase to $1.4 million during the
nine months ended September 30, 1999 is principally attributable to interest
income earned on investments purchased with the proceeds from Modem Media's
initial public offering.
Income Taxes. Modem Media had a provision for income taxes of $3.6 million
on pre-tax income of $5.0 million for the nine months ended September 30, 1999,
as compared to a provision for income taxes of $0.1 million on a pre-tax loss
of $2.0 million for the nine months ended September 30, 1998. The effective
income tax rates for the nine months ended September 30, 1999 and 1998 were
71.6% and 2.8%, respectively. The effective tax rates differ from the federal
statutory rate primarily due to the effect of non-deductible goodwill
amortization and losses of certain foreign subsidiaries on which Modem Media
did not recognize tax benefits.
12
<PAGE>
Liquidity and Capital Resources
Modem Media historically has financed its operations primarily from funds
generated from operations, its initial public offering and, prior to the
offering, from borrowings from True North. At December 31, 1998, Modem Media
had a non-interest bearing intercompany note payable to True North of $6.0
million, which was repaid in February 1999 from the net proceeds of Modem
Media's initial public offering. Pursuant to agreements between True North and
its lenders, Modem Media is subject to limitations on indebtedness that could
adversely affect Modem Media's ability to secure debt financing in the future.
Net cash provided by operating activities was $0.4 million and $0.3 million
for the nine months ended September 30, 1999 and 1998, respectively. The
investment in working capital was offset by depreciation expense and goodwill
amortization, which totaled $4.7 million and $2.5 million for the nine months
ended September 30, 1999 and 1998, respectively.
Net cash used in investing activities was $7.7 million and $2.6 million for
the nine months ended September 30, 1999 and 1998, respectively. Investing
activities reflect the June 1999 acquisition by the Company of a builder and
marketer of e-businesses in Japan, capital expenditures to purchase and install
enterprise software in 1999, and purchases of other property and equipment in
both periods.
Net cash provided by (used in) financing activities was $28.5 million and
$(0.4) million for the nine months ended September 30, 1999 and 1998,
respectively. The primary source of cash flows from financing activities was
Modem Media's initial public offering in February 1999.
Modem Media's short-term capital commitments include lease payments over the
next 12 months aggregating approximately $4.9 million and the funding of
certain international operations which are not expected to be self-sufficient
in the near-term. The long-term capital needs of Modem Media will depend on
numerous factors, including the rates at which Modem Media is able to obtain
new business from clients and expand its personnel and infrastructure to
accommodate growth, as well as the rate at which it chooses to invest in new
technologies and additional global expansion. Modem Media has ongoing needs for
capital, including working capital for operations, project development costs
and capital expenditures to maintain and expand its operations.
In August 1998, True North extended a credit facility to Modem Media
allowing for revolving borrowings in the amount of up to $3.0 million to be
outstanding at any given time. The credit facility with True North expires in
February 2001, or upon 60 days advance notice if True North's voting control in
Modem Media falls below 50% of total voting power. There are no borrowings
outstanding under this facility as of September 30, 1999.
Modem Media believes that the net proceeds from its initial public offering,
together with funds available from operations, if any, will be sufficient to
meet its capital needs for at least the next twelve months. A portion of the
net proceeds from the offering may also be used to acquire or invest in
complementary companies, services, products or technologies, or to invest in
strategic initiatives or geographic expansion. Modem Media has no agreements or
commitments with respect to any such transactions other than those disclosed in
the notes to the accompanying condensed consolidated financial statements.
Year 2000 Compliance
The following Year 2000 statement is a Year 2000 Readiness Disclosure made
pursuant to Section 7(b) of the Year 2000 Information and Readiness Disclosure
Act.
Modem Media continues to evaluate and address date-sensitive system issues
associated with the Year 2000. The Company's approach to addressing the Year
2000 issue is team-based, involving employees from multiple disciplines and an
outside consultant. Modem Media is approaching this issue in the following five
phases: awareness, assessment (including an inventory and review of information
technology systems,
13
<PAGE>
hardware, software, non-information technology systems and equipment),
repair/replacement, testing and implementation.
Regarding both the IT and non-IT systems, Modem Media has completed the
awareness phase. Modem Media is approximately 76% complete with respect to the
assessment phase, although the acquisition of offices in Tokyo, Japan and
Munich, Germany during 1999 have contributed to a delay in completing this
assessment phase. Modem Media has determined, as of the end of the third
quarter, that 7% of all items assessed require remediation and repair, of which
the repair/replacement is approximately 76% complete. Modem Media is over 75%
complete with respect to the testing and implementation phases. Completion of
the assessment, repair/replacement, testing and implementation phases is
expected during the fourth quarter of 1999.
Thus far, the assessment phase has revealed that Modem Media's non-
information technology systems do not contain any elements that are susceptible
to Year 2000 problems. Modem Media has limited exposure in its IT systems and
very little custom software. Remediation of commercial off-the-shelf software
has been scheduled and involves upgrades, replacement, or retirement of
packages determined to pose risk to normal operations. The few custom
applications are being assessed and plans have been made to address identified
date issues. All client system hardware has been upgraded or slated for
retirement prior to the end of this year. The assessment of servers is underway
with remediation taking place in parallel. As a result, Modem Media believes
that its internal computer systems will properly utilize dates beyond December
31, 1999. If, in the worst case scenario, such replacement is not made or is
not completed on a timely basis, the Year 2000 issue could have a material
impact on the operations of Modem Media.
Furthermore, there can be no assurance that Modem Media's suppliers will not
experience material business disruptions as a result of the Year 2000 issue
that could affect Modem Media. In this regard, Modem Media has asked each of
its third-party suppliers to confirm that they are Year 2000 compliant.
Substantially all of Modem Media's third-party suppliers have indicated that
they expect to be Year 2000 compliant by the Year 2000 based on their progress
to date, and a majority have indicated that their Year 2000 compliance programs
have already been completed. However, in the worst case scenario, a substantial
number of third parties could be unable to complete their Year 2000 resolution
process, causing significant disruptions in Modem Media's ability to provide
services to its clients.
Modem Media regularly conducts transactions and performs services that
interface directly with the systems of its clients. The inability of Modem
Media's clients to complete their Year 2000 compliance could cause them to
substantially reduce their spending on interactive marketing programs.
In addition, True North has agreed to provide legal, tax preparation,
insurance, treasury, financing and debt and lease guaranty services to Modem
Media. Modem Media does not believe that any Year 2000 problems experienced by
True North would have a material effect on True North's ability to provide
these services to Modem Media, for the following reasons:
. True North's ability to provide these services is based for the most
part on the availability of its personnel, rather than the integrity of
its systems,
. the use of these systems by True North personnel is generally incidental
to the services provided, and
. the systems used generally consist of off-the-shelf software that is
readily replaceable.
Modem Media is in the process of developing contingency plans to be used in
the event of a failure of its information technology systems. In connection
with Modem Media's assessment of third party readiness during 1999, Modem Media
is evaluating the extent to which contingency plans are needed based on the
level of uncertainty regarding such readiness. In the event Modem Media's
intermediaries or vendors do not expect to be Year 2000 compliant, Modem
Media's contingency plans may include replacing such intermediaries or vendors
or conducting the particular operation itself. Modem Media expects to complete
its contingency plans during the fourth quarter of 1999.
14
<PAGE>
Modem Media estimates the total cost of its Year 2000 program to be
approximately $500,000, of which $278,000 has been incurred through September
30, 1999 and none of which has been capitalized. There is no guarantee,
however, that the actual costs incurred will not differ materially from this
estimate.
In order to keep pace with the growth and expansion of its business, Modem
Media decided in 1997 to replace its existing financial accounting system. The
implementation of the new system occurred during the third quarter of 1999.
Under the purchase agreement, the system provider has given Modem Media a two-
year limited warranty that the replacement financial accounting system will be
Year 2000 compliant.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Modem Media is not a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 4, 1999, the Securities and Exchange Commission declared Modem
Media's Registration Statement on Form S-1 (No. 333-68057) effective. On
February 10, 1999, Modem Media completed an initial public offering of an
aggregate of 2,990,000 shares of Modem Media's Class A common stock at an
offering price of $16.00 per share. The managing underwriters for the offering
were BancBoston Robertson Stephens, NationsBanc Montgomery Securities LLC and
Bear, Stearns & Co. Inc. Net proceeds to Modem Media, after deducting
underwriting discounts and commissions of $3,349,000 and offering expenses of
$2,440,000 were $42,051,000. None of the expenses incurred in the offering were
direct or indirect payments to directors, officers, or general partners of the
issuer or their associates, to persons owning ten percent or more of any class
of equity securities of the issuer or to affiliates of the issuer. Modem Media
used $6,000,000 of these proceeds to settle an intercompany note payable to its
parent, True North, and approximately $7,400,000 to acquire and fund the
operations of e-businesses in Tokyo, Japan and Munich, Germany. Modem Media has
invested the remainder of the net proceeds in short-term, interest-bearing,
investment grade obligations pending their use.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Effective May 1, 1999, Doug Ahlers is no longer an executive officer of the
Company although he continues to be an employee of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <S>
4.3 Registration Rights Agreement dated August 1, 1999 by and between
certain Class A Common Stock Holders, Class B Common Stock
Holders and the Company
4.4 Warrant Agreement effective August 9, 1999 by and between Modem
Media . Poppe Tyson, Inc. and General Electric Capital
Corporation
10.13* Master Services Agreement dated July 15, 1999 between and among
General Electric Corporation and the Company
10.14* Share Transfer Agreement dated October 4, 1999 of Mcx MULTIMEDIA
EXPERTS GmbH by Modem Media Germany Holding Company GmbH, a
wholly-owned subsidiary of the Company
27.1 Financial Data Schedule
99 Douglas C. Ahlers Resignation Letter dated April 30, 1999
</TABLE>
- --------
* Modem Media has requested confidential treatment from the Securities and
Exchange Commission for portions of this document.
(b) Reports on Form 8-K
None
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MODEM MEDIA . POPPE TYSON, INC.
Date: November 12, 1999
/s/ Gerald M. O'Connell
By: _________________________________
Gerald M. O'Connell
Chief Executive Officer
(Principal Executive Officer)
/s/ Steven C. Roberts
By: _________________________________
Steven C. Roberts
Chief Financial Officer
(Principal Financial and
Accounting Officer)
17
<PAGE>
Exhibit 4.3
MODEM MEDIA.POPPE TYSON, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
August 1, 1999, by and among MODEM MEDIA . POPPE TYSON, INC., a Delaware
corporation (the "Company"), the holders of the Class A Common Stock of the
Company listed on the signature page (each a "Class A Holder") and the holders
of the Class B Common Stock of the Company listed on the signature page (each a
"Class B Holder" and, together with the Class A Holders, the "Holders").
RECITALS
A. The Class A Holders own shares of the Company's Class A Common Stock (the
"Class A Common Stock").
B. The Class B Holders own shares of the Company's Class B Common Stock (the
"Class B Common Stock").
C. The Company and True North Communications Inc. are parties to a Stockholders
Agreement dated as of the date hereof (the "Stockholders Agreement").
D. The execution of this Agreement is contemplated by the Stockholders
Agreement.
E. The Company desires to enter into this Agreement and grant the Holders the
rights contained herein in order to fulfill such condition.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
Section 1.
Certain Definitions
Certain Definitions. As used in this Agreement, the following terms shall have
the following respective meanings:
1.1 "SEC" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
1.2 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder,
as shall be in effect at that time.
1.3 The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (as defined below), and the declaration
or ordering of the effectiveness of such registration statement.
1.4 "Registrable Securities" means (i) the shares of Class A Common Stock
owned by the Class A Holders; (ii) the shares of Class B Common Stock
owned by the Class B Holders; (iii) the shares of Class A Common Stock of
the Company issuable to the Class B Holders upon conversion of the Class B
Common Stock; and (iv) any other shares of the Company's Class A Common
Stock or other Common Stock issued as (or issuable upon conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to or exchange for or
replacement of the securities referred to in clauses (i), (ii) and (iii)
above by way of a stock dividend, stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which a Holder's rights
under this Agreement are not assigned; provided, however, that Registrable
Securities shall only be treated as Registrable Securities if and so long
as, they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction or
(B) sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof so
that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale.
1.5 "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder, all as
the same shall be in effect at the time.
<PAGE>
1.6 An "Affiliate" of an entity referenced herein shall mean (i) any
entity who controls, is controlled by, or is under common control with
such entity, (ii) any constituent partner or shareholder of such entity or
(iii) with respect to an individual, such individual's spouse, siblings,
ancestors and descendants (whether natural or adopted), any spouses of
such siblings, ancestors and descendants, any siblings of such ancestors
and descendants, and any trust established solely for the benefit of one
or more of such individual's spouse, siblings, ancestors and/or
descendants.
Section 2.
Piggyback Rights
2.1 Notice of Registration. Subject to Section 2.4 below, if at any time
or from time to time, the Company shall determine to register any of its
equity securities, the Company will:
(i) promptly give to the Holders written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), all the Registrable Securities
(subject to cutback as set forth in Section 2.2) specified in a written request
or requests made within 30 days after receipt of such written notice from the
Company by any Holder.
2.2 Underwriting. In the case of an underwritten offering in which a
Holder has elected to include such Holder's shares, the right of any
Holder to registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided herein. If any
Holder proposes to distribute its securities through such underwriting,
such Holder shall (together with the Company and any other stockholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company; provided, however, that,
except as set forth in Section 8 hereof, no Holder shall be required to
make any representation or warranty to any underwriter (other than
representations and warranties regarding such Holder or such Holder's
intended method of distribution) or to undertake any indemnification
obligation to the Company or any underwriter with respect thereto.
Notwithstanding any other provision of this Section 2, if the managing
underwriter notifies the Company in writing that the number of securities
proposed to be included in the underwriting exceeds the number that can be
sold in such underwriting without adversely affecting the marketability of
the offering, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Company shall so
advise the Holder and the other stockholders distributing their securities
through such underwriting pursuant to piggyback registration rights
similar to this Section 2, and the number of shares of Registrable
Securities and other securities that may be included in the registration
and underwriting shall be allocated among the Holder and any other
participating stockholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holder and other
securities held by other stockholders at the time of filing the
registration statement; provided that the aggregate amount of Registrable
Securities held by each selling Holder included in the offering shall not
be reduced below 20% of the total amount of securities included in that
offering. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of
shares allocated to the Holder or other stockholders to the nearest 100
shares. If any Holder disapproves of the terms of any such underwriting,
he or she may elect to withdraw therefrom by written notice to the Company
and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to 180 days after the
effective date of the registration statement relating thereto.
2.3 Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section
2 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
2.4 Limitations on Piggyback Rights. Notwithstanding the provisions of
this Section 2, no Holder shall have the right to have any Registerable
Securities included in a registration by the Company of securities in
connection with (i) a registration statement on Form S-8 (or my successor
form) for securities to be offered to or
<PAGE>
by employees of the Company pursuant to any employee benefit plan; (ii) a
registration statement on Form S-4 (or any successor form) for securities
to be offered in a Rule 145 or similar transaction; and (iii) the
registration for resale of securities of the Company issued in connection
with an acquisition of a business or assets related to a business having a
purchase price of not more than $25 million.
Section 3.
Demand Registration
3.1 Demand Registration. If True North Communications Inc. ("True North"),
on behalf of any Class B Holder, requests registration of shares of
Registerable Securities held by the Class B Holders, then the Company will
use commercially reasonable efforts to cause such shares to be registered
as soon as practicable; provided, however, that (a) the Company shall not
be required to effect any such registration within 90 days prior to the
proposed filing of, and 90 days following the effective date of, a
registration statement pertaining to an underwritten public offering of
the Company's securities unless such registration statement was a
registration contemplated in Section 2.4(iii) above or in the last
sentence of Section 5 below, (b) such registration obligation shall be
deferred for not more than 90 days if the Company furnishes the requesting
holders with a certificate of the Chief Executive Officer of the Company
stating that in the good faith judgment of the Company it would be
detrimental to the Company or its stockholders for a registration
statement to be filed in the near future, but the Company shall not be
entitled to such deferral more than twice in any 12-month period and (c)
the Company shall not be obligated to effect more than a total of two such
demand registrations. Notwithstanding the foregoing, True North shall not
request registration of shares of Registrable Securities or sell any
shares of common stock of the Company for a period of up to 180 days
following an underwritten public offering of the Company's Securities if
requested in writing by the underwriters of such offering and if all
officers and directors of the Company agree to similar restrictions on the
sale of their shares; provided, however, that the foregoing restrictions
shall not apply to the registration and sale of up to 95,000 shares of
Registerable Securities.
3.2 Underwritten Public Offering. In the case of a registration pursuant
to this Section 3 that is proposed to be underwritten, the Company shall
enter into an underwriting agreement with an investment banking firm or
firms containing representations, warranties, indemnities and agreements
then customarily included by an issuer in underwriting agreements with
respect to secondary distributions. The Company shall not cause the
registration under the Securities Act of any other shares of its Common
Stock to become effective (other than registration of an employee benefit
plan, or registration in connection with any Rule 145 or similar
transaction) during the period beginning seven days prior to and ending 90
days after the effectiveness of such registration, unless the underwriter
or underwriters otherwise agree. Any registration pursuant to this Section
3 that is proposed to be underwritten shall be underwritten by an
underwriter of nationally-recognized standing.
Section 4.
Form S-3 Registration
4.1 Registrations on Form S-3. Class B Holders shall be entitled to
request (an "S-3 Registration Request") an aggregate of two registrations
of Registrable Securities then owned by such requesting Class B Holders on
a Form S-3 registration statement under the Securities Act (an "S-3
Registration"). The S-3 Registration Request must be made in writing and
the S-3 Registration Request shall: (i) specify the number of shares
intended to be offered and sold; (ii) describe the nature or method of the
proposed offer and sale thereof; and (iii) contain the undertaking of the
requesting Holders to provide all such information and materials and take
all such action as may be required in order to permit the Company to
comply with all applicable requirements of the SEC and to obtain any
desired acceleration of the effective date of such registration statement.
The Company shall, as soon as practicable, file a S-3 Registration and
proceed to obtain all such qualifications and compliance as may be so
requested and as would permit or facilitate the sale and distribution of
all or such portion of the requesting Holders' Registrable Securities as
are specified in the S-3 Registration Request, within 45 days after
receipt of such written notice by the Company; provided, however, that the
Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 4 if: (i) Form S-3
is not available for such offering by the requesting Holders; (ii) the
requesting Holders, together with the holders of any other securities of
the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
gross price to the public of less than $50 million (or such lesser
aggregate gross price to the public if such amount constitutes the
aggregate gross
<PAGE>
price of all remaining Registrable Securities then held by the Holders and
proposed to be registered); or (iii) the Company has, within the six-month
period preceding the date of such request, already effected a registration
on Form S-3 for any Holder pursuant to this Section 4. The Company shall
use commercially reasonable efforts to make Form S-3 available for the
registration of Registerable Securities pursuant to this Section 4.
4.2 Limitations. Notwithstanding the foregoing, if at the time of any
request to register Registrable Securities pursuant to this Section 4, the
Company is engaged, or has fixed plans to engage in any activity that, in
the good faith determination of the Company, would make it detrimental to
the Company or its stockholders for a registration statement to be filed
in the near future, then the Company may, at its option, direct that such
request be delayed for a period not in excess of 90 days from the
effective date of such material activity. Such rights to delay a request
to file a registration statement may not be exercised by the Company more
than twice in any 12-month period. In addition, if any event occurs or
fact exists that results in the prospectus included in any registration
statement filed pursuant to this Section 4 containing an untrue statement
of material fact or omitting any fact necessary to make the statements
therein not misleading, the Company shall have the right, by written
notice to the Holders, to suspend sales under the registration statement
until it has complied with the provisions of clause (viii) of Section 6
hereof, provided that the Company shall not have the right to suspend
sales under the registration statement pursuant to the immediately
preceding sentence for not more than 90 consecutive days or for more than
180 days in any 12-month period.
4.3 Duration of Effectiveness. A registration shall not count as one of
the permitted registrations under this Section 4 until it has become and
remains effective for a period of not less than 90 days; provided that, in
any event, the Company shall pay all expenses in connection with any such
registration whether or not it has become effective and whether or not
such registration has counted as one of the permitted registrations.
Section 5.
Other Registration Rights
Except as provided in this Agreement, the Company shall not grant to any Persons
the right to request the Company to register any equity securities of the
Company, or any securities convertible or exchangeable into or exercisable for
such securities, without the prior written consent of the holders of at least
50% of the Class A Holders and of the Class B Holders; provided that the Company
may grant rights to other Persons to (i) participate in Piggyback Registrations
so long as such rights are subordinate to the rights of the holders of
Registrable Securities with respect to such Piggyback Registrations and (ii)
request registrations so long as the holders of Registrable Securities are
entitled to participate in any such registrations with such Persons pro rata on
the basis of the number of shares owned by each such holder. Notwithstanding the
foregoing or anything to the contrary in this Agreement, the parties hereto
acknowledge and agree that the Company may grant registration rights to General
Electric Capital Corporation with respect to up to 95,000 shares of Class A
Common Stock without regard to the provisions of this Agreement.
Section 6.
Obligations of Company
Whenever the Company is required by the provisions of this Agreement to use
commercially efforts to effect the registration of the Registrable Securities,
the Company shall: (i) prepare and, as soon as possible, file with the SEC a
registration statement with respect to the Registrable Securities, and use
commercially efforts to cause such registration statement to become effective
and to remain effective until the earlier of the sale of the Registrable
Securities so registered or 180 days subsequent to the effective date of such
registration; (ii) furnish to counsel for the Holders prior to filing copies of
all registration statements proposed to be filed pursuant to the requirements of
this Agreement; (iii) notify Holders of the effectiveness of any registration
statement required to be filed pursuant to this Agreement; (iv) prepare and file
with the SEC such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to make and to
keep such registration statement effective and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all
securities proposed to be registered in such registration statement until the
earlier of the sale of the Registrable Securities so registered or 180 days
subsequent to the effective date of such registration statement; (v) furnish to
any Holder such number of copies of any prospectus (including any preliminary
prospectus and any amended or supplemented prospectus), in conformity with the
requirements of the Securities Act, as such Holder may reasonably request in
order to effect the offering and sale of the Registrable Securities to be
offered and sold, but only while the Company shall be required under the
provisions hereof to cause the registration statement to remain current; (vi)
use commercially reasonable efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such states as Holder shall reasonably request, maintain any such
registration or qualification current until the earlier of the sale of the
<PAGE>
Registrable Securities so registered or 180 days subsequent to the effective
date of the registration statement, and take any and all other actions either
necessary or reasonably advisable to enable Holders to consummate the public
sale or other disposition of the Registrable Securities in jurisdictions where
such Holders desire to effect such sales or other disposition; (vii) take all
such other actions either necessary or reasonably desirable to permit the
Registrable Securities held by a Holder to be registered and disposed of in
accordance with the method of disposition described herein; (viii) notify each
seller of Registrable Securities, 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 the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, subject to
Sections 3.1 and 4.2 above, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading; (ix) cause all
such Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed; (x) enter into such
customary agreements (including underwriting agreements in customary form) and
take all such other actions as the holders of a majority of the Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities; (xi)
make available for inspection by any seller of Registrable Securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountant to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement; and, (xii) in the event of
the issuance of any stop order suspending the effectiveness of a registration
statement, or of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any common stock included in such
registration statement for sale in any jurisdiction, the Company shall use its
best efforts promptly to obtain the withdrawal of such order. Notwithstanding
the foregoing, the Company shall not be required to register or to qualify an
offering of the Registrable Securities under the laws of a state if as a
condition to so doing the Company is required to qualify to do business or to
file a general consent to service of process in any such state or jurisdiction,
unless the Company is already subject to service in such jurisdiction.
Section 7.
Expenses of Registration
The Company shall pay all of the fees and expenses incurred in connection with
any registration statement that is initiated pursuant to this Agreement,
including, without limitation, all SEC and blue sky registration and filing
fees, printing expenses, transfer agent and registrar fees, the fees and
disbursements of the Company's outside counsel and accountants. In addition, any
underwriting discounts, fees and disbursements of any additional counsel to the
Holders, selling commissions and stock transfer taxes applicable to the
Registrable Securities registered on behalf of Holders shall be borne by the
Holders of the Registrable Securities included in such registration.
Section 8.Section
Indemnification
8.1 The Company. To the extent permitted by law, the Company will
indemnify Holders and each person controlling Holders within the meaning
of Section 15 of the Securities Act, and each underwriter if any, of the
Company's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse Holders and
each person controlling Holders, and each underwriter, if any, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged
<PAGE>
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to the Company by such Holder or controlling
person or underwriter seeking indemnification.
8.2 Holders. To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities
as to which such registration, qualification or compliance is being
effected (the "Indemnifying Holder"), indemnify the Company, each of its
directors and officers and each person who controls the Company within the
meaning of Section 15 of the Securities Act, and each underwriter, if any,
of the Company's securities with respect to any registration,
qualification or compliance which has been effected pursuant to this
Agreement, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by such Indemnifying Holder of any rule or regulation
promulgated under the Securities Act applicable to such Indemnifying
Holder in connection with any such registration, qualification or
compliance, and the Indemnifying Holder will reimburse the Company, such
directors and officers and each person controlling Company and each
underwriter, if any, for any legal or any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, in reliance upon and in conformity with
written information furnished to the Company by such Indemnifying Holder,
provided that in no event shall any indemnity under this Section 8.2
exceed the gross proceeds of the offering received by such Indemnifying
Holder.
8.3 Defense of Claims. Each party entitled to indemnification under this
Section 7 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense;
provided, however, that the Indemnifying Party shall pay such expense if
representation of the Indemnified Party by counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential
differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding, and provided further that
the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Section 8 unless the failure to give such notice is materially prejudicial
to an Indemnifying Party's ability to defend such action. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with
the consent of each Indemnified Party which consent shall not be
unreasonably withheld, 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. No Indemnifying
Party shall be required to indemnify any Indemnified Party with respect to
any settlement entered into without such Indemnifying Party's prior
written consent.
Section 9.
Termination of Rights
Unless otherwise specified herein, the rights and provisions of this Agreement
shall terminate as to all Holders on the third anniversary of the date hereof;
provided, however, that if the filing of any registration statement required to
be filed pursuant to this agreement is delayed or sales of Registrable
Securities are suspended, the termination date of the rights of the Holders
under this Agreement will be extended for a period of time equal to such delay
or suspension.
Section 10.
Miscellaneous
<PAGE>
10.1 Assignment. The rights to cause the Company to register Registrable
Securities granted to the Class B Holders by the Company under this
Agreement may be transferred or assigned by the Class B Holders to (i) any
corporation owning not less than 75% of the equity interests of a Class B
Holder or (ii) a majority-owned subsidiary of a Holder; provided that the
Company is given written notice at the time of or within a reasonable time
after said transfer or assignment, stating the name and address of the
transferee or assignee and identifying the securities with respect to
which such registration rights are being transferred or assigned; provided
further, that the transferee or assignee of such rights assumes the
obligations of such Class B Holder under this Agreement. The rights to
cause the Company to register Registrable Securities granted to the Class
A Holders by the Company under this Agreement may be transferred or
assigned by the Class A Holders to an Affiliate of such Class A Holder.
Subject to the preceding two sentences, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Any transferee or assignee shall
thereafter be treated as a Holder, subject to the limitations herein.
Until the Company receives actual notice of any transfer or assignment, it
shall be entitled to rely on the then existing list of Holders and the
failure to notify the Company of any transfer or assignment shall not
affect the validity of a notice properly given by the Company to the
Holders pursuant to lists maintained by the Company.
10.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements entered
into solely between residents of and to be performed entirely within, such
state.
10.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing
or interpreting this Agreement.
10.5 Notices.
(a) All notices, requests, demands and other communications under
this Agreement or in connection herewith shall be given to or made upon the
Holder at the addresses set forth in the Company's records and, if to the
Company, at the address previously furnished by the Company to the Holders,
addressed to the attention of the Chief Financial Officer.
(b) All notices, requests, demands and other communications given or
made in accordance with the provisions of this Agreement shall be in writing,
and shall be sent by airmail, return receipt requested, or by facsimile with
confirmation of receipt, and shall be deemed to be given or made when receipt is
so confirmed.
(c) Any party may, by written notice to the other, alter its address
or respondent, and such notice shall be considered to have been given three (3)
days after the airmailing or faxing thereof.
10.6 Amendments and Waivers. Any term of this Agreement may be amended or
any right hereunder waived with the written consent of the Company and the
Holders of at least a majority of the outstanding Registrable Securities.
Any amendment or waiver effected in accordance with this Section 10.6
shall be binding upon the Holders and each transferee of the Registrable
Securities, each future holder of all such Registrable Securities, and the
Company.
10.7 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be
severed 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.
10.8 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or
remedy of such non-breaching party nor shall it be construed to be a
waiver of any such breach or default, or an
<PAGE>
acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed
a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or by law or otherwise afforded to
any Holder, shall be cumulative and not alternative.
10.9 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof and any other written or oral agreements between
the parties hereto are expressly canceled.
10.10 No Inconsistent Agreements. The Company shall not hereafter enter
into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of the day
and year first above written.
COMPANY: CLASS A HOLDERS:
/s/: G. M. O'Connell
MODEM MEDIA . POPPE TYSON, INC. /s/: Robert Allen
/s/: Douglas Ahlers
/s/ G. M. O'Connell
Title: Chief Executive Officer
***REGISTRATION RIGHTS AGREEMENT***
<PAGE>
CLASS B HOLDERS:
/s/: Gary Chester
Title: Vice President, Assistant
Treasurer
Foote, Cone & Belding Advertising, Inc.
/s/: Gary Chester
Title: Vice President, Secretary
Foote, Cone & Belding, Inc.
/s/: Gary Chester
Title: Vice President, Treasurer
R/GA Media Group, Inc.
/s/: Gary Chester
Title: Secretary
TN Technologies, Inc.
/s/: Gary Chester
Title: Vice President, Taxes
True North Communications, Inc.
***REGISTRATION RIGHTS AGREEMENT***
<PAGE>
Exhibit 4.4
WARRANT
To Purchase Class A Common Stock of
MODEM MEDIA . POPPE TYSON, INC.
Warrant No. 1
No. of Shares of Class A Common Stock: 95,000
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 4
2.1. Manner of Exercise 4
2.2. Payment of Taxes 5
2.3. Fractional Shares 5
2.4. Continued Validity 5
3. TRANSFER, DIVISION AND COMBINATION 6
3.1. Transfer 6
3.2. Division and Combination 6
3.3. Expenses 6
3.4. Maintenance of Books 6
4. ADJUSTMENTS 6
4.1. Stock Dividends, Subdivisions and Combinations 7
4.2. Certain Other Distributions and Adjustments 7
4.3. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets 8
4.4. Other Action Affecting Common Stock 8
5. NOTICES TO WARRANT HOLDERS 9
6. NO IMPAIRMENT 9
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY 10
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS 10
9. RESTRICTIONS ON TRANSFERABILITY 10
9.1. Restrictive Legend 10
9.2. Restrictions on Transfer; Registration of Transfers and Exchanges 11
9.3. Shelf Registration Statement 11
9.4. Registration Procedures 11
9.5. Expenses 13
9.6. Indemnification and Contribution 13
9.7. Termination of Restrictions 14
9.8. Representations of GE Capital 15
9.9. Listing on Securities Exchange 15
10. SUPPLYING INFORMATION 15
11. LOSS OR MUTILATION 16
12. OFFICE OF COMPANY 16
13. FINANCIAL AND BUSINESS INFORMATION 16
13.1. Quarterly Information 16
13.2. Annual Information 16
13.3. Filings 17
14. LIMITATION OF LIABILITY 17
15. MISCELLANEOUS 17
15.1. Nonwaiver and Expenses 17
15.2. Notice Generally 17
15.3. Remedies 18
15.4. Successors and Assigns 18
15.5. Amendment 18
15.6. Severability 19
15.7. Headings 19
15.8. Governing Law 19
i
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT. No. of Shares of Class A Common Stock: 95,000 Warrant No. 1
WARRANT
To Purchase Class A Common Stock of
MODEM MEDIA.POPPE TYSON, INC.
THIS IS TO CERTIFY THAT GENERAL ELECTRIC CAPITAL CORPORATION, or registered
assigns, is entitled, at any time during the Exercise Period (as hereinafter
defined), to purchase from MODEM MEDIA.POPPE TYSON, INC., a Delaware corporation
("Company"), 95,000 shares of Class A Common Stock (as hereinafter defined and
subject to adjustment as provided herein), in whole or in part, including
fractional parts, at a purchase price of $24.32 per share (subject to adjustment
as provided herein) all on the terms and conditions and pursuant to the
provisions hereinafter set forth.
This Warrant is being issued in connection with GE Capital and the Company
entering into a Services Agreement with Company on the date hereof. For all
income tax purposes, (a) Company and GE Capital agree that the fair market value
of this Warrant is $587,100 and (b) Company and GE Capital will treat $587,100
of the consideration payable by GE Capital under the foregoing Services
Agreement as the purchase price of this Warrant.
DEFINITIONS
As used in this Warrant, the following terms have the respective meanings set
forth below:
"Additional Shares of Common Stock" shall mean all shares of Common Stock issued
by Company after the date hereof, other than Warrant Stock.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day on
which banks are required or permitted to be closed in the State of New York.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates) the
Class A Common Stock, $0.001 par value, of Company as constituted on the date
hereof, and any capital stock into which such Common Stock may thereafter be
changed, and shall also include (i) capital stock of Company of any other class
(regardless of how denominated) issued to the holders of shares of Common Stock
upon any reclassification thereof which is also not preferred as to dividends or
assets over any other class of stock of Company and which is not subject to
redemption and (ii) shares of common stock of any successor or acquiring
corporation (as defined in Section 4.3) received by or distributed to the
holders of Common Stock of Company in the circumstances contemplated by Section
4.3.
"Convertible Securities" shall mean evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable, with or without
payment of additional consideration in cash or property,
1
<PAGE>
for Additional Shares of Common Stock, either immediately or upon the occurrence
of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common Stock on
any date herein specified, the average of the daily market prices for 20
consecutive Business Days commencing 30 days before such date. The daily market
price for each such Business Day shall be (i) the last sale price on such day on
the principal stock exchange or Nasdaq National Market ("Nasdaq") on which such
Common Stock is then listed or admitted to trading, (ii) if no sale takes place
on such day on any such exchange or Nasdaq, the average of the last reported
closing bid and asked prices on such day as officially quoted on any such
exchange or Nasdaq, (iii) if the Common Stock is not then listed or admitted to
trading on any stock exchange or Nasdaq, the average of the last reported
closing bid and asked prices on such day in the over-the-counter market, as
furnished by the National Association of Securities Dealers Automatic Quotation
System or the National Quotation Bureau, Inc., (iv) if neither such corporation
at the time is engaged in the business of reporting such prices, as furnished by
any similar firm then engaged in such business, or (v) if there is no such firm,
as furnished by any member of the NASD selected mutually by the Majority Holders
and Company or, if they cannot agree upon such selection, as selected by two
such members of the NASD, one of which shall be selected by the Majority Holders
and one of which shall be selected by Company.
"Current Warrant Price" shall mean, in respect of a share of Common Stock at any
date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is exercisable
pursuant to Section 2.1. "Expiration Date" shall mean August 9, 2004.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding at such date and all shares of Common
Stock issuable in respect of this Warrant outstanding on such date, and other
options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date which would be deemed outstanding in
accordance with GAAP for purposes of determining book value or net income per
share on a fully diluted basis.
"GAAP" shall mean generally accepted accounting principles in the United States
of America as from time to time in effect.
"GE Capital" shall mean General Electric Capital Corporation, a New York
corporation. "Holder" shall mean the Person in whose name the Warrant set forth
herein is registered on the books of Company maintained for such purpose.
"Majority Holders" shall mean the holders of Warrants exercisable for in excess
of 50% of the aggregate number of shares of Common Stock then purchasable upon
exercise of all Warrants, whether or not then exercisable.
"NASD" shall mean the National Association of Securities Dealers, Inc., or any
successor corporation thereto.
"Other Property" shall have the meaning set forth in Section 4.3.
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"Outstanding" shall mean, when used with reference to Common Stock, at any date
as of which the number of shares thereof is to be determined, all issued shares
of Common Stock, except shares then owned or held by or for the account of
Company or any subsidiary thereof, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Restricted Common Stock" shall mean shares of Common Stock which are, or which
upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Warrants" shall mean this Warrant and for purposes of Section 9 hereof, all
warrants issued upon transfer, division or combination of, or in substitution
therefor.
"Warrant Price" shall mean an amount equal to (i) the number of shares of Common
Stock being purchased upon exercise of this Warrant pursuant to Section 2.1,
multiplied by (ii) the Current Warrant Price as of the date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the holders
of the Warrants upon the exercise thereof.
EXERCISE OF WARRANT
Manner of Exercise. From and after the date hereof and until 5:00 P.M., New York
time, on the Expiration Date (the "Exercise Period"), Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder. In order to exercise this Warrant, in whole
or in part, Holder shall deliver to Company at its principal office at 230 East
Avenue, Norwalk, Connecticut 06855 or at the office or agency designated by
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price and (iii) this Warrant.
Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt thereof, Company shall, as promptly as
practicable, and in any event within ten (10) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as such Holder shall request in the notice and shall be
registered in the name of Holder or, subject to Section 9, such other name as
shall be designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together
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with the cash or check or other payment as provided below and this Warrant, is
received by Company as described above and all taxes required to be paid by
Holder, if any, pursuant to Section 2.2 prior to the issuance of such shares
have been paid. If this Warrant shall have been exercised in part, Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Stock, deliver to Holder a new Warrant evidencing the rights of Holder
to purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of Holder, appropriate notation may be made on this Warrant
and the same returned to Holder. Notwithstanding any provision herein to the
contrary, Company shall not be required to register shares in the name of any
Person who acquired this Warrant (or part hereof) or any Warrant Stock otherwise
than in accordance with this Warrant. Payment of the Warrant Price shall be made
by certified or official bank check.
Payment of Taxes. All shares of Common Stock issuable upon the exercise of this
Warrant pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable and without any preemptive rights. Company shall pay all expenses
in connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof, unless such tax or
charge is imposed by law upon Holder, in which case such taxes or charges shall
be paid by Holder. Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Common Stock issuable upon exercise of this
Warrant in any name other than that of Holder, and in such case Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the satisfaction of
Company that no such tax or other charge is due.
Fractional Shares. Company shall not be required to issue a fractional share of
Common Stock upon exercise of any Warrant. As to any fraction of a share which
the Holder of one or more Warrants, the rights under which are exercised in the
same transaction, would otherwise be entitled to purchase upon such exercise,
except as otherwise provided in Section 2.1, Company shall pay a cash adjustment
in respect of such final fraction in an amount equal to the same fraction of the
Current Market Price per share of Common Stock on the date of exercise.
Continued Validity. A holder of shares of Common Stock issued upon the exercise
of this Warrant, in whole or in part (other than a holder who acquires such
shares after the same have been publicly sold pursuant to a Registration
Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which
it would have been entitled as Holder under Sections 9, 10 and 15 of this
Warrant. Company will, at the time of each exercise of this Warrant, in whole or
in part, upon the request of the holder of the shares of Common Stock issued
upon such exercise hereof, acknowledge in writing, in form reasonably
satisfactory to such holder, its continuing obligation to afford to such holder
all such rights; provided, however, that if such holder shall fail to make any
such request, such failure shall not affect the continuing obligation of Company
to afford to such holder all such rights.
TRANSFER, DIVISION AND COMBINATION
Transfer. Subject to compliance with Section 9 hereof, transfer of this Warrant
and all rights hereunder, in whole or in part, shall be registered on the books
of Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of Company referred to in Section 2.1 or the office or
agency designated by Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, Company shall, subject to Section 9, execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination specified in such instrument of
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assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
Division and Combination. Subject to Section 9, this Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by Holder or its
agent or attorney. Subject to compliance with Section 3.1 and with Section 9, as
to any transfer which may be involved in such division or combination, Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
Expenses. Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 3.
Maintenance of Books. Company agrees to maintain, at its aforesaid office or
agency, books for the registration and the registration of transfer of the
Warrants.
ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is exercisable, or
the price at which such shares may be purchased upon exercise of this Warrant,
shall be subject to adjustment from time to time as set forth in this Section 4.
Company shall give each Holder notice of any event described below which
requires an adjustment pursuant to this Section 4 at the time of such event.
Stock Dividends, Subdivisions and Combinations. If at any time Company shall:
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution of, Additional
Shares of Common Stock,subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then (i) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event would own or be entitled to receive after the
happening of such event, and (ii) the Current Warrant Price shall be adjusted to
equal (A) the Current Warrant Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares for which this Warrant is exercisable
immediately after such adjustment.
Certain Other Distributions and Adjustments. 1) If at any time Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of: cash,any evidences of its
indebtedness, any shares of its stock or any other securities or property of any
nature whatsoever (other than cash, Convertible Securities or Additional Shares
of Common Stock), or any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock),then Holder shall be entitled
to receive such dividend or distribution as if Holder had exercised this
Warrant.
A reclassification of the Common Stock (other than a change in par value, or
from par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by Company to the holders of its Common Stock of such shares of
such other class of stock within the meaning of paragraph (a) above and, if the
outstanding shares of Common Stock
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shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets. In case Company shall reorganize its capital, reclassify its capital
stock, consolidate or merge with or into another corporation (where Company is
not the surviving corporation or where there is a change in or distribution with
respect to the Common Stock of Company), or sell, transfer or otherwise dispose
of all or substantially all its property, assets or business to another
corporation and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of Common Stock of Company, then each Holder shall
have the right thereafter to receive, upon exercise of such Warrant, the number
of shares of common stock of the successor or acquiring corporation or of
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of Company) in order to provide for adjustments of shares of
Common Stock for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes of this Section 4.3, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.3 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
Other Action Affecting Common Stock. In case at any time or from time to time
Company shall take any action in respect of its Common Stock, other than any
action described in this Section 4, then, unless such action will not have a
materially adverse effect upon the rights of the Holders, the number of shares
of Common Stock or other stock for which this Warrant is exercisable and/or the
purchase price thereof shall be adjusted in such manner as may be equitable in
the circumstances.
NOTICES TO WARRANT HOLDERS
Whenever the number of shares of Common Stock for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of the Warrants, shall be adjusted pursuant to Section
4, Company shall forthwith prepare a certificate to be executed by the chief
financial officer of Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated,
specifying the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.3 or 4.4)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. Company shall
promptly cause a signed copy of such certificate to be delivered to each Holder
in accordance with Section 15.2. Company shall keep at its office or agency
designated pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during
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normal business hours by any Holder or any prospective purchaser of a Warrant
designated by a Holder thereof.
NO IMPAIRMENT
Company shall not by any action, including, without limitation, amending its
articles of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, Company will take all such
action as may be necessary or appropriate in order that Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, including taking such action as is necessary for the
Current Warrant Price to be not less than the par value of the shares of Common
Stock issuable upon exercise of this Warrant, and (b) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
Company to perform its obligations under this Warrant.
Upon the request of Holder, Company will at any times during the period this
Warrant is outstanding acknowledge in writing, in form satisfactory to Holder,
the continuing validity of this Warrant and the obligations of Company
hereunder.
RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF
ANY GOVERNMENTAL AUTHORITY From and after the date hereof, Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
Before taking any action which would result in an adjustment in the number of
shares of Common Stock for which this Warrant is exercisable or in the Current
Warrant Price, Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance upon exercise
of Warrants require registration or qualification with any governmental
authority or other governmental approval or filing under any federal or state
law (otherwise than as provided in Section 9) before such shares may be so
issued, Company will in good faith and as expeditiously as possible and at its
expense endeavor to cause such shares to be duly registered or such approval to
be obtained or filing made.
TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, Company will in each such case take such a
record and will take such record as of the close of business on a Business Day.
Company will not at any time, except upon dissolution, liquidation or winding up
of Company, close its stock transfer books or Warrant transfer books so as to
result in preventing or delaying the exercise or transfer of any Warrant.
RESTRICTIONS ON TRANSFERABILITY
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The Warrants and the Warrant Stock shall not be transferred, hypothecated or
assigned before satisfaction of the conditions specified in this Section 9,
which conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the Transfer of any Warrant or any Warrant Stock.
Holder, by acceptance of this Warrant, agrees to be bound by the provisions of
this Section 9.
Restrictive Legend. 2) Except as otherwise provided in this Section 9, each
certificate for Warrant Stock initially issued upon the exercise of this
Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended, and may not be transferred in violation of
such Act or the rules and regulations thereunder." Except as otherwise provided
in this Section 9, each Warrant shall be stamped or otherwise imprinted with a
legend in substantially the following form: "This Warrant and the securities
represented hereby have not been registered under the Securities Act of 1933, as
amended, and may not be transferred in violation of such Act, the rules and
regulations thereunder or the provisions of this Warrant."
Restrictions on Transfer; Registration of Transfers and Exchanges. Prior to any
proposed transfer of the Warrants or the Warrant Stock, unless such transfer is
(a) made pursuant to an effective registration statement under the Securities
Act, or (b) to an affiliate of the Holder, the transferring Holder will deliver
to Company an opinion of counsel, reasonably satisfactory in form and substance
to Company, to the effect that the Warrants or Warrant Stock, as applicable, may
be sold or otherwise transferred without registration under the Securities Act.
No Warrant may be transferred to any Person unless the issuance of Warrant Stock
to such Person upon the exercise of such Warrant would be exempt from
registration under the Securities Act.
Shelf Registration Statement. Company shall prepare and file with the Commission
a Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Warrant Stock (the "Shelf Registration
Statement"). The Shelf Registration Statement shall be on the appropriate form
permitting registration of the Warrant Stock for resale by the holders thereof
in the manner designated by them. Company shall not permit any securities other
than the Warrant Stock to be included in the Shelf Registration Statement.
Registration Procedures.
Company will:
prepare and file with the Commission the Shelf Registration Statement on for
before June 9, 2000 and use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act on or prior to
August 9, 2000, and to keep the Shelf Registration Statement continuously
effective under the Securities Act until August 9, 2004 or such shorter period
ending when all shares of Warrant Stock have been sold in the manner set forth
and as contemplated in the Shelf Registration Statement (the "Effectiveness
Period") as expeditiously as possible, prepare and file with the Commission such
amendments and supplements to the Shelf Registration Statement and the
prospectus used in connection therewith or any document incorporated therein by
reference as may be necessary to keep the Shelf Registration Statement effective
and to comply with the provisions of the Securities Act with respect to the sale
or other disposition of all Warrant Stock until the expiration of the
Effectiveness Period; provided, however, that Company shall not be required to
amend or supplement the Shelf Registration Statement or the prospectus used in
connection therewith or any document incorporated therein by reference, in the
event that, and for a period not to exceed 90 consecutive days or an aggregate
of 180 days in any 12-month period if, (I) an event occurs and
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is continuing as a result of which the Shelf Registration Statement would, in
Company's good faith judgment, contain an untrue statement of material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading and
(ii)(a) Company determines in its good faith judgment that the disclosure of
such event at such time would have a material adverse effect on the business,
operations or prospectus of Company or (b) the disclosure otherwise relates to a
pending material business transaction that has not been publicly disclosed;
as expeditiously as possible, furnish to the holders of Warrant holders such
number of copies of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents, as such holders may reasonably request;as
expeditiously as possible, use its best efforts to register or qualify the
securities covered by the Shelf Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United States and
Puerto Rico as each holder of such securities shall request (provided, however,
that Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then qualified or
to file any general consent to service or process), and do such other reasonable
acts and things as may be required of it to enable such holder to consummate the
disposition in such jurisdiction of the Warrant Stock; and as expeditiously as
possible, otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, but not later than 18 months after the effective
date of the Shelf Registration Statement, an earnings statement covering a
period of at least 12 months beginning after the effective date of the Shelf
Registration Statement, which earnings statements shall satisfy the provisions
of Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of Company under to this
Section 9 that the holders of the Warrant Stock shall furnish to Company such
information regarding the Warrant Stock held by such holders and the intended
method of disposition thereof as Company shall reasonably request and as shall
be required in connection with the action taken by Company.
Expenses. All expenses incurred in complying with Section 9, including, without
limitation, all registration and filing fees (including all expenses incident to
filing with the NASD), printing expenses, fees and disbursements of counsel for
Company, the reasonable fees and expenses of one counsel for the holders of the
Warrant Stock (selected by the Majority Holders), expenses of any special audits
incident to or required by any such registration and expenses of complying with
the securities or blue sky laws of any jurisdictions pursuant to Section 9.4(d),
shall be paid by Company.
Indemnification and Contribution. i) Company shall indemnify and hold harmless
the holder of the Warrant Stock, such holder's directors and officers, and each
other Person who participated in the offering of such Warrant Stock and each
other Person, if any, who controls such holder or such participating Person
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or
officer or participating Person or controlling Person may become subject under
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in the Shelf Registration Statement
under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse such holder or such director, officer or
participating Person or controlling Person for any legal or any other expenses
reasonably incurred by such holder or such director, officer or participating
Person or controlling Person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any alleged untrue
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statement or alleged omission made in the Shelf Registration Statement,
preliminary prospectus, prospectus or amendment or supplement in reliance upon
and in conformity with written information furnished to Company by such holder
specifically for use therein. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such holder or
such director, officer or participating Person or controlling Person, and shall
survive the transfer of such securities by such holder. Each holder of any
Warrant Stock, by acceptance thereof, agrees to indemnify and hold harmless
Company, its directors and officers and each other Person, if any, who controls
Company within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which Company or any such director
or officer or any such Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
information in writing provided to Company by such holder of such Warrant Stock
specifically for use in the following documents and contained, on the effective
date thereof, in the Shelf Registration Statement, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto, but
in an amount not to exceed the net proceeds received by such holder in the
offering.
If the indemnification provided for in this Section 9 from the indemnifying
party is unavailable to an indemnified party hereunder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. The liability of any holder of Warrant Stock
hereunder shall not exceed the net proceeds received by it in the offering.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 9.6(c) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
Termination of Restrictions. Notwithstanding the foregoing provisions of Section
9, the restrictions imposed by this Section upon the transferability of the
Warrants, the Warrant Stock and the Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) and the legend requirements of
Section 9.1 shall terminate as to any particular Warrant or share of Warrant
Stock or Restricted Common Stock (or Common Stock issuable upon the exercise of
the Warrants) (i) when and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (ii)
when Company shall have received an opinion of counsel reasonably satisfactory
to it that such shares may be transferred without registration thereof under the
Securities Act. Whenever the restrictions imposed by Section 9 shall terminate
as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from Company, at the expense of Company, a new Warrant without the
restrictive legend set forth in Section 9.1(b). Whenever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the holder thereof shall be
10
<PAGE>
entitled to receive from Company, at Company's expense, a new certificate
representing such Common Stock not bearing the restrictive legend set forth in
Section 9.1(a).
Representations of GE Capital. GE Capital represents and warrants to Company
that: it is purchasing the Warrant solely for its own account and not as nominee
or agent for any other person and not with a view to, or for offer or sale in
connection with, any current distribution thereof (within the meaning of the
Securities Act) that would cause the original purchase of the Warrant to be in
violation of the securities laws of the United States of America, without
prejudice, however, to its right at all times to sell or otherwise dispose of
all or any part of the Warrant pursuant to a registration statement under
Securities Act or pursuant to an exemption from the registration requirements of
the Securities Act, and subject to the disposition of its property being at all
times within its control.
GE Capital is knowledgeable, sophisticated and experienced in business and
financial matters and in investing in privately held and public business
enterprises; it has previously invested in securities similar to the Warrant and
it acknowledges that the Warrant has not been registered under the Securities
Act and understands that the Warrant must be held indefinitely unless it is
subsequently registered under the Securities Act or such sale is permitted
pursuant to an available exemption from such registration requirement; it is
able to afford the complete loss of such investment; and it is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act.
GE Capital did not make its investment decision to purchase the Warrant based on
any form of general solicitation or general advertising used by Company,
including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
Listing on Securities Exchange. If Company shall list (or shall currently have
listed) any shares of Common Stock on any securities exchange or Nasdaq, it
will, at its expense, list thereon, maintain and, when necessary, increase such
listing of, all shares of Common Stock issued or, to the extent permissible
under the applicable securities exchange rules, issuable upon the exercise of
this Warrant so long as any shares of Common Stock shall be so listed during any
such Exercise Period.
SUPPLYING INFORMATION
Company shall cooperate with each Holder of a Warrant and each holder of
Restricted Common Stock in supplying such information as may be reasonably
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Stock.
LOSS OR MUTILATION
Upon receipt by Company from any Holder of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of this
Warrant and indemnity reasonably satisfactory to it (it being understood that
the written agreement of GE Capital shall be sufficient indemnity), and in case
of mutilation upon surrender and cancellation hereof, Company will execute and
deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to Company for cancellation.
OFFICE OF COMPANY
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<PAGE>
As long as any of the Warrants remain outstanding, Company shall maintain an
office or agency (which may be the principal executive offices of Company) where
the Warrants may be presented for exercise, registration of transfer, division
or combination as provided in this Warrant.
FINANCIAL AND BUSINESS INFORMATION
Quarterly Information. To the extent Company is not required to file quarterly
reports (pursuant to the Exchange Act) with the Commission, Company will deliver
to each Holder, as soon as practicable after the end of each of the first three
quarters of Company, and in any event within 45 days thereafter, one copy of an
unaudited consolidated balance sheet of Company and its subsidiaries as at the
close of such quarter, and the related unaudited consolidated statements of
income and cash flows of Company for such quarter and, in the case of the second
and third quarters, for the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year. Such financial statements shall be prepared
by Company in accordance with GAAP (without period-end adjustments or footnotes)
and accompanied by the certification of Company's chief executive officer or
chief financial officer that such financial statements are complete and correct
and present fairly the consolidated financial position, results of operations
and cash flows of Company and its subsidiaries as at the end of such quarter and
for such year-to-date period, as the case may be.
Annual Information. To the extent Company is not required to file annual reports
(pursuant to the Exchange Act) with the Commission, Company will deliver to each
Holder as soon as practicable after the end of each fiscal year of Company, and
in any event within 90 days thereafter, one copy of: an audited consolidated
balance sheet of Company and its subsidiaries as at the end of such year, and
audited consolidated statements of income and cash flows of Company and its
subsidiaries for such year; setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal year, all prepared
in accordance with GAAP, and which audited financial statements shall be
accompanied by (i) an opinion thereon of the independent certified public
accountants regularly retained by Company, or any other firm of independent
certified public accountants of recognized national standing selected by Company
and (ii) a report of such independent certified public accountants confirming
any adjustment made pursuant to Section 4 during such year.
Filings. Company will deliver to Holder promptly upon their becoming available
one copy of each report, notice or proxy statement sent by Company to its
stockholders generally, and of each regular or periodic report (pursuant to the
Exchange Act), filed by Company with (i) the Commission or (ii) any securities
exchange on which shares of Common Stock are listed.
LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to purchase
shares of Common Stock, and no enumeration herein of the rights or privileges of
Holder hereof, shall give rise to any liability of such Holder for the purchase
price of any Common Stock or as a stockholder of Company, whether such liability
is asserted by Company or by creditors of Company.
MISCELLANEOUS
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise
any right hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice Holder's rights, powers or remedies. If Company
fails to make, when due, any payments provided for hereunder, or fails to comply
with any other provision of this Warrant, Company shall pay to Holder such
amounts as shall be sufficient to cover any costs and expenses including, but
not limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
12
<PAGE>
Notice Generally. Any notice, demand, request, consent, approval, declaration,
delivery or other communication hereunder to be made pursuant to the provisions
of this Warrant shall be sufficiently given or made if in writing and either
delivered in person with receipt acknowledged or sent by registered or certified
mail, return receipt requested, postage prepaid, or by telecopy and confirmed by
telecopy answerback, addressed as follows:
If to any Holder or holder of Warrant Stock, at its last known address appearing
on the books of Company maintained for such purpose.
If to Company at
Modem Media.Poppe Tyson, Inc.
230 East Avenue
Norwalk, Connecticut 06855
Attention: Chief Financial Officer
Telecopy Number: (203) 299-7060
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three (3) Business Days after the same shall have been deposited
in the United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
Remedies. Each holder of Warrant and Warrant Stock, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under Section 9 of this
Warrant. Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of Section 9
of this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
Successors and Assigns. Subject to the provisions of Sections 3.1 and 9, this
Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors of Company and the successors and assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
Warrant Stock.
Amendment. This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived with the written consent of Company and the Majority
Holders, provided that no such Warrant may be modified or amended to reduce the
number of shares of Common Stock for which such Warrant is exercisable or to
increase the price at which such shares may be purchased upon exercise of such
Warrant (before giving effect to any adjustment as provided therein) without the
prior written consent of the Holder thereof.
Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
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<PAGE>
Headings. The headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.
Governing Law. This Warrant shall be governed by the laws of the State of New
York, without regard to the provisions thereof relating to conflict of laws.
IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed by its
authorized officer.
Dated: August 9, 1999
MODEM MEDIA.POPPE TYSON, INC.
/s/: Robert Allen
President and COO
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<PAGE>
Exhibit:10.13
Confidential treatment has been requested for portions of this Exhibit 10.13.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as [XXXXX]. A complete version of this Exhibit
has been filed with Securities and Exchange Commission.
<PAGE>
GENERAL ELECTRIC-MODEM MEDIA.POPPE TYSON, INC.
MASTER SERVICES AGREEMENT
This Master Services Agreement (the "Agreement") is between Modem
Media.Poppe Tyson, Inc. with its principal place of business at 230 East
Avenue, Norwalk, Connecticut 06855 ("Modem Media") and General Electric
Company with its principal place of business at 3135 Easton Turnpike,
Fairfield, Connecticut 06431 ("GE"). The provisions of this Agreement
shall apply to Services provided to GE, globally, under this Agreement.
When completed and executed by both parties, a Statement of Work shall
evidence the Services to be provided and GE's payment obligation for same.
A. Definitions
1. "Services" shall mean work performed by Modem Media for GE pursuant
to a SOW, agreed to by the parties, under this Agreement. The
schedule and particular requirements for Services will be agreed
upon by the parties in a SOW.
2. "Statement of Work (SOW) " shall mean any mutually agreed upon form
for ordering Services and any written attachments thereto, which
form(s) shall specify the Services, applicable fees (including
whether such fees shall be on a time & materials ("T&M"), or on a
fixed price ("FP") basis), scope of work, and appropriate project
timelines, as well as any project-specific requirements; for
example, the intent of parties with respect to any rights to
particular developments (intellectual property), specific project
milestones and/or quality and warranty considerations (e.g.
DFSS-Design for Six Sigma Requirements), special fees, and all such
other particular objectives, considerations, or requirements in
conjunction with the delivery of Services by Modem Media. Each SOW
shall be governed by the terms of this Agreement and shall reference
the Effective Date specified below. SOWs for Services outside the
United States may, upon agreement of the parties, include terms and
conditions which modify or are in addition to the provisions of this
Agreement due to the laws of the country.
B. Charges, Payment, and Taxes
1. Fees for Services
Services will be provided either on a time and material (T&M) basis
at rates and applicable discounts in accordance with Exhibit A
during the term thereof, or on a fixed price basis (FP), at the
fixed price stated in the applicable SOW, where the bid for such
fixed price shall incorporate rates and [XXXXX] in accordance with
the letter agreement between the parties hereto dated August 4, 1999
(the "Letter Agreement") and attached hereto as Exhibit A.
If a dollar limit is stated in the applicable SOW for T&M Services,
the limit shall be deemed an estimate for GE's budgeting and Modem
Media's resource scheduling purposes; after the limit is expended,
Modem Media will continue to
- ----------
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE>
provide the Services on a T&M and GE agrees that Modem Media will be
paid for such additional Services unless such estimate was deemed to
be a firm limit as stated in a SOW.
2. Invoicing and Payment
Modem Media shall invoice GE monthly, or, according to local Modem
Media practice if outside of the US, unless otherwise expressly
specified in the applicable SOW. Charges shall be payable within
forty-five (45) days firm of receipt of invoice. Notwithstanding the
previous sentence, GE shall pay pass through costs and third party
costs within 30 days of receipt of invoice from Modem Media if Modem
Media's payment terms for such charges are less than 45 days. GE
shall issue a purchase order, or alternative document acceptable to
Modem Media, on or before commencement of Services under the
applicable SOW.
3. Incidental Expenses
Upon prior written agreement of the parties, appropriate travel,
administrative, and out-of-pocket expenses incurred by Modem Media
in connection with the Services performed shall be invoiced and
reimbursed by GE to Modem Media. Modem Media acknowledges that, when
approved by GE, any such incidental expenses incurred by Modem Media
for which Modem Media will be reimbursed by GE shall be in
accordance with GE's general policies for such expenses. A copy of
such policies is attached herewith as Exhibit B.
4. Third Party Software
Without the express written authorization of an applicable SOW,
Modem Media shall not acquire any license in Third Party Software
for the development, of incorporation into, or use of the GE
Property. Prior to acquiring any Third Party Software that shall
cost GE more than ten thousand dollars ($10,000) in the aggregate
and under the foreseeable deployment contemplated in the applicable
SOW, Modem Media shall verify to the extent commercially practical
with GE that GE does not have any existing license to such Third
Party Software under which Modem Media can utilize such Third Party
Software at no additional expense to GE. If GE does not have any
license to the required Third Party Software, any Third Party
Software that will cost greater than ten thousand dollars ($10,000)
shall be specifically approved by GE in the applicable SOW or
relevant Change Order. Unless otherwise noted, license fees for
Third Party Software that are less than ten thousand dollars
($10,000) per copy are not included in the payments to Modem Media
under any SOW and will be the responsibility of GE
Further, Modem Media will identify in all applicable SOWs any Third
Party Software which may be used in the development of (or may need
to be used by GE in the operation or modification of) the GE Web
Site for which Modem Media cannot grant to GE the rights set forth
in Section D. 2. below. Except to the extent described in a SOW or
otherwise agreed by GE and the Third Party Software licensor, Modem
Media represents and warrants (to the extent reasonably foreseeable
by Modem Media) that there are and will be no royalty terms
applicable to Modem Media's or GE's use of such Third Party Software
in work product made for hire, including GE Property, pursuant to
any SOW under this Agreement. Modem Media shall assign to GE all
licenses and sublicenses to
<PAGE>
Third Party Software executed by Modem Media for the purpose of
performing the tasks contemplated by any SOW and necessary for the
operation of any Work or the GE Property as reasonably foreseeable
under any SOW. Modem Media shall provide to GE, on terms identical
to those granted to Modem Media by third parties, a sub-license to
use any third party computer code routine that is made part of any
Work or GE Property provided under any SOW.
GE shall set forth all GE standard software and hardware platforms
that may be relevant to any SOW, including all Third Party Software
licenses relating thereto, and Modem Media shall work with GE to
ensure that, whenever possible, such standard software and platforms
are taken into consideration during the design and development of
the GE Property and its specifications.
5. Taxes
The charges do not include taxes. If Modem Media is required to pay
any federal, state, country or local taxes based on the Services
provided under this Agreement, the taxes shall be billed to and paid
by GE; this shall not apply to taxes based on Modem Media's income.
C. GE and Modem Media Obligations
1. GE support of Modem Media Services Engagements: GE acknowledges that
the timely provision of and access to office accommodations,
facilities, equipment, assistance, cooperation, complete and
accurate information and data from its officers, agents, and
employees, and suitably configured computer products, where such
computer products are identified in writing by Modem Media and
acknowledged in writing by GE in an appropriate SOW, may be
essential to the performance of any Services and that Modem Media's
ability to complete any Services may be dependent upon same. If, for
the performance of Services, GE is to provide computer products in
addition to those previously obtained by GE, such additional
computer products will be agreed upon by the parties and identified
in writing in the applicable SOW. If any of the aforementioned items
essential to Modem Media's performance of the Services are not
provided or provided in such a way that Modem Media is unable to
perform the Services, Modem Media's Project Manager shall so inform
GE in writing, including the relevant specifics and details. GE
acknowledges that Modem Media's ability to provide services as set
forth in an SOW may be affected if GE does not provide reasonable
assistance as set forth above.
2. Modem Media support of Services Engagements Modem Media acknowledges
its obligations to provide reasonable assistance and cooperation to
GE in order to perform any Services and that GE's ability to benefit
from the provision of Services may be dependent upon same.
3. Project Management GE business units shall designate Project
Manager(s) who shall be principally responsible for providing
direction for Modem Media's provision of Services to GE business
unit projects, as initiated by particular SOWs. Such Project
Manager(s) shall assist Modem Media to facilitate an efficient
delivery of Services.
<PAGE>
4. Resource Changes. GE, in its reasonable discretion, may request that
Modem Media remove a particular consultant who is providing Services
under this Agreement and applicable SOW if GE reasonably believes
that such consultant is not providing Services as warranted and
Modem Media, after notice, has been unable to resolve performance
issues relative to such consultant. Modem Media shall pay the costs
of familiarizing the replacement consultant with the project and GE
agrees that time deadlines and cost estimates, if any, may require
adjustment as a result of replacing a consultant. GE may request to
interview and approve any replacement consultant prior to such
consultant's commencement of Services for GE; GE's approval shall
not be unreasonably withheld.
5. Change Orders. Any change in the specified Scope of Work in an SOW
that would have a material impact to either party on the fixed or
estimated SOW cost or SOW schedule must be mutually agreed upon by
the parties in writing. Modem Media consent should be obtained if
any change in GE's system environment (software or hardware) will
impair Modem Media's ability to perform the Services. Modem Media's
standard Change Order Procedures may be used to document these
changes.
D. INFRINGEMENT, WARRANTY, REMEDY, LIMITATION OF LIABILITY, INSURANCE
1. Infringement:
Modem Media represents and warrants that it has the authority or has
obtained the appropriate license or transfer rights for all elements
incorporated into any Deliverable or work for hire prepared for GE
pursuant to this Agreement. Modem Media further represents and
warrants that it has the authority to grant such rights
Each party ("Provider") will defend and indemnify the other party
("Recipient") against a claim that any information, design,
specification, instruction, software, data, or material furnished by
the Provider ("Material") and used by the Recipient in connection
with either the provision or the receipt of the Services infringes a
copyright or patent provided that: (a) the Recipient notifies the
Provider in writing within thirty (30) days of the claim; (b) the
Provider has sole control of the defense and all related settlement
negotiations; and (c) the Recipient provides the Provider with the
assistance, information, and authority reasonably necessary to
perform the above; reasonable out-of-pocket expenses incurred by the
Recipient in providing such assistance will be reimbursed by the
Provider.
The Provider shall have no liability for any claim of infringement
resulting from: (a) the Recipient's use of a superseded or altered
release of some or all of the Material if infringement would have
been avoided by the use of a subsequent unaltered release of the
Material which is provided to the Recipient; or (b) any information,
design, specification, instruction, software, data, or material not
furnished by the Provider.
In the event that some or all of the Material is held or is believed
by the Provider to infringe, the Provider shall have the option, at
its expense, (a) to modify the Material to be non-infringing; (b) to
obtain for the Recipient a license to continue
<PAGE>
using the Material; or (c) to require return of the infringing
Material and all rights thereto from the Recipient. If Modem Media
is the Provider and such return materially affects Modem Media's
ability to meet its obligations under this Agreement and applicable
SOW, then GE may, at its option and upon thirty days' prior written
notice to Modem Media, terminate the applicable SOW and shall be
entitled to recover the fees paid by GE for that portion of the
Material and for those Services provided to develop the Material
which GE cannot reasonably use as a consequence of Modem Media's
provision of infringing Material. If GE is the Provider and such
return materially affects Modem Media's ability to meet its
obligations under this Agreement and applicable SOW, then Modem
Media may, at its option and upon thirty days' prior written notice
to GE, terminate the applicable SOW and GE shall pay Modem Media for
the Services rendered through the date of termination on a T&M or
percent of completion basis as applicable under the SOW. This
Section D.1 states the parties' entire liability and exclusive
remedy for infringement.
2. Warranty:
Modem Media represents and warrants that it is the sole owner of, or
has obtained appropriate license, use and/or transfer rights from
the rightful owner of all elements incorporated into all Services
and work product made for hire including GE Property prepared by
Modem Media for GE pursuant to this Agreement and any SOW.
Modem Media further represents and warrants that such rights have
been obtained (or will be obtained, as appropriate) for all elements
incorporated into all Services and work product made for hire
including GE Property under all applicable laws for such enforceable
legal and intellectual property rights including, but not limited to
copyrights, patent rights, trademark rights, trade secret rights,
privacy rights and publicity rights-whether such elements are text,
databases, musical works, sound recordings, images, audiovisual
works, software or other digital audio, visual, graphical or other
content elements. In each case such rights will be obtained by Modem
Media for GE for the known, anticipated, or reasonably foreseeable
use by GE contemplated by any SOW pursuant to this Agreement.
Modem Media further represents and warrants that it has the full
power and authority to grant the rights herein granted to GE without
the further, future or conditional consent of any other person or
party.
Modem Media warrants that its Services hereunder will be performed
by qualified individuals in a professional and workmanlike manner
conforming to generally accepted industry standards and practices,
and Modem Media's consulting methodology and/or such other
methodology(s) as may be mutually agreed upon by the parties. Modem
Media further warrants that unless otherwise agreed to by the
parties in writing, all such development by Modem Media on behalf of
GE shall be in compliance with Modem Media development guidelines
and Modem Media best practices and in conformance with release
compatibility considerations for other Modem Media applications,
whether commercially developed, or developed specifically as GE
Property under this Agreement.
<PAGE>
The foregoing warranty is exclusive and in lieu of all other
warranties, whether express or implied, including the implied
warranties of merchantability and fitness for a particular purpose.
In order to receive warranty remedies, GE must report deficiencies
in the Services to Modem Media in writing within five days of
learning of such deficiency but in no event later than 90 days of
performance of T&M Services and in the case of fixed price Services
no later than 90 days of delivery of the GE Property.
3. Year 2000 Compliance Warranty
In addition to any other warranties and representations provided by
Modem Media to GE, whether pursuant to this Agreement or by law,
Modem Media represents and warrants that any Services, work for hire
and GE Property provided pursuant to an SOW and (a) any product(s)
and/or maintenance and support services, as provided by Modem Media
hereunder, including, without limitation, each item of hardware,
software, firmware, content element, Programs, Subroutines, and
Tools and/or Utilities; any system, equipment, or products
consisting of or containing one or more thereof; and any and all
enhancements, program upgrades, customizations, modifications shall
be Year 2000 Compliant at the time of delivery and at all times
thereafter and in all subsequent updates or revisions of any kind,
and (b) Modem Media's supply of Services and GE Property to GE shall
not be interrupted, delayed, decreased, or otherwise affected by
dates prior to, on, after or spanning January 1, 2000.
For purposes of this Agreement, Year 2000 Compliant means that (1)
the Services and GE Property accurately process, provide and/or
receive date data (including without limitation calculating,
comparing, and sequencing), within, from, into, and between
centuries (including without limitation the twentieth and
twenty-first centuries), including leap year calculations, to the
extent that other information technology, used in combination with
the Services and GE Property, properly exchanges date data
(including without limitation calculating, comparing, and
sequencing), and (2) neither the performance nor the functionality
nor your supply to GE of the Services will be affected by dates
prior to, on, after, or spanning January 1, 2000.
The functionality of said Services and GE Property to ensure
compliance with the foregoing warranties and representations shall
include, date data century recognition, calculations that
accommodate same century and multi-century formulae and date values,
and date data interface values that reflect the century. In
particular (i) no value for current date will cause any error,
interruption, or decreased performance in the operation of such
Services and GE Property, (ii) all manipulations of date-related
data (including, but not limited to, calculating, comparing,
sequencing, processing, and outputting) will produce correct results
for all valid dates, including when used in combination with other
products to the extent that other information technology, used in
combination with the Services and GE Property, properly exchange
date data, (iii) date elements in interfaces and data storage will
specify the correct century to eliminate date ambiguity without
human intervention, including Leap Year calculations, (iv) where any
date element is represented without a century, the correct century
will be
<PAGE>
unambiguous for all manipulations involving that element, (v)
authorization codes, passwords, and zaps (purge functions) should
function normally and in the same manner prior to, on, after and
spanning January 1, 2000, including, without limitation, the manner
in which they function with respect to expiration dates and CPU
serial numbers.
If at any time the Services and GE Property are found, by GE, not to
be Year 2000 Compliant, then, in addition to any other obligation of
Modem Media under the law, pursuant to this Agreement, at equity, or
otherwise, at no additional charge to GE, Modem Media shall, by no
later than thirty (30) days after receipt of a report of
noncompliance from GE, render the Services Year 2000 Compliant, and
shall thereafter distribute such corrected version to GE, and, at
GE's option, install such corrected version for GE, all free of
charge. In doing so, Modem Media shall not require GE to make any
changes to the Services except to install or have installed any
changes provided by Modem Media, shall not require or cause to be
made any changes to GE's data unless GE in its sole discretion
approves such changes, and shall not require or cause to be made any
changes to any other product or service that GE uses in its business
operations. If, as a result of a Year 2000 warranty claim by any
other of Modem Media's customers, Modem Media generally releases a
version of hardware, software, firmware, Programs, Subroutines, and
Tools and/or Utilities in response to such warranty claim, then
Modem Media shall make such version(s) available to GE at no charge.
If the performance Modem Media's obligations as set forth above are
not commercially feasible, then Modem Media's liability as to the
remedy of any deficiencies of this Year 2000 Compliant warranty
provision shall be to repair or replace the non-conforming Product.
Notwithstanding anything herein to the contrary, the liability of
Modem Media for a breach of Modem Media's Year 2000 Compliant
representation and warranty shall be limited to an amount not to
exceed two (2) times the value of the SOW related to the breach of
this warranty set forth in Section D3. This Section D.3 states the
parties' entire liability and exclusive remedy for breach of Y2k
warranty.
MODEM MEDIA SHALL NOT BE RESPONSIBLE FOR ANY CONSEQUENTIAL, SPECIAL,
INCIDENTAL OR INDIRECT DAMAGES OR LOST PROFITS, INCLUDING LOSS OF
DATA for breach of this warranty set forth in Section D3. Modem
Media makes no warranties (whether written, verbal, implied or
inferred) concerning the Year 2000 readiness of any third-party
services or information technology relied upon, licensed or
subcontracted from others in connection with the Services; provided,
however, that Modem Media will not use any third party materials
without obtaining a Year 2000 Warranty on behalf of GE. In the event
Modem Media cannot obtain a warranty for any third-party materials,
Modem Media will promptly inform GE. If Modem Media cannot obtain a
Year 2000 Warranty for a third party material on behalf of GE, such
third party material will treated in the same manner as if it cost
above $10,000 for purposes of Section B4, Third Party Software,
above.
Any statute of limitations that might be applicable to Modem Media's
Year 2000 Compliant warranty and representation shall not accrue or
begin to run until the
<PAGE>
later of January 1, 2000 or the time when such statute of
limitations would otherwise accrue or begin to run, and, with
respect to any claim based on any failure of the Services to be Year
2000 Compliant, Modem Media shall not assert any defense based on or
alleging the passage of time from the Effective Date of this
Agreement to January 1, 2000.
4. Exclusive Remedy for Breach of Warranty: Except for the warranties
set forth in Sections D1 "Infringement", and D3, "Year 2000
Warranty", for any breach of the above warranty, GE's exclusive
remedy, and Modem Media's entire liability, shall be the
re-performance of the Services. If Modem Media is unable to
re-perform the Services as warranted, GE shall be entitled to
recover the fees paid to Modem Media for the deficient Services and
for those Services provided under an applicable SOW arising from or
related to the deficient Services which GE cannot reasonably use as
a consequence of Modem Media's inability to perform the Services as
warranted.
5. Limitation of Liability: In no event shall either party be liable to
the other party for any indirect, incidental, special or
consequential damages, or damages for loss of profits, revenue,
data, or use, incurred by either party or any third party, whether
in an action in contract or tort, even if the other party or any
other person has been advised of the possibility of such damages.
Modem Media's and GE's liability for damages hereunder shall in no
event exceed the amount of fees paid and payable by GE under an
applicable SOW for the relevant Services. In no event shall the
foregoing limitation limit either party's liability to the other
party for direct damages resulting from the following: (i) any
violation by one party of the other party's intellectual property
rights, or (ii) either party's disclosure of the other party's
Confidential Information, or (iii) personal injury, or (iv) tangible
property damage; nor shall said foregoing limitation apply to a
Modem Media's indemnity obligation under the first paragraph of
Section D.1 "Infringement" of this Agreement nor to shall said
forgoing limitation apply to Section D3, "Year 2000 Warranty",. As
used above, the term "tangible property" shall not include software,
documentation, and/or data files.
6. Insurance: During the performance of Services under this Agreement,
Modem Media shall provide and maintain minimum insurance coverage as
follows:
(a) Worker's Compensation and employees liability, per statutory
requirements;
(b) Comprehensive General Liability insurance including contractual
liability coverage with the following limits in equivalent units of
the local currency:
Bodily Injury: Each Person $1,000,000 USD
Each Occurrence $1,000,000 USD
Property Damage: Each Accident $1,000,000 USD
Aggregate $2,000,000 USD
Upon GE's request, Modem Media shall provide GE with a certificate
of insurance completed by its insurance carrier certifying that
minimum insurance coverage as required above are in effect.
<PAGE>
E. ADDITIONAL TERMS
1. Term and Termination: This Agreement shall commence on its Effective
Date and shall remain in effect for a period of fifteen (15) months
from July 1, 1999 ("the Effective Date").
GE may terminate this Agreement if Modem Media is in material breach
of this Agreement after having Repeatedly Failed ("Repeatedly
Failed" shall mean on more than two occasions) to materially perform
the Services defined in one or more SOWs in a manner required by
this Agreement or a SOW; provided that GE has given Modem Media
written notice upon the occurrence of each such failure, which
notice shall specify each such failure, and provided further that
Modem Media has not cured each such failure within 30 days of each
notice. GE may also terminate this Agreement if Modem material
breach for any other reason and has not cured the breach within
thirty (30) days' written notice specifying the breach.
Modem Media may terminate this Agreement as to a particular major
Business Unit of GE if the major Business Unit is in material breach
of the Agreement and has not cured the breach within thirty (30)
days' written notice specifying the breach. Except for any material
breach by Modem Media for Repeated Failures, consent to extend the
cure period shall not be unreasonably withheld, so long as the
breaching party has commenced cure during the thirty-day notice
period and pursues cure of the breach in good faith. If the other
party shall have become insolvent or bankrupt, admitted in writing
its inability to pay its debts as they mature or taken any action
for the purpose of entering into winding-up, dissolution,
bankruptcy, reorganization or similar proceedings analogous in
purpose or effect thereto, or any such action shall have been
instituted against it and such party shall have acceded thereto or
such action shall not have been dismissed or stayed within sixty
(60) days of the institution thereof, or any order shall have been
made by any competent court or any resolution shall have been passed
for the appointment of a liquidator or trustee in bankruptcy or such
party shall have appointed or suffered to be appointed any receiver
or trustee of the whole or any material part of its assets or
business or shall have entered into any composition with its general
creditors. In any such event the other may terminate this Agreement
at any time after such event by giving notice or may suspend or
cancel it obligations for services or payment during the
continuation of any such event.
In the event that within fifteen months after the Effective Date
hereof substantially all of the assets of Modem Media are acquired
by a third party, or that all or substantially all of the capital
stock of Modem Media is acquired by a third party, GE shall have the
right to terminate this Agreement. An assignee of either party, if
authorized hereunder, shall be deemed to have all of the rights and
obligations of the assigning party set forth in this Agreement.
Termination of this Agreement shall not limit either party from
pursuing any other remedies available to it, including injunctive
relief. Termination shall not relieve GE of its obligation to pay
(I) for work performed, Services rendered and Modem Media's expenses
in connection with any SOW and this Agreement, and (ii) all charges
that have accrued prior to such termination to the extent that such
<PAGE>
charges have a) been previously approved in writing by GE and b)
such charges, are assignable to GE and without any additional
assignment penalty or cost to GE. The parties' rights and
obligations under Sections A, B, C, and D shall survive termination
of this Agreement. After termination and upon GE's request, Modem
Media shall return to GE any GE data, records, or other materials,
provided that GE has furnished Modem Media with a list of the data,
records, and other materials to be returned.
2. Rights to Developments
(a) "GE Property" shall mean all tangible GE Property (i.e., any GE
Property in written, electronic or other documentary form, including
tape or disk) provided to GE under this Agreement and/or applicable
SOW except for: (i) any software program(s) and documentation owned
or distributed by Modem Media that are developed prior to or outside
of the scope of this Agreement and/or applicable SOW ("Programs");
(ii) any Modem Media high level macro-language or CASE-generated
subroutines that are used in developing or that are embodied in the
GE Property ("Subroutines") (excluding any GE Confidential
Information); and (iii) any Tools or Utilities previously developed
by or on behalf of Modem Media as generic utility software.
As used in the preceding sentence, "Tools" and/or "Utilities" shall
refer to software code and/or a portion of code that: (i)
accelerates the pace of application development; or (ii) accelerates
the data conversion process.
(b) Modem Media shall develop GE Property as a work made for hire (i.e.
GE shall own the copyright and all other intellectual property
rights to the GE Property), and Modem Media upon creation of such GE
Property automatically assigns, and agrees to assign without further
consideration, the copyright and all other intellectual property
rights to all such GE Property. Modem Media will provide GE with the
source code for the GE Property. Upon written agreement by GE, at
GE's sole and exclusive discretion, and for such consideration as GE
and Modem Media may agree to in writing, Modem Media may request to
acquire the nonexclusive right to use and distribute the copyrighted
GE Property.
(c) Modem Media retains all right, title, and interest, including all
copyrights and patents, in any preexisting Programs, Subroutines,
and Tools and/or Utilities owned by Modem Media. Modem Media grants
to GE and subsidiaries of GE a worldwide, nonexclusive,
nontransferable, royalty-free, perpetual, irrevocable internal use
license to use, copy, and modify such Subroutines and Tools and/or
Utilities that are incorporated into the GE Property. Nothing in
this paragraph shall be deemed to expand or restrict the rights
granted for Programs under the applicable licensing.
4. Nondisclosure: By virtue of this Agreement, the parties may have
access to information that is confidential to one another
("Confidential Information"). Confidential Information shall be
limited to any Modem Media program licenses, the GE Property,
Subroutines, Tools and Utilities, and all information that would
reasonably be considered confidential, including but not limited to
GE's employees, organization, activities, policies, or software
developed or licensed by GE, products and including any written
reports, findings, conclusions,
<PAGE>
recommendations, or reporting data and analysis prepared by Modem
Media and provided to GE under this Agreement. It is the intent of
this Section that Modem Media not disclose to any third party any
information it learns concerning the business of GE in the
performance of Services hereunder without the express written
consent of GE. GE shall use commercially reasonable efforts to
disclose to Modem Media employees only that information which is
necessary for the performance of this Agreement.
A party's Confidential Information shall not include information
that (a) is or becomes a part of the public domain through no act or
omission of the other party; or (b) was in the other party's lawful
possession prior to the disclosure and had not been obtained by the
other party either directly or indirectly from the disclosing party;
or (c) is lawfully disclosed to the other party by a third party
without restriction on disclosure; or (d) is independently developed
by the other party. Results of benchmark tests run by GE may not be
disclosed unless Modem Media consents to such disclosure in writing.
The parties agree, both while the Services are being performed under
the applicable SOW and for a period of two years after the earlier
of cessation of Services under or termination of the applicable SOW,
to hold each other's Confidential Information in confidence. The
parties agree not to make each other's Confidential Information
available in any form to any third party or to use each other's
Confidential Information for any purpose other than the
implementation of this Agreement. Each party agrees to use the same
degree of care that it uses to protect its own confidential
information of a similar nature and value, but in no event less than
a reasonable standard of care, to ensure that Confidential
Information is not disclosed or distributed by its employees or
agents in violation of the provisions of this Agreement. Each party
represents that it has, with each of its employees who may have
access to any Confidential Information, an appropriate agreement
sufficient to enable it to comply with all of the terms of this
Section D.4.
5. Publicity: Except as otherwise required by law, neither party shall
release information with respect to the existence or terms of this
Agreement or an amendment or any other document thereto or use the
name of the other in publicity releases or advertising without
securing the prior written consent of the other.
6. Compliance with GE's Policies
6.1 Safety Policies. Modem Media agrees to use reasonable efforts
to cause any consultant who provides Services under this
Agreement to comply when on GE's premises with GE's reasonable
standard safety policies that GE communicates to such
consultant, to the extent that such policies are applicable to
the site where such consultant is providing Services.
6.2 Drug Abuse Policies. Modem Media will advise any consultant
who provides Services under this Agreement of GE's policy,
exclusively when providing services where drug screening is
mandatory pursuant to governmental regulations, to require an
initial drug screen prior to the commencement of the
assignment and, further, to require a drug screen at
<PAGE>
any time during the assignment either (i) if the GE believes
in good faith that the consultant is under the influence of an
illegal substance, or (ii) as a consequence of an accident
caused by or involving the consultant on GE's premises during
the performance of this Agreement and likely to have been
related to the consultant's use of an illegal substance. Any
drug screens shall be performed by GE (or a company hired by
GE) at GE's expense.
6.3 Other Policies. GE may supply any consultant who provides
Services under this Agreement with copies of its Policies
20.2, Equal Employment Opportunity; 20.4, Ethical Business
Practices; 20.5, Complying with the Antitrust Laws; and 30.5,
Avoiding Conflicts of Interest. If GE supplies such consultant
with such policies, Modem Media agrees to use reasonable
efforts to cause such consultant to comply with such policies
to the extent that such policies are applicable to the
activities conducted by the consultant in performing the
Services.
7. Relationship between the Parties: Modem Media is an independent
contractor; nothing in this Agreement shall be construed to create a
partnership, joint venture, or agency relationship between the
parties.
Nothing in this Agreement shall be interpreted or construed as
creating or establishing the relationship of employer and employee
between GE and either Modem Media or any employee or agent of Modem
Media. Each party will be solely responsible for payment of all
compensation owed to its employees, as well as federal and state
income tax withholding, Social Security taxes, and unemployment
insurance applicable to such personnel as employees of the
applicable party. Each party shall bear sole responsibility for any
health or disability insurance, retirement benefits, or other
welfare or pension benefits (if any) to which such party's employees
may be entitled. Each party agrees to defend and indemnify the other
against any claims that the indemnified party has failed to pay
compensation, tax, insurance, or benefits for employees of the
indemnifying party; provided that (a) the indemnified party notifies
the indemnifying party in writing within thirty (30) days of the
claim; (b) the indemnifying party has sole control of the defense
and all related settlement negotiations; and (c) the indemnified
party provides the indemnifying party with the assistance,
information, and authority reasonably necessary to perform the
above; reasonable out-of-pocket expenses incurred by the indemnified
party in providing such assistance will be reimbursed by the
indemnifying party.
Anything to the contrary in this Agreement notwithstanding, the
parties hereby acknowledge and agree that GE shall have no right to
control the manner, means, or method by which Modem Media performs
Services pursuant to this Agreement. Rather, GE shall be entitled
only to direct Modem Media with respect to the elements of services
to be performed by Modem Media and the results to be derived by GE,
to inform Modem Media as to where and when such services shall be
performed, and to review and assess the performance of such Services
by Modem Media for the limited purposes of assuring that such
Services have been performed in accordance with this Agreement.
Notwithstanding the above, where a SOW specifies that Modem Media is
to buy media on behalf of GE, Modem Media is appointed as GE's agent
for the
<PAGE>
purpose of such media buys and GE agrees to be primarily liable for
such media buys to the extent such Services were approved in a SOW.
8. Nonsolicitation: Modem Media and GE agree that during the
performance of Services under the applicable SOW, neither GE nor
Modem Media shall solicit for employment or retention as an
independent contractor any employee or former employee of the other
who provided any Service pursuant to any applicable SOW. "Solicit"
shall not be deemed to include advertising in newspapers or trade
publications available to the public. In the event that one of the
aforementioned entities solicits an employee of the other in
violation of this paragraph, the entire liability of the soliciting
entity and the exclusive remedy for the nonsoliciting entity shall
be payment of ten thousand dollars ($10,000) to the nonsoliciting
entity by the soliciting entity.
9. Nonexclusivity: This Agreement is nonexclusive, and GE may contract
with other entities to perform services related to or within the
Scope of Work set forth in an SOW under this Agreement, so long as
other services providers are not competitors of Modem Media.
10. Notice: All notices, including notices of address change, required
to be sent hereunder shall be in writing and shall be deemed to have
been given when mailed by first class mail to the GE Project Manager
at the address in the applicable SOW, with a copy to GE Company,
Corporate Initiatives Group Counsel, 3135 Easton Turnpike,
Fairfield, Connecticut 06431 (if to GE), or to the Modem Media
Project Manager at the address in the applicable SOW, with a copy to
Modem Media at 230 East Avenue, Norwalk CT 06855 (if to Modem
Media).
11. Waiver: The waiver by either party of any default or breach of this
Agreement shall not constitute a waiver of any other or subsequent
default or breach. Except for actions for nonpayment or breach of
either party's intellectual property rights, no action, regardless
of form, arising out of this Agreement may be brought by either
party more than one year after the party discovered, or should have
discovered, the basis for the cause of action.
12. Force Majeure: Neither party shall be in default or otherwise liable
for any delay in or failure of its performance under this Agreement
where such delay or failure arises by reason of any Act of God, or
any government or any governmental body, acts of the common enemy,
the elements, strikes or labor disputes, or other similar or
dissimilar cause beyond the control of such party.
13. Export Administration: Each party agrees to comply with all relevant
export laws and regulations of the United States ("Export Laws") to
assure that neither any software deliverable, if any, nor any direct
product thereof is (1) exported, directly or indirectly, in
violation of Export Laws or (2) is intended to be used for any
purposes prohibited by the Export Laws, including without
limitation, nuclear, chemical, or biological weapons proliferation.
14. Assignment/Subcontractors Except for an assignment and delegation to
a successor in interest to substantially all of a party's stock or
assets, neither party may assign any rights or delegate any duties
under this Agreement without the
<PAGE>
prior written consent of the other party, which consent shall not be
unreasonably withheld. This Agreement shall be binding upon the
heirs, successors, legal representatives and valid assigns of the
parties.
15. Compliance with Laws: Modem Media warrants that its Services
hereunder will be performed in strict accordance with all applicable
law, regulations, codes and standards of government agencies or
authorities having jurisdiction.
16. Quality: The parties acknowledge that Modem Media's willingness and
ability to provide certain Services at a higher level of quality
than Modem Media's warranty stated in Section C.2 of this Agreement
is important to GE. In as much as the quality level required by GE
for Services will vary from project to project, the parties
acknowledge that the provision of particular Services by Modem Media
under this Agreement will be based upon the provisions, if any,
specified in the applicable SOW (e.g. the application of appropriate
Modem Media resources for the timely delivery of Services consistent
with the applicable project plans stated in the SOW). The parties
acknowledge that any additional quality level warranty and any
particular penalties or liquidated damages which may be applicable
to specific Services, will be limited to those provisions
specifically enumerated and agreed upon by the parties in the
respective SOW.
17. Entire Agreement: This Agreement constitutes the complete agreement
between the parties and supersedes all previous agreements or
representations, written or oral, with respect to the Services and
GE Property, described herein. In the event of any conflict between
the terms of this Agreement and the Letter Agreement, the Letter
Agreement shall prevail. In the event of any conflict between the
terms of this Agreement and any SOW, this Agreement shall prevail.
This Agreement may not be modified or amended except in a writing
signed by a duly authorized representative of each party. It is
expressly agreed that any preprinted terms and conditions of GE's
purchase order shall be superseded by the terms and conditions of
this Agreement.
The Effective Date of this Agreement shall be July 1, 1999.
General Electric Company: Modem Media.Poppe Tyson, Inc.:
/s/ Mark Mastriani /s/ Robert Allen
Manager, Technology President and COO
<PAGE>
EXHIBIT A
to the
MASTER SERVICES AGREEMENT
August 9, 1999
Mr. Richard Costello
Manager, Corporate Marketing Communications
General Electric Corporation
3135 Easton Tpke
Fairfield, CT 06431
Dear Richard:
I am writing this letter in order to establish a framework whereby Modem Media .
Poppe Tyson, Inc. ("MMPT") and General Electric Corporation ("GE") will agree on
the terms of a mutually rewarding business arrangement. MMPT and GE are
currently in the process of negotiating definitive agreements whereby (a) MMPT
will grant certain Warrants for MMPT Common Stock to GE and (b) MMPT will
provide various Services to GE under a Master Services Agreement. In connection
with those agreements, GE commits to provide $12 million in Performance Revenue
(as defined below) to MMPT over a 15-month period beginning July 1, 1999 (the
"Commitment"). In connection with those negotiations, MMPT and GE desire to
reflect their mutual intent with respect to the definition of, and calculation
of, $12 million of Performance Revenue to MMPT, which terms are as follows:
1. Performance Revenue shall equal all revenue recognized by MMPT and any of
its wholly owned foreign subsidiaries, in accordance with US GAAP and
MMPT's past accounting practices consistently applied, as a result of
Services performed by MMPT or such subsidiaries for GE or any of its
subsidiaries or majority owned joint ventures. GE recognizes that MMPT's
affiliate in Sao Paulo, Brazil is not a subsidiary of MMPT and
accordingly, this arrangement will not apply to the work performed by that
office. However, any disputed invoice will not be included in the
calculation of Performance Revenue unless and until such dispute its
mutually resolved by the parties. Within 30 days after the conclusion of a
calendar quarter, the parties will confirm the Performance Revenue
achieved through that quarter.
GE acknowledges that in connection with providing the Services, MMPT will
from time to time engage in activities in which the costs are
passed-through to GE and are not recognized as revenue to MMPT. For
example, when MMPT purchases media space from websites, MMPT acts as GE's
agent and purchases such space on GE's behalf and GE is directly liable to
the media property for such costs. The direct costs to purchase such space
will be billed to GE by MMPT upon placement of the insertion order. Other
"pass through" costs may
<PAGE>
include but are not limited to travel and living expenses, hardware, and
software. Such pass through costs or other third party costs will not be
considered Performance Revenue. However, time spent by personnel to
provide such Services will be considered part of the Performance Revenue
to the extent consistent with MMPT past practices consistently applied.
2. All rates charged by MMPT and any of its subsidiaries will be based on the
attached Rate Card. This Rate Card includes [XXXXX]. Performance Revenue
shall be based on the net revenue recognized, after the[XXXXX] but before
the [XXXXX] in MMPT's revenues a result of the issuance of the Warrants.
This rate will be fixed for Services performed from [XXXXX]. Thereafter,
MMPT's standard rates shall apply [XXXXX]; provided, however, in no event
shall such standard rates exceed [XXXXX]. The parties agree that if MMPT
is requested to perform Services in a hyper-inflationary country, they
will work together in good faith to adjust the attached Rate Card to
reflect the economic circumstances in that country.
3. A full description of the Services to be provided by Modem Media to GE,
and the compensation therefore, will each be set forth on a Statement of
Work. These Services may include the design and development of various
internet and intranet websites, the planning, preparing, and placing of
advertising/marketing, general consulting on issues related to the
Internet and on-line commerce, including systems and process, research,
Website development, maintenance and expansion, media planning and buying
and any development work related to any such Service. Notwithstanding the
foregoing, if a proposed project is estimated to be less than [XXXXX] or
the Service requested is from a location of a GE affiliate such that the
provision of the Services are impracticable, MMPT shall have the option to
decline to provide such Services. If MMPT decides not to provide such
Services under those circumstances, the estimated Performance Revenue that
would have been recognized relative to such Services shall not be included
in calculation the Commitment.
4. All Performance Revenue for Services commencing after July 1, 1999 will be
included for purposes of calculating the Commitment.
5. If MMPT cannot perform a requested Service due to a conflict with one of
its clients, such requested Service, and the revenue that would have been
recognized to perform such Service, will not be included in calculating
the Commitment.
6. During the 15-month period, GE will use its best efforts to ensure that
its request for Services is proportionally allocated over such 15-month
period and across various regions. The parties expect that the Performance
Revenue in 1999 will not be greater than [XXXXX]. As such, if the scope
and value of any project is large or the timing or service location of any
project is impracticable, the parties will work together to discuss
staffing and timing of such projects. If, after such discussion, MMPT
cannot commit to providing such Services due to the scope or timing of the
project, MMPT may decline performing such additional Services and, the
estimated Performance
- ----------
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE>
Revenue that would have been recognized will not be included in
calculating the Commitment. The parties agree to work together to discuss
the timing and scope of such projects.
7. If GE exceeds the Commitment during the 15-month period, GE will not be
entitled to any additional Warrants.
8. If, at the end of the 15-month period, the Performance Revenue is less
than $12 million, GE will make a cash payment to MMPT for such difference
within 30 days of the expiration of such 15-month period and any
outstanding invoices shall also be due on such date.
9. GE shall have the right to terminate as provided in the Master Services
Agreement. In the case of a valid termination, GE will no longer be
obligated to meet its Commitment nor will MMPT be obligated to provide the
Services at a [XXXXX].
10. MMPT acknowledges that GE has certain commitments to other service
providers, such as iXL and Proxicom. GE will use its best efforts to
ensure that before MMPT is given the opportunity to present its
capabilities to provide a Service on a project, GE will have determined
that it is not obligated to award such project to one of the other
companies to satisfy its commitments.
11. From time to time, MMPT may be required to make presentations to GE in
order for GE to determine whether MMPT will be awarded a particular
project. If MMPT is not awarded the project, MMPT will not be compensated
for the time spent on such presentation. However, once GE orally advises
MMPT that it was awarded the project, time spent by MMPT developing the
scope of work with GE, will be compensated by GE.
MMPT and GE agree that the effectiveness of this letter agreement is
contingent upon the parties executing and delivering definitive agreements
(the "Definitive Agreements"), reflecting the terms and conditions of the
issuance of the Warrants, and the terms and conditions upon which the
Services will be provided, in form and substance satisfactory to both
parties. The businesses relationship will be governed by the Master
Service Agreement, substantially in the form attached hereto.
MMPT and GE will use their best efforts to negotiate and enter into the
Definitive Agreements and to consummate the transactions contemplated
thereby as soon as practicable.
- ----------
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE>
The existence of this letter agreement and the Definitive Agreements shall
remain strictly confidential, except to extent MMPT is required by law to
issue a press release or disclose in its public filings letter agreement
or the Definitive Agreement.
If this letter reflects your understanding, please sign both copies,
return a set to me and maintain one for your records.
Sincerely,
/s/ Robert Allen
President and COO
Accepted and Agreed
This 9 day of August, 1999
General Electric Corporation
/s/: Richard Costello
Manager, Corporate Marketing Communications
<PAGE>
EXHIBIT B
to the
MASTER SERVICES AGREEMENT
GE TRAVEL and LIVING POLICIES
Travel & Living Guidelines for Corporate Employees
Revised April 1999 - Revisions shown in red
- --------------------------------------------------------------------------------
Before you plan any trip or meeting, use the Bullet Train Screen:
o Think first! Ask why?
o Is this trip necessary? Is this meeting necessary? Do I really have
to go?
o Do I have other options?
- --------------------------------------------------------------------------------
o Use of GE Travel Center (GETC) and GE Corporate Card:
All travelers are required to use the GETC and the GE Corporate Card for
all business-related travel arrangements and expenses. Personal travel
arrangements may not be booked via the GETC. The Corporate Card should be
used for business related travel expenses only. The Corporate card may not
be used for personal expenses or personal cash advances.
o Submission & Approval Requirements:
o Travelers are expected to submit expense reports within five (5) days
of end of trip. IRS regulations require the imputing of income on
uncleared corporate card balances. Failure to submit timely expense
reports will also result in suspension of corporate card privileges.
o Receipts are required for all corporate card items and for cash items
of $15 or more.
o Designated managers will receive monthly statements from the GE Travel
Center in order to review and approve the appropriateness of trips and
reasonability of expenses for each employee.
o Transportation
o Air Travel
o Coach class is required for all flights within North America,
within Europe, and within Asia-Pacific (for flights originating in
those respective regions).
o Coach class is strongly recommended for all flights between North
America and Europe and between North America and the northern
portion of South America.
For these flights, because of the combination of longer
distances and the potential for unusual timing or
circumstances, the ultimate decision between coach and
business class remains with the traveler. It is expected that
the choice of business class will be limited.
<PAGE>
o Business class is allowed for flights beyond the above "coach
zone", e.g., North America to Asia-Pacific.
o Flights must be taken on Preferred airlines designated by the GETC,
unless Preferred airlines are not available.
o Officer pre-approval is required for any exception to the above
service class guidelines.
o Employees may retain credits from frequent traveler programs.
However, travel plans, routing requirements, etc., should not
result in additional expense to the Company nor require an increase
in travel time during regularly assigned working hours.
o The cost of upgrading an airline ticket to another class is not
reimbursable.
o Meetings
o Utilize GETC Meeting Planning Service for all Company meetings
involving 10 or more air fares.
o Consultant/Contractor Travel
Work with your finance representative:
o Consultants and contractors who travel regularly for GE should
complete a non-employee travel profile and use the GETC for all
GE-related travel arrangements.
o Components using consultants who travel infrequently (1 - 5 times a
year) or when scheduling interviews with external candidates should
make the travel arrangements through the GETC by using a Mastercard
Special Purpose Account.
o Reservations
o Make your own travel reservations and when possible schedule
meetings to allow for travel during off-peak hours.
o Take the "best buy" air fare recommended by the agent.
o Book tickets as early as possible.
o Use teleconferencing and/or videoconferencing to minimize travel
costs.
o Minimize number of employees taking same trip, e.g., to
trade shows, conferences, etc.
o Consider non-refundable fare for frequent trips to the same
location.
o Consider staying over on Saturday night to obtain lower air fare
(Company will reimburse hotel and meal costs if the total cost is
lower).
o Ground Transportation
o Use hotel/airport shuttle services when practical.
o For car rental, use the Company-designated agency, Hertz. When not
available, use National.
o Book smallest rental car practical for traveler's purpose.
When using your personal vehicle, you will be reimbursed @
$.31 per mile, which covers depreciation, insurance, and gas.
o For New York airports private limos are not allowable expenses,
except:
o When traveling outside normal working hours (very early in the
morning or late in the evening) or when there is a safety
concern;
o When there are at least two passengers and a private limo would
be a lower cost option than other alternatives such as a rental
car or scheduled limo service with Red Dot.
<PAGE>
o From Fairfield use Hertz or Red Dot Limo Service.
o Minimize Company costs on rental cars by: declining Collision
Damage Waiver in the U.S. (covered under GE contract programs);
returning rental cars with a full tank of gas.
o Living, Meals & Other Expenses
o Lodging
o Book all hotels through the GETC at the time air reservations are
made.
o Reservations will be made at GE Preferred full service, moderate or
economy properties, depending on the business requirements.
o Personal Meals
o Meals are reimbursable provided you are on Company business away
from your normal place of business with an overnight stay.
o On a day trip, meals eaten outside your regularly assigned work
hours are reimbursable.
o Other Reimbursables
o Nominal gifts in lieu of meals and/or lodging at friends' or
relatives' residences are reimbursable as long as the cost to GE is
lower.
o Gratuities for bellhop, taxi, meals, etc.
o Highway tolls and parking fees.
o Laundry and dry cleaning services if the employee is away for five
consecutive days.
o Telephone and fax expenses incurred on behalf of the Company,
including essential calls to home.
o Use your Dial Comm Key Card for all long distance phone calls.
o Review "in lieu of" situations with your financial representative.
o Dues, Initiation Fees & Memberships
o Dues and initiation fees for professional organizations are not
reimbursable, except in those instances where memberships are primarily
for the benefit of the Company. Company officer approval is required for
all fees.
o Country club memberships require approval by the Corporate Executive
Office for reimbursement.
o Business Meals & Business Meetings
o Costs incurred in connection with meetings are reimbursable, provided
there is a legitimate business purpose, e.g., meeting with key
suppliers, meeting on quality with GE business representatives, etc.
o Expense account must be submitted by the highest level employee at the
meeting.
o Expense account must indicate date, time, place, business purpose and
business relationship of attendees.
o Exercise good judgment and adhere to customer policies when incurring
expenses to entertain customers and GE associates for business purposes.
Refer to the GE Integrity Guide for Company policy.
o Discourage GE to GE entertainment and meals unless the business purpose
is clearly defined.
o Consider offering only non-alcoholic beverages at GE-sponsored meetings.
<PAGE>
o Expenses Not Reimbursable
The following items are considered to be of a personal nature, and
therefore are not normally reimbursable by the Company.
o Airline club membership fees
o Clothing or toiletries, except if caused by airline delay or overbooking
of airplane reservations
o Cost of an employee's family member traveling with the employee, except
when the family member's presence serves a business purpose and the
costs have Corporate Officer approval
o Cost of a circuitous or side trip for personal convenience or benefit
o Fines traffic violations
o Gifts to employees or their families of flowers, money, merchandise, or
services
o Insurance on personal property; personal travel insurance
o Items for personal use, such as: hairstyling, shoe shine, magazines,
newspapers, movies (including in-room movies), shows, and sporting
events (unless for entertainment on behalf of the Company) and other
similar items
o Loss or theft of personal property (e.g., clothes, jewelry, etc.), cash
advance, personal funds, or tickets
o Maintenance or repair of personal property (e.g., home and grounds)
while out of town on Company business
o Parking or garage charges at the employee's regularly assigned place of
business
o Personal credit card fees or charges incurred as a result of third-party
misuse of lost credit cards
o Traveling expense between home and regularly assigned place of business
o Unusual Expenses
o In the event there are valid business reasons to incur expenses not
reimbursable under these guidelines, these expenses may be reimbursed
with Company Officer approval.
o Review unusual circumstances with your finance representative in
advance.
For clarification, contact the GE Travel Center or your financial
representative.
<PAGE>
Modem Media.Poppe Tyson, Inc.
1999 Rate Card
[XXXXX]
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with respect to
the omitted portions.
<PAGE>
Exhibit 10.14
Confidential treatment has been requested for portions of this Exhibit 10.14.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as [XXXXX]. A complete version of this Exhibit
has been filed with Securities and Exchange Commission.
<PAGE>
D-60325 Frankfurt am Main
Bockenheimer Landstrasse 51
Telefon 069-17095 Telefax 069/725773 u. 723983
ACQUISITION AGREEMENT MMPT/MEx
Section 1 The Company 4
Section 2 Sale and Transfer; Effectiveness of Transfer as
from the Closing Date 5
Section 3 Purchase Price 6
Section 4 Payment of the Purchase Price 7
Section 5 Stock Options for Sellers 8
Section 6 Management Services Agreements of Sellers
Section 7 Representations and Warranties 9
Section 8 Liability for breach of representations and warranties 15
Section 9 Taxes 17
Section 10 Merger Control 20
Section 11 Publications, Notices 20
Section 12 Arbitration Clause 21
Section 13 Miscellaneous 23
LIST OF EXHIBITS 25
<PAGE>
The persons appearing requested that a notarial deed be drawn up of the
following
Agreement on the Sale and Transfer of Shares
between
1. Jurgen Funk, address Auenbruggerstr. 5, 80999 Munchen ("Seller
Funk")
2. Martin Konitzer, address Nordendstr. 20, 80799 Munchen ("Seller
Konitzer")
3. Thomas Fickert, address Banatstr. 16, 81377 Munchen ("Seller
Fickert")
(Seller Funk, Seller Konitzer and Seller Fickert are hereinafter jointly
referred to as the "Sellers")
and
4. MWW Siebzehnte Vermogensverwaltungs GmbH (in the future renamed into
Modem Media Germany Holding GmbH), Frankfurt am Main (in the future
having its seat in Munich)
(hereinafter the "Buyer")
<PAGE>
PREAMBLE
A. The Sellers are the sole shareholders of MEx MULTIMEDIA EXPERTS GmbH
Gesellschaft fur Kommunikationstechnologie, having its seat in Munich and
being registered with the commercial register of the local court Munich
under HR B 100011 (hereinafter the "Company")
B. The Company's activities are production, trade and services in the
information and communication technology business, in particular
Multimedia.
C. The Buyer is a direct 100% subsidiary of Modem Media.Poppe Tyson, Inc.,
Norwalk, Connecticut/USA (hereinafter "MMPT").
Thereupon, the Parties agreed as follows:
1 The Company
(1) The Company is registered with the commercial register of the local
court Munich and has a nominal share capital of DM 100,000 which is
fully paid in.
(2) The Sellers have submitted to the Buyer a copy of the Articles of
Association of the Company dated June 9, 1997; no amendment to the
Articles has been resolved upon since that date.
(3) Sellers are the only shareholders of the Company having the
following shareholdings:
(a) Seller Funk holds a share in the nominal amount of DM 33,400.
(b) Seller Konitzer holds a share in the nominal amount of DM
33,300.
(c) Seller Fickert holds a share in the nominal amount of DM
33,300.
2 Sale and Transfer; Effectiveness of Transfer as from the Closing Date
(1) The Sellers hereby sell to the Buyer all shares in the Company
specified in Section 1 (3)(a)-(c). The Buyer hereby accepts this
sale.
(2) With effect as of the Closing Date, the Sellers hereby transfer to
the Buyer all of the Company shares specified in Section 1 sections
(3) (a)- (c). The Buyer hereby accepts such transfer
"Closing Date" shall be October 4, 1999
The transfer of the shares is subject to the condition precedent
that the payment of the Cash Portion (as defined in Section 3(1)(a))
is made in accordance with Section 4 (1). As proof for the
fulfillment of this condition precedent the confirmations of the
banks referred to in Section 4(1), shall be required and sufficient.
(3) The Sellers hereby consent to the transfer of all shares referred to
in Section 1(3) (a)-(c) in their capacity as shareholders.
<PAGE>
(4) As a precautionary measure, each Seller hereby waives any and all
rights to sell the shares, any pre-emptive rights or rights of first
refusal to which he is entitled with regard to the shares specified
in Section 1(3) (a)-(c), irrespective on what legal grounds.
(5) The Sellers Funk and Fickert submit as Exhibits 2.5 the consents of
their spouses.
(6) The annual profits for the current business year, which are to be
attributed to the shares transferred under Section 2(2), shall be
due to the Buyer.
Section 3 Purchase Price
(1) The purchase price for the shares specified in Section 1(3)(a)-(c)
("Purchase Price") consists of
(a) a portion of US$ 3 million to be paid in cash (the "Cash
Portion"), and
(b) MMPT stock with a value of US$ 2.4 million (the "Stock
Portion") in accordance with sub-para (2) hereof.
With respect to the Cash Portion and the Stock Portion, each Seller shall be
entitled to the following share:
Seller Funk: one third
Seller Konitzer: one third
Seller Fickert: one third.
(2) The number of shares to be issued to the Sellers in order to pay the
Stock Portion, shall be calculated as follows:
First, MMPT will calculate the average closing price of MMPT's stock price of
its Class A Common Stock for the 10 trading days preceding the Closing Date as
reported by NASDAQ (the "Average Price"). Second, the Stock Portion shall be
equal to that number of shares of MMPT Class A Common Stock which is represented
by dividing US$ 2.4 million by the Average Price. One third of the stock portion
will be kept in Buyer's escrow until (i) all of the invoices which are due to be
built as of Sept., 30 have been built and issued and (ii) 80 % of the amounts
outstanding of these invoices have been collected.
Section 4 Payment of the Purchase Price
The Purchase Price shall be paid as follows:
(1) The Cash Portion shall be paid on the Closing Date as follows:
(a) The DM equivalent of US$ 1,000,000 shall be paid to Seller
Funk on his bank account at [XXXXX]
(b) The DM equivalent of US$ 1,000,000 shall be paid to Seller
Konitzer on his bank account at [XXXXX]
(c) The DM equivalent of US$ 1,000,000 shall be paid to Seller
Fickert on his bank account at [XXXXX]
Each of the Sellers shall irrevocably instruct his bank, to immediately upon
receipt of the respective aforementioned amount, confirm by fax to the Buyer
that the respective amount has been received; the respective fax shall be sent
to
- ----------
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with respect to
the omitted portions.
<PAGE>
Buyer c/o
TELEFAX No 49-69-72 57 73
Hengeler Mueller Weitzel Wirtz
Attn.: Dr. Joachim Rosengarten
(2) The Stock Portion shall be subject to the following conditions: The
shares issued by MMPT for the purpose of paying the Stock Portion
shall immediately vest in the Sellers but such shares will have
resale restrictions. For the first 12 months following the Closing
Date such shares shall not be eligible to resale pursuant to the
securities laws of the United States. Thereafter, such shares may be
resold as follows: During each of the second, third and fourth 12
months'-periods following the Closing Date, each Seller cannot sell
more than one third of his share of the Stock Portion.
Section 5 Stock Options for Sellers
In accordance with the amended and restated 1997 stock option plan of MMPT, each
of the Sellers will be granted [XXXXX] options to purchase MMPT stock at fair
market value (i.e. closing price as reported by NASDAQ) at the date of grant of
the options. Such stock options will vest according to the current MMPT Vesting
Schedule as follows: 20% at the day of grant and 20% upon each of the next four
anniversaries of the date of grant.
Section 6 Management Services Agreements of Sellers
(1) As from the Closing Date, the employment relationship between Seller
Funk and the Company shall be governed by the employment agreement
and the non-competition covenant which have been signed today.
(2) As from the Closing Date, the employment relationship between Seller
Konitzer and the Company shall be governed by the employment
agreement and the non-competition covenant which have been signed
today.
(3) As from the Closing Date, the employment relationship between Seller
Fickert and the Company shall be governed by the employment
agreement and the non-competition covenant which have been signed
today.
Section 7 Representations and Warranties
The Sellers hereby warrant by way of an independent warranty [selbstendiges
Garantieversprechen] the following, and this in relation to the time of
conclusion of this Agreement and as per the Closing Date (if no other point in
time or time period is referred to in the following):
(1) Legal Situation
(a) The statements in Section 1 of this Agreement are correct and
complete.
(b) The capital contributions on the shares sold and transferred
pursuant to Section 2 have been fully paid in and the share capital
has not been reduced by repayments or any comparable processes.
(c) The shares in the Company sold and transferred pursuant to Section 2
are free from any encumbrances and other third party rights.
(d) The Company does not hold any direct or indirect participations in
other companies.
(2) Financial Situation
(a) The following annual accounts of the Company have been prepared or
-as to 1997 accounts - are prepared in accordance with generally
accepted accounting principles in Germany, and having regard to the
principle of continuity of accounting and valuation (taking due
account of the accounting principles applied in
- ----------
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with respect to
the omitted portions.
<PAGE>
previous years), and correctly reflect the financial situation of the
Company as to its respective asset, financial and profit situation:
- Audited annual accounts of the Company as per 12/31/1998 ("1998
Accounts");
- audited annual accounts of the Company as per 12/31/1997.
(b) As per December 31, 1998, the Company had no liabilities other than
those shown in the 1998 Accounts; since then, liabilities have only
been incurred in the ordinary course of business, except for those
liabilities listed in Exhibit 7.2(b). It is understood that the
Sellers give no warranty on future revenues or profits.
(3) Assets
(a) Except as set forth in Exhibit 7.3 (a), the Company is the owner of
all assets shown in the 1998 Accounts, free from third party claims
(excepting customary retention of title), except as for assets
disposed of in the ordinary course of business since January 1,
1999.
(b) All assets used by the Company as well as the operation, storage and
handling thereof are effected in accordance with applicable laws and
legal provisions, and this in particular also with regard to
environmental and other public law provisions, regulations and
permits other than the exceptions listed in Exhibit 7.3(b).
(c) As of the date of this Agreement, the Company has no accounts
receivables which are 90 days or more past due, except for those
listed in Exhibit 7.3(c).
(4) Litigation/Compliance with Applicable Law
(a) Except for those proceedings listed in Exhibit 7.4(a) the Company is
- as of the signing of this Agreement - not a party to any legal
action, whether as plaintiff or defendant, (including any
arbitration proceedings) nor are there any other legal, arbitration
or other proceedings in which they are involved. As of the date of
signing of this Agreement, the Sellers have no knowledge of any
administrative proceedings or investigations imminent or pending
against the Company, including any such proceedings under
competition law. Except for claims listed in Exhibit 7.4(a), as of
the signing of this Agreement no claims have been asserted or
threatened against the Company, which would involve a one-off or
annual burden of more than DM 50,000 on the company. As of the date
of signing of this Agreement, the Sellers are not aware of any
factual circumstances on which such claims could be based.
(b) The Company is authorized without restrictions and has been granted
all permits which are necessary to continue its present business
operations, except for those cases listed in Exhibit 7.4(b). There
are no public law authorizations which, due to the sale envisaged
with this Agreement, could be modified, withdrawn or revoked. The
Sellers have no knowledge of the Company being in breach of any
provisions under public law, competition law or laws for the
protection of intellectual property rights, unless listed in Exhibit
7.4(b).
(5) Contracts
Except for those contracts and agreements listed in Exhibit 7.5 (consisting of
parts (a), (b), (d), (h)), the Company is not a party to any written or oral
agreement or contract of the following kind:
(a) any rental or lease agreements or other agreements the contract or
obligation value whereof exceeds in each instance DM 50,000 p.a.,
except for employment contracts;
(b) agreements with sales representatives, commission merchants,
contract dealers or other distributors;
(c) any contracts or other obligations limiting or excluding the right
of the Company to compete;
<PAGE>
(d) loan agreements. The terms, interest rates and balances shown in
Exhibit 7.5(d) are complete and accurate;
(e) any agreement granting the respective counterparty a right to
terminate or change the agreement in case shares of the Company are
to be sold;
(f) any guarantee, warranty or other agreements or unilateral
transactions whereby collateral is granted for or the assumption of
third party liabilities, any futures contracts, currency
transactions or swap agreements;
(g) any agreements or contracts which grant to third parties any
rebates, discounts or any other deductions than those previously
granted in the ordinary course of business;
(h) any contracts with employees with an annual salary exceeding DM
100,000 (including any percentage of profits or a bonus paid);
(i) any agreement or obligation outside the scope of the ordinary
business.
(6) Employees
(a) The Company has no more than 21 employees.
(b) Except as shown in Exhibit 7.6(b), the Company is not a party to any
voluntary pension promises or direct insurances, agreements on
commissions or bonuses, employment agreements with extended
termination periods compared with bargaining agreements, agreements
with unions, shop agreements or agreements with professional
associations (e.g. employers' associations).
(7) Intellectual Property Rights/Registrations/Y2K
(a) The business operations of the Company involve the use of the
intellectual property rights listed in Exhibit 7.7(a). This list is
exhaustive and all such intellectual property rights have been
registered for the Company as shown in Exhibit 7.7(a). The Company
is the sole legitimate owner of the respective intellectual property
rights.
(b) The business operations of the Company do not require the use of any
other intellectual property rights other than those listed in
Exhibit 7.7(a).
(c) To the best of Sellers' knowledge the intellectual property rights
listed in Exhibit 7.7(a) are - in their geographical respective area
of validity - not subject to third party objections. There are no
respective legal actions pending or imminent nor to be expected
based on other circumstances. Where applicable, the intellectual
property rights have been duly extended and are actually used,
unless listed otherwise in Exhibit 7.7. (a).
(d) All license agreements regarding intellectual property rights in
respect of which the Company is the licensor or licensee are listed
in Exhibit 7.7(d).
(e) The software provided to clients by the Company is year 2000
compliant, i.e. its use will not cause problems for the clients in
connection with the beginning of the year 2000. This warranty does
not include a warranty for the functionality and Year 2000
compliance of software or software components of third parties.
(8) Agreements between the Sellers and the Company and among Sellers
(a) Except for those contracts listed in Exhibit 7.8(a), there are no
contracts existing between one or several of the Sellers on the one
hand, and the Company on the other hand. The contracts listed in
Exhibit 7.8(a) are entered into under arms' length conditions.
(b) Except for contracts listed in Exhibit 7.8(b), there are no
contracts among the Sellers which relate to the Company.
<PAGE>
(c) With the exception of this Agreement, there are no agreements
between Sellers or the Company on the one hand and the Buyer on the
other hand.
(9) Existing Contracts; Insurance
The contracts and agreements to which the Company is a party and which are
to be listed in Exhibit 7.5, are effective. There are no significant
disruptions in the performance thereof. In particular, the Company is not
in default with any of its contractual obligations. The Company maintains
the insurances which are listed in Exhibit 7.9. All premium payments due
have been paid. The insurance contracts are valid and in force and there
currently exist no violations. There exist no open insurance cases other
than those cases listed in Exhibit 7.9.
(10) Transactions since January 1, 1999 until the Closing Date
Within the period between January 1, 1999 and the Closing Date the
following principles will be and have been complied with:
(a) the business of the Company shall be conducted in accordance with
proper business principles and past practice and no extraordinary
transactions shall be effected;
(b) the scope and contents of the business activities shall not be
changed substantially;
(c) except as listed in Exhibit 7.10 (c) no profit distributions shall
be declared or made (including hidden profit distributions);
(d) being understood that Sellers have received pension commitments on
December 14, 1998, no increase in the remuneration, no change of
other employment conditions and no pension commitments or changes
thereof for any of the employees (including managing directors)
shall be effected or promised except for increases of remuneration
under union agreements (tarifvertragliche Erhurhungen) except for
those transactions which are listed in Exhibit 7(10)(d) or elsewhere
in the Exhibits.
(e) the Company shall not (i) conclude or use loans or (ii) enter into
contracts which have a total value of more than DM 20,000 p.a. each,
except for the cases listed in Exhibit 7(10)(e) elsewhere in the
exhibits;
(f) the purchasing and payment practice shall not be changed;
(g) no special discounts shall be granted to customers.
Exceptions to these principles shall only be permissible with the prior written
consent of the Buyer.
Section 8 Liability for breach of representations and warranties
(1) If any of the warranties given by the Sellers under Section 7 is
incorrect, the following shall apply:
The Sellers shall place the Buyer or (at Buyer's choice), if the Company
has incurred the damage, the Company in that position as if the warranty
had been correct. If and to the extent that the Sellers within one month
fail to put the respective party in the position as set forth in the
Agreement, or if it is impossible to put that party in that position, the
Buyer shall be entitled to claim monetary damages. Buyer is not entitled
to damages if and to the extent that the damage is covered by accruals in
the Closing Balance Sheet.
<PAGE>
(2) To the extent that the Sellers have represented in this Agreement that the
Company is free of liabilities, the Sellers shall indemnify and hold
harmless the Company from any liabilities (including the cost for legal
advisers), which exist or are asserted contrary to this representation.
(3) Claims under this Section 8 shall be time-barred
(a) in respect of incorrectness of any of the warranties detailed in
Section 7(1) after 4 years from the Closing Date;
(b) in respect of any other claims under this Section 8 on March 31,
2001.
The limitation period shall be suspended by raising a claim in writing
vis-a-vis the Sellers. Should there be a written notice of a claim before
the end of the limitation period, the limitation period for the respective
claim shall be extended by another three months. After such additional
three months, the claim will be time-barred unless the limitation period
is interrupted in accordance with the law.
(4.) Any other warranty claims of the Buyer are excluded, unless there is a
case of wilful misconduct or gross negligence.
(5) Claims under this Section 8 and Section 9 shall be limited to DM 4,32
million in the aggregate. With respect to any claim for a breach of the
warranty under Section 7 (7) (e), the Sellers shall only be liable to the
extent that the damage caused exceeds DM 225,000.
Section 9 Taxes
(a) Sellers warrant that all tax declarations or tax applications which
were to be filed by the Company until the Closing Date, have been
filed and that all statements made therein are correct and complete.
(b) Sellers further warrant: All amounts which, pursuant to these tax
declarations or filings, are to be paid by the Company (including
interest and other ancillary duties) and which relate to the time
period before the Closing Date, have been paid in full and in time.
For unpaid taxes which were to be paid until December 31, 1998,
sufficient liabilities or accruals are shown in the 1998 Accounts.
The Company has, in accordance with statutory provisions, in full
and in time, withheld and paid to the tax authorities, social
security institutions or health insurance institutions, all wage
taxes as well as employees' shares for social security and other
social benefits (hereinafter collectively referred to as "Employment
Charges") for all time periods until the Closing Date. For
Employment Charges relating to the period until December 31, 1998
and which are not paid, appropriate obligations or provisions have
been stated in the 1998 Accounts therefor.
(c) Sellers warrant that all accounts receivable for the repayment of
taxes (Erstattungsanspruche) which are capitalized in the 1998
Accounts, have been or will be honoured.
(2) (a) All tax liabilities of the Company which relate to relevant time
periods before December 31, 1998 and for which sufficient
liabilities or reserves have not been stated in the 1998 Accounts
("Additional Tax Liabilities") shall, independently from the date of
determination by the authorities and the due date, be borne by
Sellers. This applies, in particular, to the additional
determination of hidden profit distributions which have been made
before December 31, 1998.
To the extent that Additional Tax Liabilities are caused by taxes
which result from a change of valuation principles for fixed and
current assets and which correspond to lower tax charges in the
future, then from the Additional Tax Liabilities shall be deducted
the amount of lower taxes for the future, discounted at a rate of
6%; if the time period for the discounting cannot be determined, a
time period of ten years shall be used.
"Tax liabilities" in the above sense are obligations to pay taxes,
provided that it also constitutes a tax liability where the payment
of a tax can be avoided by the set-off with claims for the
<PAGE>
repayment of taxes to the extent that those claims for repayment are
shown in the 1998 Accounts and to the extent that these claims for
repayment relate to periods before December 31, 1998. The term
"taxes" includes, in this respect and the following, domestic and
foreign, direct and indirect taxes of Bund, Landern, Gemeinden and
other public law communities; earnings, income, asset and
transaction taxes, real taxes, duties and deductions, VAT, transfer
taxes, consumption taxes and other tax duties of all kinds,
including all add-ons and ancillary duties such as interest, add-ons
for late payment and penalties of fines, no matter how they are
levied or determined.
(c) To the extent that, for the Company previous tax benefits, subsidies
and similar advantages have to be repaid as a result of facts which
occurred prior to December 31, 1998 ("Repayment Obligations"), such
Repayment Obligations shall be borne by the Sellers.
(d) To the extent that accounts receivable for the repayment of taxes
("Claims for Tax Refunds") which are capitalized in the1998
Accounts, should not be honoured at their respective due date,
Sellers shall bear the respective amount.
(3) (a) Sellers shall compensate Buyer by way of reduction of the purchase
price or (at Buyer's choice) the Company, for all disadvantages
which the Company suffers from the non-existence of a warranted
fact. In case of constructive dividends the disadvantage which shall
be compensated by the Sellers does not only comprise the tax burden
caused by the distribution but also, if not yet included, the tax
effect of a used-up corporate tax credit
("Korperschaftsteueranrechnungsguthaben").
In particular, Sellers shall be obligated to indemnify Buyer by way
of purchase price reduction or (at Buyer's choice) the Company, for
Additional Tax Liabilities, Repayment Obligations or Claims for Tax
Refunds which Sellers shall bear in accordance with the above
provisions.
(b) To the extent that the Company has made payments for taxes and
received repayments for previously paid taxes related to periods
prior to January 1, 1999 without a claim to such repayments being
shown in the1998 Accounts, the respective amount shall be paid to
Sellers or shall be deducted from the amounts which Sellers have to
pay in accordance with the above provisions.
(4) Negotiations and administrative proceedings relating to Additional Tax
Liabilities, Repayment Obligations or Claims for Tax Refunds will be held
by Buyer in coordination with Sellers. The parties will support each other
and will give each other access to the respective books and files. Sellers
shall bear the costs of such proceedings.
(5) Claims for indemnification for Additional Tax Liabilities, Repayment
Obligations or Claims for Tax Refunds under this paragraph shall be barred
by statute of limitation three months after tax assessments have become
final or, if no final payment order is made, three months after the
respective tax liability is barred by statute of limitation in accordance
with the law.
Section 10 Merger Control
This agreement is not subject to merger control by the Federal Cartel Office or
any other cartel office.
Section 11 Publications, Notices
(1) The parties will publish the sale of the Company in a joint press release
as of the Closing Date.
(2) Each party is authorized to make, without the consent of the other party,
publications which are required by law (including publication requirements
of the stock exchange rules). In all other cases publications are only
permitted with the consent of the respective other party.
(3) Notices to be made by the Sellers vis-a-vis the Buyer are to be addressed
to:
<PAGE>
[Buyer]
c/o Modem Media.Poppe Tyson, Inc.
Attn.: Sloane Levy, Esq.
General Counsel
230 East Avenue
Norwalk, CT 06855
Tel.: 001 203 299 7132
Fax.: 001 203 299 7457
Notices to be addressed by Buyer to the Sellers are to be made to each of
the Sellers by registered letter. The addresses set out in the recitals
shall apply until the Buyer has been informed in writing of a new address.
Section 12 Arbitration Clause
(1) Unless provided for otherwise by mandatory law, all disputes arising out
of or in connection with this Agreement shall be referred to and finally
decided by an arbitration board. The arbitration board shall also decide
on the validity of this Agreement.
(2) The arbitration board shall consist of two arbitrators and one chairman.
(3) The procedure to establish the arbitration board shall be initiated by
plaintiff notifying defendant about the alleged claims, giving the name
and address of the arbitrator he has appointed. Defendant shall appoint
his arbitrator within a period of four weeks after having received the
aforesaid notice. It is agreed that those individuals of the Sellers who
are involved in the dispute (no matter whether they are involved as
plaintiff of defendant) shall appoint a joint arbitrator. In case
defendant should not appoint his arbitrator within the period mentioned in
the second sentence, the arbitrator shall be appointed by the President of
the Chamber of Industry and Commerce at Munich.
(4) If the defendants in an arbitration proceeding are two or more persons and
those two or more persons cannot, within a time period of four weeks after
receipt of the notice referred to in subpara (3), first sentence, agree on
the joint appointment of an arbitrator, then the President of the Chamber
of Industry and Commerce Munich, after hearing the parties, shall appoint
two arbitrators, unless the parties agree otherwise. The appointment of
two arbitrators by the President of the Chamber of Industry and Commerce
Munich shall render the previous appointment of an arbitrator by the
plaintiff ineffective.
(5) The arbitrators appointed by the parties or the authority referred to in
subpara (4) shall elect a chairman. The chairman shall be a person
experienced in commercial matters. If the arbitrators cannot agree on the
appointment of a chairman within a period of four weeks after the
appointment of the second arbitrator, the chairman shall be appointed by
the President of the Chamber of Industry and Commerce at Munich.
(6) In case that an arbitrator or the chairman shall become unable to act, the
provisions of subparas 3 to (5) shall apply correspondingly.
(7) The arbitration board shall meet at Munich.
(8) The arbitration board shall make all reasonable attempts to reach an
amicable settlement even before the chairman has been appointed.
(9) As far as not provided for otherwise in this Agreement, the procedure of
the arbitration board shall be conducted in compliance with the provisions
of the 10th Chapter of the German Code of Civil Procedure (ZPO). The rules
of the ZPO shall also apply correspondingly for the costs of the
proceedings.
(10) To the extent that the assistance of State courts is necessary (Section
1062 ZPO), the court of appeal of Munich Bayerisches Oberstes
Landesgericht shall have jurisdiction.
<PAGE>
Section 13 Miscellaneous
(1) Sellers shall be liable jointly and severally for all obligations under
this Agreement.
(2) The Sellers have granted to the Company a free license for the use of all
their rights in the "Web Factory" products. This license shall continue.
In addition thereto, the Sellers will grant to MMPT a license for the use
of all their rights in the Web Factory by MMPT or its affiliates; as
compensation, MMPT or the respective affiliate shall pay to the Sellers
50% of the income which MMPT or the respective affiliate generates by
selling Web Factory products or by granting sub-licenses. Details shall be
provided for in separate agreements to be concluded.
(3) Neither Sellers nor Buyer shall be entitled, without the consent of the
respective other party, to assign any rights or obligations under this
Agreement to a third party. This restriction does not apply in case of any
assignment by Buyer to an affiliated company.
(4) The notarial fees in connection with the execution of this Agreement shall
be borne by Buyer. Each party bears the costs of its advisors.
(5) Should any provision of this Agreement be invalid or ineffective in full
or in part, such invalidity or ineffectiveness shall not affect the
validity of the rest of the Agreement. In such event, the ineffective
provision shall be deemed to be replaced by such effective provision which
achieves as much as possible the economic purpose of the ineffective
provision. The same applies to any gaps in this Agreement.
Sellers declared: The Company does not own real estate.
The notary shall notify the Company of the transfer of the shares according to
Section 2 of this Agreement, in accordance with Section 16(1) GmbH (Act on
Companies with Limited Liability).
The above protocol, the List of Exhibits and the Exhibits were read to the
persons appearing by the acting Notary and approved by the persons appearing and
signed by the persons appearing and the notary as follows:
/s/ Dr. Oliver Vossius
Acting Notary
/s/ Jurgen Funk
/s/ Martin Konitzer
/s/ Thomas Fickert /s/ Timothy Sexton
Sellers Managing Director
Modem Media Holding Company GmbH
LIST OF EXHIBITS
Exhibit 2.5 Consents Spouses
Exhibit 7.2(b) New liabilities outside ordinary course of business
Exhibit 7.3(a) Assets
Exhibit 7.3(b) Compliance with Law
Exhibit 7.3(c) Accounts 90 days or more
Exhibit 7.4(a) Litigation
Exhibit 7.4(b) Permits
Exhibit 7.5(a), (b), (d), (h) Contracts
Exhibit 7.6(b) Pension plans etc.
Exhibit 7.7 (a) Intellectual Property
Exhibit 7.7(d) License Agreement
Exhibit 7.8(a) Agreements between Sellers and the Company
Exhibit 7.8(b) Contracts among Sellers
Exhibit 7.9. Insurances
Exhibit 7.10(c) Profits 1998
Exhibit 7.10(d) Pension commitments/salary increases until Closing Date
<PAGE>
Exhibit 7.10(e) Loans and Contracts until Closing Date
22
- - 6 -
English Acquisition Agreement - Modem Media-Mex / 10489994 04.10.99
HENGELER MUELLER WEITZEL WIRTZ
RECHTSANWC4LTE
<PAGE>
Exhibit 7.2(b)
New liabilities outside ordinary course of business
Investments for the new offices: renovation, office equipment (about 500.000 DM)
<PAGE>
Exhibit 7.3(a)
Assets
Not necessary / None
<PAGE>
Exhibit 7.3(b)
Compliance with Law
Not necessary / None
<PAGE>
Exhibit 7.3(c)
Accounts 90 days or more
[XXXXX]
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with respect to
the omitted portions.
<PAGE>
Exhibit 7.4(a)
Litigation
Not necessary / None
<PAGE>
Exhibit 7.4(b)
Permits
Not necessary / None
<PAGE>
Exhibit 7.5(a), (b), (d), (h)
Contracts
a)
Office Rental Agreement, dated 1.7.1999, about 23.000 DM p.m.
b)
[XXXXX]
d.)
Open credit by HypoVereinsbank, dated 27.7.1999; amount: 500.000 DM; = actual 9%
p.a. Interest rate Current Status: ca. 600.00 DM minus
h.)
Employment Contracts with:
Managing Directors Funk, Konitzer, Fickert
Martin Schleyer (101.114 DM p.a.)
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with respect to
the omitted portions.
<PAGE>
Exhibit 7.6(b)
Pension plans etc.
Voluntary pension promises, direct insurance and bonus agreements with the three
Managing Directors Funk, Konitzer, Fickert.
All Employment Agreements have extended termination periods compared with
agreements with unions between 4 to 12 weeks before the end of each annual
quarter).
<PAGE>
Exhibit 7.7 (a)
Intellectual Property
Brand and logo "MEX" in written and visual form, dated 19.10.1996 Software
rights and media rights licensed from third parties Domain names
<PAGE>
Exhibit 7.7(d)
License Agreement
Co operation Agreement with InfoOffice (formerly Infotip) dated 23.7.1997
Publishers Contract with Ullstein Soft Media GmbH, dated 8.5.1995
Publishers Contract with arsEdition AG, dated 9.11.1994
Licence Contract with Mindscape Int., Burgess Hill, U.K., dated November 1994
<PAGE>
Exhibit 7.8(a)
Agreements between Sellers and the Company
Employment Contracts with Managing Directors Funk, Konitzer, Fickert
<PAGE>
Exhibit 7.8(b)
Contracts among Sellers
Not necessary / None
<PAGE>
Exhibit 7.9
Insurance
Car Insurance for three Business cars used by the Managing Directors (Costs are
paid by the company; the contracts are made with each MD)
Life Insurance for Mr. Funk, dated 20.3.1996 (Hannoversche Leben)
Corporate Liability Insurance, dated 23.12.1993 (VHV)
Electronic Equipment Insurance: Alte Leipziger, formerly Domcura, dated
15.5.1995
Mixed Insurance (Robbery, Fire, Water, Hurricane, Glas), dated 14.9.1993
(Mannheimer)
Accident Insurance for all employees, dated 20.5.1993 (Grosshandels- und
Lagerei-Berufsgenossenschaft)
Voluntary pension promises and direct insurance for the three Managing Directors
Funk, Konitzer, Fickert, dated August 1999, Zurich Leben.
<PAGE>
Exhibit 7.10(c)
Profit distribution
The profit distribution for the year 1998 was declared and will be made.
<PAGE>
Exhibit 7.10(d)
Pension commitments/salary increases until Closing Date
Increase of renumeration for the Managing Directors in January 1999, 13.000 DM
p.m. Business Cars for the Managing Directors (ordered in February 1999)
Increase of renumeration for various employees: [XXXXX]
[XXXXX]= Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with respect to
the omitted portions.
<PAGE>
Exhibit 7.10(e)
Loans and Contracts until Closing Date
Open credit by HypoVereinsbank, dated 27.7.1999; amount: 500.000 DM; actual 9%
p.a. Interest rate
Office Rental Agreement dated 1.7.1999, about 23.000 DM per month
Employment contracts with Ralf Rebhahn, Julia Kerling, Petr Neuberger, Michael
Schuele, Tobias Weinmann, Beate Schiller, Matthias Nawa
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 28,915
<SECURITIES> 14,800
<RECEIVABLES> 14,854
<ALLOWANCES> (1,051)
<INVENTORY> 0
<CURRENT-ASSETS> 64,714
<PP&E> 15,652
<DEPRECIATION> (5,010)
<TOTAL-ASSETS> 129,113
<CURRENT-LIABILITIES> 27,473
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> 101,195
<TOTAL-LIABILITY-AND-EQUITY> 129,113
<SALES> 49,546
<TOTAL-REVENUES> 49,546
<CGS> 0
<TOTAL-COSTS> 45,962
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,406)
<INCOME-PRETAX> 4,990
<INCOME-TAX> 3,574
<INCOME-CONTINUING> 1,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,416
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
</TABLE>
<PAGE>
Exhibit 99
April 30, 1999
G.M. O'Connell
Chief Executive Officer
Modem Media . Poppe Tyson, Inc.
230 East Avenue
Norwalk, CT 06855
Dear G.M.:
This letter serves to advise you that effective May 1, 1999, I resign from
my position as Executive Vice President of Modem Media. Poppe Tyson, Inc.
I agree to remain with the company as a regular employee (not an officer
or executive) with an annual salary of $25,000.00.
Sincerely,
/s/ Douglas C. Ahlers
