<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 2000
REGISTRATION NO. 333-94191
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
i3 MOBILE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7373 51-0335259
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
181 HARBOR DRIVE
THIRD FLOOR
STAMFORD, CONNECTICUT 06902
(203) 428-3000
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEPHEN G. MALONEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
i3 MOBILE, INC.
181 HARBOR DRIVE
THIRD FLOOR
STAMFORD, CONNECTICUT 06902
(203) 428-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL HIRSCHBERG, ESQ. MORRIS DEFEO, JR., ESQ.
PAUL J. POLLOCK, ESQ. LORRAINE MASSARO, ESQ.
PIPER MARBURY RUDNICK & WOLFE LLP MORRISON & FOERSTER LLP
1251 AVENUE OF THE AMERICAS 1290 AVENUE OF THE AMERICAS
NEW YORK, NY 10020 NEW YORK, NY 10104
(212) 835-6000 (PHONE) (212) 486-8000 (PHONE)
(212) 835-6001 (FACSIMILE) (212) 468-7900 (FACSIMILE)
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practical after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
- ------------------------------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value... 5,060,000 $16.00 $80,960,000 $4,214(2)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares subject to the underwriters' overallotment option.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933. A registration
fee of $17,160 was paid at the time of the initial filing of this
registration statement based on the estimated aggregate offering price.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION,
DATED FEBRUARY 18, 2000
[I3 MOBILE, INC. LOGO]
- --------------------------------------------------------------------------------
i3 MOBILE, INC.
4,400,000 SHARES
COMMON STOCK
- --------------------------------------------------------------------------------
This is the initial public offering of i3 Mobile, Inc. We are offering
4,400,000 shares of our common stock. We anticipate that the initial public
offering price will be between $14.00 and $16.00 per share.
We have applied to list our common stock on the Nasdaq National Market under
the symbol "IIIM."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS I3 MOBILE, INC.
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to an additional
660,000 shares to cover any over-allotments.
DEUTSCHE BANC ALEX. BROWN
CHASE H&Q
CREDIT SUISSE FIRST BOSTON
The date of this prospectus is , 2000
<PAGE> 3
Inside Front Cover
[Description of Artwork:
FRONT COVER:
The front cover will be a single page with the i3 Mobile, Inc. logo centered
towards the upper middle section of the page. The logo is in the center of an
imaginary circle with seven arrows pointing at its top and seven sound waves
emanating from its bottom towards the bottom half of the page. At the top of
the page, on the other end of the arrows is the following text forming the top
half of the imaginary circle: ENTERTAINMENT, E-COMMERCE & ADVERTISING, NEWS,
FINANCIAL INFORMATION, SPORTS, INTERNET & INTRANET, WEATHER.
Behind the text is a graphic complementary to it:
- - a cloud with rain behind WEATHER;
- - a computer behind INTERNET & INTRANET;
- - sports equipment behind SPORTS;
- - stock chart behind FINANCIAL INFORMATION;
- - newspaper behind NEWS;
- - clenched fist behind E-COMMERCE & ADVERTISING; and
- - theater mask behind ENTERTAINMENT.
The seven sound waves lead to seven oval pictures of different men and women
using wireless devices (pagers, cell phones) in various situations (in the
office, in the car, in the park, on the street), forming the bottom half of the
imaginary circle.
In the lower third of the page, there are three pictures of wireless devices
lined up next to each other (a Nokia cell phone, a personal digital assistant,
and a NeoPoint cell phone) with different text messages on each one (horoscope,
stock quote, and sports score, respectively). Below that is the following text:
CONNECTING CONSUMERS, CONTENT & COMMERCE.
Centered at the bottom of the page is the "Powered by i3 Mobile" logo.
INSIDE OF GATEFOLD OF FRONT COVER:
The inside of the gatefold of the cover features some of the same graphics
(cloud with rain; newspaper; sports equipment; computer; stock chart). There are
also graphics of a wireless phone and a personal digital assistant in the
background as well. The i3 Mobile, Inc. corporate logo and the company name are
in the top left corner of the page. The bottom left corner has the following
text:
CONNECTING CONSUMERS, CONTENT & COMMERCE.
The page is divided into three sections by three large ovals with text in the
right side and graphics in the left side of each oval. On the top outer layer
of each oval box is the text:
INTEGRATION, PERSONALIZATION, DISTRIBUTION.
All three ovals are linked by sound waves.
The text of the INTEGRATION oval: i3 Mobile offers a wide range of content and
e-commerce services for distribution to small-screen wireless devices from over
50 third party content providers. i3 Mobile has also entered into a number of
strategic relationships.
To the left of the text are 12 content provider logos (Dow Jones; Sports Ticker;
Associated Press; The Weather Channel; Los Angeles Times; The Canadian Press;
SmarTraveler; Comtex; FOX News; 1-800-flowers.com; infoUSA; cnbc.com). Under the
text are 3 selected strategic logos (NBC; Sony; Sony Music)
The text of the PERSONALIZATION oval:
i3 Mobile has created proprietary systems to parse, filter and format data based
on personal specified by our customers through the more than 20 interactive
wireless portals we have built for wireless network operators and Web sites.
To the left of and under the text are five screen shots of various
Web-provisioning sites that i3 has built (Omnipoint Communications; AT&T; The
Weather Channel; Bell Mobility; Southwestern Bell Wireless).
The text of the DISTRIBUTION oval:
i3 Mobile has developed a network of distribution relationships with some of the
most innovative wireless carriers and Web sites in North America, who offer our
services under the "Powered by i3 Mobile" brand.
To the left of and under the text are logos of business partners through whom i3
Mobile distributes its services (AT&T, Southwestern Bell Wireless; US Cellular;
US West; Cellular One; Omnipoint Communications; Pacific Bell; The Weather
Channel; Clearnet; TeleCorp Pcs; Triton Pcs) and our "Powered by i3 Mobile"
logo.
Emanating from this oval are four sound waves that connect to pictures of
devices to which i3 delivers content: Nokia mobile phone, Neopoint phone,
PalmPilot, and pager.]
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and may
not contain all the information that is important to you. To learn about this
offering and our business, you should carefully read the entire prospectus,
including the risk factors and our financial statements and related notes.
Unless otherwise indicated, we present information in this prospectus assuming:
- the conversion of all outstanding shares of preferred stock into an
aggregate of 11,316,765 shares of common stock upon the closing of this
offering;
- our common stock will be sold at $15.00 per share, which is the mid-point
of the range shown on the cover of this prospectus; and
- the underwriters have not exercised their over-allotment option to
purchase additional shares of common stock.
OUR BUSINESS
We provide timely personalized information to users of wireless devices
such as mobile phones, pagers and personal digital assistants to address their
media content and electronic commerce needs. We currently deliver information
content in a variety of categories, including finance, news, weather, sports,
entertainment, traffic and travel, from over 50 content sources. We have also
begun to offer additional products and services, including advertising sales,
wireless electronic commerce, e-mail and personal information management
applications. We believe that our technical knowledge, business relationships
and experience will enable us to capitalize on the growth of the wireless data
medium.
We provide our products and services primarily through our distribution
relationships with wireless network operators. We currently provide personalized
wireless information services developed for, and provided under agreements with,
more than 15 wireless network operators, collectively representing approximately
48 million wireless phone subscribers at September 30, 1999, or more than 55% of
the North American market of wireless phone users. We have also developed
wireless message delivery systems for four Internet media networks and corporate
enterprises. At December 31, 1999, we had over 450,000 users of our products and
services, of which approximately 100,000 were paying subscribers and 350,000
were complimentary users.
Our three largest distributors by subscription revenue are Omnipoint
Communications Services, Bell Mobility Cellular (Canada) and SBC Communications,
through its subsidiaries Pacific Bell, Southwestern Bell Mobile Systems and its
Cellular One properties in Baltimore, Boston and Washington, D.C., which
collectively accounted for approximately 70% of our subscription revenues in
1999. We also have distribution relationships with AT&T Wireless Services and
AirTouch Cellular who currently have the two largest wireless telephone
subscriber bases in North America. We have recently formed strategic alliances
with two of our investors, NBC Interactive Media, Inc. and Sony Corporation of
America. Under our agreements with these companies, we will be able to offer
selected content from NBC Interactive and Sony and each of their affiliates to
our distributors.
3
<PAGE> 5
PRODUCTS AND SERVICES
We market our products and services using the established distribution
channels of our distributors and the combined brand names of our distributors
and our own brand name. Our products and services are offered on both a
complimentary and subscription basis. Our complimentary service allows users to
select from a limited number of content categories, such as sports, weather or
finance, to receive a daily message at no cost to the user. Our subscription
service allows users to select from a larger number of content categories to
receive multiple personalized messages throughout the day for a fee. We have
proprietary technology and systems that have been designed to provide a network
and device independent platform for the creation and delivery of our products
and services.
In addition, we offer wireless network operators a package of services,
including personal profiling, content aggregation, content parsing, application
development, message delivery, billing and customer service, for the delivery of
customized content and information through their networks. We also offer any one
or more of these services to Internet media networks and corporate enterprises.
MARKET OPPORTUNITY
We believe that wireless mobile data is emerging as a powerful new medium,
uniquely capable of creating value through the ability to deliver highly
personalized, local, timely and interactive content and services to wireless
devices. According to DataQuest, wireless data subscribers will grow at a
compound annual growth rate of 82% from 3 million subscribers in 1999 to 36
million subscribers in 2003, creating a market with more than $3 billion in
annual revenue. The emergence of the mobile data medium is being driven by the
convergence of four major trends:
- growth in wireless communications;
- growth in internet services;
- evolution of media; and
- development of technology, applications and standards.
The emergence of the Internet has significantly increased consumer demand
for access to information. As a group, on-line consumers are increasingly using
new methods, including wireless technologies, to access information typically
available on the Internet. International Data Corporation predicts that the
worldwide annual sales of Internet handheld devices, such as wireless phones and
personal digital assistants, will grow at a compound annual rate of 62% from
$1.2 billion in 1998 to $8.2 billion in 2002. The convergence of the Internet
and digital wireless technologies presents new opportunities for consumers to
access real-time information while away from their desktop computers. We believe
that, by using our platform, wireless network operators, Internet media networks
and corporate enterprises can differentiate their services to retain and
strengthen their existing customer relationships and attract new customers.
4
<PAGE> 6
STRATEGY
Our objective is to be the leading provider of personalized wireless data
products and services that provide information, entertainment and electronic
commerce. The key elements of our strategy are to:
- position i3 Mobile as the single-source wireless portal for wireless
network operators, Internet media networks and corporate enterprises;
- continue to build innovative products;
- grow our user base and build i3 Mobile brand awareness;
- expand and diversify our distribution relationships;
- develop advertising and transactional revenue; and
- advance our technology and content delivery systems.
RISK FACTORS
Investing in our shares of common stock involves a high degree of risk. In
particular, you should be aware that we incurred net losses of approximately
$1.3 million for the year ended December 31, 1996, approximately $2.4 million
for the year ended December 31, 1997, approximately $2.9 million for the year
ended December 31, 1998 and approximately $10.3 million for the year ended
December 31, 1999, resulting in an accumulated deficit of approximately $45.0
million at December 31, 1999, of which $26.6 million represents non-cash charges
related to dividends on and redemptions of our preferred stock in 1999. We
expect to continue to operate at a significant net loss and have negative
operating cash flows as we incur costs related to product development, sales and
marketing and administrative expenses. We face a number of risks that you should
consider before you decide to invest in our common stock. See the section
entitled "Risk Factors" which starts on page 9.
OUR OFFICES AND HISTORY
We were incorporated as Intelligent Information Incorporated under the laws
of the State of Delaware on June 28, 1991. On January 4, 2000, we changed our
name to i3 Mobile, Inc. Our principal executive office is located at 181 Harbor
Drive, Stamford, Connecticut, and our telephone number at that office is (203)
428-3000. In addition, we maintain offices at One Dock Street, Suite 500,
Stamford, Connecticut; 1237 Southridge Court, Suite 100, Hurst, Texas; and 305
N.E. Loop, Hurst, Texas. Our Web site is located at www.i3mobile.com.
Information contained on our Web site does not constitute part of this
prospectus.
5
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by i3 Mobile..... 4,400,000 shares.
Common Stock to be outstanding after
this offering....................... 21,487,265 shares.
Use of Proceeds....................... For expansion of sales and marketing,
further development of systems
infrastructure, funding operating
losses, working capital and general
corporate purposes, including the
development of technology alliances.
See Use of Proceeds for more detailed
information.
Proposed Nasdaq National Market
Symbol.............................. "IIIM"
</TABLE>
- -------------------------
The outstanding share information shown in the table above excludes:
- 1,929,084 shares of common stock issuable upon the exercise of warrants
at a weighted average exercise price of $3.50 per share;
- an aggregate of 914,000 shares of common stock issuable upon the exercise
of outstanding stock options under our 1995 Stock Incentive Plan at a
weighted average exercise price per share of $2.71; and
- 100,000 shares of common stock available for future grant under our 1995
Stock Incentive Plan and 1,250,000 shares of common stock available for
future grant under our 2000 Stock Incentive Plan.
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes our consolidated statement of operations
data for each of the years ended December 31, 1995, 1996, 1997, 1998 and 1999,
and our consolidated balance sheet data as of December 31, 1999. The data for
the year ended December 31, 1995 is unaudited. This information should be read
along with the consolidated financial statements and the related notes included
elsewhere in this prospectus.
The pro forma net loss per share data below for the year ended December 31,
1999, reflects the conversion of all of our outstanding shares of preferred
stock into 11,316,765 shares of common stock upon the completion of this
offering as though this event occurred as of their issuance date.
The pro forma summary consolidated balance sheet data below reflects the
conversion of all of our outstanding shares of preferred stock into 11,316,765
shares of common stock upon the completion of this offering as though this event
occurred as of December 31, 1999.
The pro forma as adjusted summary consolidated balance sheet data below
adjusts the pro forma information to give effect to the sale of 4,400,000 shares
of common stock offered by us in this offering, at an assumed initial public
offering price of $15.00 per share, after deducting underwriting discounts and
commissions and estimated offering expenses, and the application of the
estimated net proceeds. See Use of Proceeds.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1996 1997 1998 1999
----------- --------- --------- --------- ---------
) (IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue..................................... $ 387 $ 645 $ 825 $ 1,405 $ 1,734
Cost of revenue................................. 190 465 700 1,081 1,302
------ ------- ------- ------- --------
Gross profit.................................... 197 180 125 324 432
Operating expenses.............................. 966 1,507 2,492 2,890 6,962
------ ------- ------- ------- --------
Operating loss.................................. (769) (1,327) (2,367) (2,566) (6,530)
Interest (income) expense - net................. (22) (8) 81 329 326
------ ------- ------- ------- --------
Loss before extraordinary item.................. (747) (1,319) (2,448) (2,895) (6,856)
Extraordinary loss on extinguishment of debt.... - - - - (3,434)
------ ------- ------- ------- --------
Net loss........................................ $ (747) $(1,319) $(2,448) $(2,895) $(10,290)
Dividends on and redemptions of preferred
stock......................................... - (8) (76) (274) (26,580)
====== ======= ======= ======= ========
Loss applicable to common stock................. $ (747) $(1,327) $(2,524) $(3,169) $(36,870)
====== ======= ======= ======= ========
Net loss per share -- basic and diluted:
Loss before extraordinary item.................. $(0.10) $ (0.18) $ (0.33) $ (0.42) $ (5.83)
Extraordinary item.............................. - - - - (0.60)
------ ------- ------- ------- --------
Net loss........................................ $(0.10) $ (0.18) $ (0.33) $ (0.42) $ (6.43)
====== ======= ======= ======= ========
Shares used in computing net loss per share..... 7,282 7,552 7,554 7,554 5,736
====== ======= ======= ======= ========
Pro forma net loss per share -- basic and
diluted:......................................
Pro forma loss before extraordinary item........ $ (0.57)
Extraordinary item.............................. (0.29)
--------
Net pro forma loss.............................. $ (0.86)
========
Shares used in computing pro forma net loss per
share......................................... 11,948
========
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 28,241 $28,241 $87,904
Working capital............................................. 29,468 29,468 89,131
Total assets................................................ 36,241 36,241 95,441
Mandatorily redeemable convertible preferred stock.......... 55,338 - -
Total stockholders' equity (deficit)........................ (22,696) 32,642 91,842
</TABLE>
- -------------------------
The outstanding share information shown in the table above excludes:
- 1,929,084 shares of common stock issuable upon the exercise of warrants at
a weighted average exercise price of $3.50 per share;
- an aggregate of 914,000 shares of common stock issuable upon the exercise
of outstanding stock options under our 1995 Stock Incentive Plan at a
weighted average exercise price per share of $2.71; and
- 100,000 shares of common stock available for future grant under our 1995
Stock Incentive Plan and 1,250,000 shares of our common stock available
for future grant under our 2000 Stock Incentive Plan.
8
<PAGE> 10
RISK FACTORS
You should carefully consider the following risks and other information in
this prospectus before you decide to buy our common stock. An investment in our
common stock involves a high degree of risk. Our business, financial condition
or operating results may suffer if any of the following risks actually occur.
Additional risks and uncertainties not currently known to us may also adversely
affect our business, financial condition or operating results. If any of these
risks or uncertainties occurs, the trading price of our common stock could
decline.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE HAVE A LIMITED OPERATING HISTORY IN A NEW AND RAPIDLY EVOLVING
MARKET, OUR FUTURE PROFITABILITY IS UNCERTAIN.
Although we were founded in 1991, the increased growth in digital wireless
capabilities and Internet use has occurred only recently and, as a result, the
focus of our business changed significantly. Due to changes in technology and
the emergence of wireless digital telephone networks, our business has expanded
from providing limited content to pagers to our current arrangements with
distributors who offer our products and services to many users and a wide
variety of wireless devices. When making your investment decision, you should
consider the risks, expenses and difficulties that we may encounter or incur in
a new and rapidly evolving market. We face a number of risks encountered by
companies in the rapidly evolving wireless telecommunications market, including:
- our current reliance on wireless network operators to launch and maintain
commercial services utilizing our products;
- the uncertainty of market acceptance of commercial services utilizing our
products;
- our substantial dependence on products with only limited market
acceptance to date;
- our need to expand our marketing, sales, consulting and support
organizations, as well as our distribution channels;
- our ability to anticipate and respond to market competition;
- our need to manage expanding operations; and
- our dependence upon key personnel.
Our business strategy may not be successful, and we may not successfully address
these risks.
9
<PAGE> 11
BECAUSE WE HAVE A HISTORY OF LOSSES AND EXPECT TO CONTINUE TO INCUR SIGNIFICANT
EXPENSES, WE EXPECT TO CONTINUE TO INCUR LOSSES.
We have incurred annual operating losses each year since our inception and
we expect to incur further losses for the foreseeable future. We have incurred
net losses of $10,290,000 for the year ended December 31, 1999, $2,895,000 for
the year ended December 31, 1998, $2,448,000 for the year ended December 31,
1997, and $1,319,000 for the year ended December 31, 1996. As of December 31,
1999, our accumulated deficit was $45,001,000, of which $26,580,000 represents
non-cash charges for dividends on and redemption of our preferred stock during
1999. Because we expect to continue to incur significant product development,
sales and marketing, and administrative expenses, we will need to generate
significant revenues to become profitable and sustain profitability on a
quarterly or annual basis. We may not achieve or sustain our revenue or profit
goals, and our ability to do so depends on a number of factors outside of our
control, including the extent to which:
- there is market acceptance of commercial services utilizing our products;
- our competitors announce and develop, or lower the prices of, competing
products; and
- our distributors dedicate resources to selling our products and services.
As a result, we cannot predict if we will ever achieve profitability. In
addition, our failure to achieve profitability within the time frame expected by
our investors may adversely affect the market price of our common stock.
BECAUSE BOTH OUR BUSINESS MODEL AND THE USE OF WIRELESS DEVICES FOR DELIVERY OF
DATA SERVICES ARE EVOLVING AND UNPROVEN, WE CANNOT PREDICT WHETHER OUR PRODUCTS
AND SERVICES WILL GENERATE SUFFICIENT REVENUES.
Our business model is relatively new, is unproven and is likely to continue
to evolve. Accordingly, it may not be successful, and we may have to adjust it.
In addition, our future success depends on the continued increase in wireless
device use and the continued development of wireless devices as a viable medium
for the delivery of products and services. In particular, our success depends on
commercial acceptance of wireless telephones and other wireless devices, and the
Internet, to obtain timely personalized information. We cannot predict whether
demand for our products and services will continue to develop, particularly at
the volume or prices that we need to become profitable.
IF WIRELESS DEVICES ARE NOT WIDELY ACCEPTED FOR MOBILE DELIVERY OF CONTENT
SERVICES AND INTERNET-BASED SERVICES, OUR BUSINESS WILL SUFFER MATERIALLY.
Our future success depends upon the acceptance of wireless communications
for delivery of content and Internet-based services. Most mobile individuals
currently use portable computers to access the Internet, conduct electronic
commerce transactions and remotely retrieve real-time information and e-mail.
Computers are generally designed for the visual presentation of data, whereas
wireless telephones and pagers historically have been limited to messaging by
letters, numbers and a finite number of symbols. If users do not accept
text-based messages instead of a computer image to conduct electronic commerce
using wireless devices, our electronic commerce business may not develop as
expected.
10
<PAGE> 12
We cannot assure you that wireless users will accept the use of handheld devices
to receive content or Internet-based services.
BECAUSE WE DEPEND UPON WIRELESS NETWORKS OWNED AND CONTROLLED BY OTHERS FOR
ACCESS TO SUFFICIENT CAPACITY AND LEVEL OF SERVICE QUALITY, WE MAY BE UNABLE TO
DELIVER OUR PRODUCTS AND SERVICES AND OUR USER BASE AND REVENUE COULD DECREASE.
Our ability to grow and achieve profitability partly depends on our ability
to access sufficient capacity on the networks of wireless carriers such as AT&T
Wireless Services and Omnipoint Communications Services and on the reliability
and security of their systems. All of our products and services are delivered
using transmission services provided by third parties. We depend on these
companies to provide uninterrupted and quality service and would not be able to
satisfy our users' needs if our wireless network operators fail to provide the
required capacity or level of service.
BECAUSE WE DEPEND ON THIRD PARTIES TO MARKET AND DISTRIBUTE OUR PRODUCTS AND
SERVICES, IF THEIR EFFORTS ARE NOT SUFFICIENT OR EFFECTIVE, WE MAY NOT ACHIEVE
PROFITABILITY.
We rely substantially on the efforts of others to actively market and
distribute our wireless data services. In order to increase the value of our
products and services to our users and encourage demand for content delivery via
wireless devices, we must successfully promote our products and services to
distributors. If our distributors fail to create sufficient interest in content
delivery services via wireless devices, we may be unable to attract new users
and our business could suffer materially. We may not be able to control how
those who distribute and market our products and services perform and we cannot
be certain that their marketing efforts will be satisfactory. If the marketing
and/or distribution efforts of wireless network operators, Internet media
networks or corporate enterprises fail to attract new users, we may be unable to
acquire new subscribers and our revenue could be adversely affected.
BECAUSE THREE OF OUR WIRELESS NETWORK OPERATORS ACCOUNTED FOR APPROXIMATELY 70%
OF OUR REVENUE FOR THE YEAR ENDED DECEMBER 31, 1999, A LOSS OF ANY OF THEM AS
DISTRIBUTORS OF OUR PRODUCTS AND SERVICES WOULD SIGNIFICANTLY REDUCE OUR
REVENUE.
To date, the largest distributors of our products and services in terms of
revenue generated have been Omnipoint Communications Services, SBC
Communications, Inc. and Bell Mobility Cellular, Inc. Subscription revenues
generated by users of these wireless networks together accounted for
approximately 70% of our revenue for the year ended December 31, 1999 and 52%
for the year ended December 31, 1998. In addition, Omnipoint Communications
Services alone accounted for over 41% of our total revenue for the year ended
December 31, 1999 and 41% for the year ended December 31, 1998. We expect that
we will generate a significant portion of our revenue from a small number of
wireless network operators for the foreseeable future. Our growth depends on
maintaining our relationships with these and our other wireless network
operators and developing distribution relationships with additional wireless
network operators. If
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we lose any of these wireless network operators our revenue would be
significantly reduced, which would harm our business.
BECAUSE OUR BUSINESS HAS GROWN RAPIDLY, WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE
OUR GROWTH.
Our growth has placed, and any further growth is likely to continue to
place, considerable strain on our management team and other personnel, our
internal accounting and management information systems and the third-party
systems on which we depend. If we fail to manage our growth effectively our
business would be adversely affected. In addition, we intend to use the net
proceeds of this offering to develop additional products and services and to
accelerate our growth. Our growth plans are likely to continue to place a
significant strain on our personnel, and we believe that our current accounting
and management information systems are inadequate to handle our anticipated
growth. Our failure to hire additional personnel or to improve our systems
increases the risk that we will not be able to achieve our growth objectives or,
if achieved, we will not be able to manage our operations effectively.
BECAUSE WE HAVE NON-EXCLUSIVE AGREEMENTS WITH THE WIRELESS NETWORK OPERATORS WHO
DISTRIBUTE OUR PRODUCTS AND SERVICES, OUR COMPETITORS MAY BE ABLE TO OBTAIN
ARRANGEMENTS SIMILAR TO OURS.
Our existing agreements with our wireless network operators are non-
exclusive. Some or all of our wireless network operators may decide to establish
relationships with our competitors. In addition, some of these wireless network
operators are, or could become, our competitors by offering the same or similar
products and services. If the wireless network operators who distribute our
products and services began competing directly with us or offering our
competitors' products and services, our business and growth prospects would
suffer.
OUR EXPENSES WOULD INCREASE AND OUR PROFITABILITY COULD BE MATERIALLY ADVERSELY
AFFECTED IF OUR WIRELESS NETWORK OPERATORS CHANGE THEIR CURRENT FEE STRUCTURES.
Currently, we pay our wireless network operators a distribution fee for
allowing us to use their networks to deliver content to our direct subscribers
and for delivery of advertising and electronic commerce-enabling messages. If
the wireless network operators increase these fees or begin to charge additional
fees, our expenses would increase and our profitability could be materially
adversely affected. Further, if the wireless network operators require us to
lower the subscription rates we charge their customers for our products and
services, our revenues would also decrease, which would also affect our
profitability adversely.
BECAUSE OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, WE MAY
NOT MEET EXPECTATIONS OF INVESTORS AND OUR STOCK PRICE MAY DECLINE.
Our operating results are likely to fluctuate from period to period due to
a variety of factors, including the following:
- continued growth in the use and quality of wireless communications
products;
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- the rate at which we are able to acquire new users;
- our ability to generate subscriptions among our user base;
- changes in our revenue arrangements with wireless network operators;
- timing of introduction of new products and services;
- changes in pricing policies and product offerings by us or our
competitors;
- continued growth in Internet usage;
- our ability to enter into revenue generating relationships with content
and electronic commerce providers;
- costs associated with advertising, marketing and promotional efforts to
acquire subscribers;
- changes in our fee arrangements with advertisers, electronic commerce
providers and content providers; and
- capital expenditures and other costs and expenses related to improving
our business, expanding our operations and adapting to new technologies
and changes in subscriber preferences.
In addition, our operating expenses are based on our expectations of the
future demand for our products and services. Moreover, we frequently will incur
expenses in connection with the integration and offering of new content, which
are likely to be incurred substantially in advance of related revenues. We may
be unable to adjust spending quickly enough to offset any unexpected demand
shortfall or delay in offering our products and services. Any shortfall in
revenues would have a direct impact on operating results for a particular
quarter, and these fluctuations could affect the market price of our common
stock. If we do not meet expectations of investors in a particular quarter, the
price of our common stock could decline.
IF WE LOSE KEY MANAGEMENT OR OTHER PERSONNEL, WE MAY EXPERIENCE DELAYS IN OUR
PRODUCT DEVELOPMENT AND OUR GROWTH PROSPECTS.
We believe that our success depends upon the continued efforts of our
senior management and key technical personnel, including Stephen G. Maloney, our
president and chief executive officer. Our growth and success also depends on
our ability to attract, hire and retain additional highly qualified management,
technical, marketing and sales personnel. These individuals are in high demand
and we may not be able to attract the staff we need. The hiring process is
intensely competitive, time consuming and may divert the attention of our
management from our operations. Competitors and other companies may attempt to
recruit our employees. If we lose the services of any of our senior management
or key technical personnel, or if we fail to continue to attract qualified
personnel, our business could suffer.
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BECAUSE OUR BUSINESS DOES NOT GENERATE SUFFICIENT CASH TO FUND OUR OPERATIONS,
IF WE DO NOT OBTAIN ADDITIONAL CAPITAL ON ACCEPTABLE TERMS, WE MAY NOT BE ABLE
TO CONTINUE TO GROW OUR BUSINESS.
In the past, we have met our capital needs through private sales of
securities. In order to implement our strategy, we expect to spend significant
amounts of money to:
- advertise, market and promote our products and services;
- expand our technical infrastructure;
- secure agreements with content and electronic commerce providers;
- create advanced customer care and operations centers; and
- fund operating losses and working capital.
If additional funds are raised through a bank credit facility or the
issuance of debt securities, the holders of this indebtedness would have rights
senior to the rights of the holders of our common stock, and the terms of this
indebtedness could impose restrictions on our operations. We may not be able to
raise additional capital in the future on terms acceptable to us, or at all. If
alternative sources of financing are insufficient or unavailable, we will be
required to modify our growth and operating plans in accordance with the extent
of available funding.
IF WE ARE UNABLE TO MAINTAIN, IMPROVE AND DEVELOP OUR PRODUCTS AND SERVICES, WE
MAY NOT ACHIEVE PROFITABILITY.
We may not be able to develop and introduce new products, services and
enhancements that respond to technological changes, evolving industry standards
or customer needs and trends on a timely basis, in which case our business would
suffer. We believe that our future business prospects depend in part on our
ability to maintain and improve our current products and services and to develop
new ones on a timely basis. Our products and services will have to achieve
market acceptance, maintain technological competitiveness and meet an expanding
range of customer requirements. As a result of the complexities inherent in our
offerings, major new wireless data services and service enhancements may require
long development and testing periods. We may experience difficulties that could
delay or prevent the successful development, introduction or marketing of new
products and services and service enhancements. Additionally, our new products,
services and enhancements may not achieve market acceptance. Also, our
competitors may develop alternative technologies that gain broader market
acceptance than our products and services. If we cannot effectively maintain,
improve and develop products and services we may not be able to recover our
fixed costs or otherwise become profitable.
BECAUSE THE ADOPTION PERIOD FOR OUR PRODUCTS AND SERVICES BY THE CUSTOMERS OF
THE WIRELESS NETWORK OPERATORS, INTERNET MEDIA NETWORKS AND CORPORATE ENTER-
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PRISES WHO DISTRIBUTE OUR PRODUCTS AND SERVICES IS LONG, OUR STOCK PRICE COULD
DECLINE IF REVENUES ARE DELAYED.
We cannot predict the rate of adoption by wireless users of our services or
the price they may be willing to pay for our products and services in the
future. Fluctuations in our operating performance are exacerbated by the length
of time between our first contact with a wireless network operator, Internet
media network or corporate enterprise and the first revenue from sales of
products and/or services to the end-user.
IF WE ARE UNABLE TO MIGRATE OUR COMPLIMENTARY USERS TO OUR SUBSCRIBER SERVICES,
OR GENERATE SUFFICIENT ADVERTISING REVENUE TO SUPPORT THESE COMPLIMENTARY USERS,
WE MAY NOT ACHIEVE PROFITABILITY.
At December 31, 1999, 22% of our users were paying subscribers. We intend
to migrate our complimentary users to paying subscribers through direct and
cooperative marketing efforts with our distributors, including advertising
messages describing the products and services attached to complimentary
messages, direct mail pamphlets included with wireless telephone invoices and
Internet-based promotions on distributors' Web sites. If a wireless network
operator limits the use of the complimentary service to the user to a limited
period and these complimentary users fail to become subscribers, our user base
may decline and we may not generate sufficient revenues to become profitable.
IF WE DO NOT CONTINUE TO OFFER DESIRED CONTENT, WE MAY NOT BE ABLE TO ATTRACT
AND RETAIN SUBSCRIBERS AND ADVERTISERS.
Currently, we rely on third parties, such as news, sports, weather and
financial information companies, to provide the content we offer our users. It
is important to our business that we maintain our existing relationships with
these content providers and enter into new relationships giving our users access
to content they find useful. Our content agreements frequently are for one-year
terms and are non-exclusive. Our content providers may choose not to renew their
agreements with us or may terminate their agreements early if we do not fulfill
our contractual obligations. If that occurs, we would need to establish new
relationships with other content providers, or we would face the prospect of
losing users. In addition, we cannot assure you that our content providers will
not raise the prices they charge for content. If the pricing terms with our
content providers change substantially, our revenues and profitability would be
affected. Our failure to provide useful content could result in decreased
numbers of users, which, in turn, would result in decreased revenue.
IF COMPETITION FOR OUR PRODUCTS AND SERVICES INCREASES, IT COULD REDUCE OUR
MARKET SHARE AND DECREASE OUR REVENUE.
We face competition from a wide variety of businesses that provide products
and services that compete with some or all of our products and services. We also
face competition from new products which could affect our business. Generally,
our agreements with wireless network operators, wireless handheld device
manufacturers and content providers are non-exclusive. As a result, our
competitors may establish relationships that allow them to use the same products
and services. With time and capital, it would be possible for competitors to
replicate
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our services. Competition could reduce our market share or force us to lower
prices to unprofitable levels.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST COMPETITORS THAT HAVE
SIGNIFICANTLY GREATER RESOURCES THAN WE DO WHICH COULD CAUSE US TO LOSE USERS
AND IMPEDE OUR ABILITY TO ATTRACT NEW USERS.
The business of providing wireless information services is highly
competitive and is affected by the introduction of new services by, and the
market activities of, major industry participants. Several of our competitors
are substantially larger and have greater financial, technical and marketing
resources than we do. In particular, larger competitors have certain advantages
over us which could cause us to lose our wireless network operators or users and
impede our ability to attract new users, including:
- brand recognition with distributors and users;
- financial, technical, marketing, personnel and other resources
substantially greater than ours;
- more established relationships with our targeted distributors;
- more funds to deploy services; and
- ability to lower prices of competitive products and services.
Furthermore, some competitors have and others may develop a different
approach to marketing the products and services we provide in that they may not
require subscribers to pay for the wireless information provided. As a result,
we may not be able to compete successfully in our market.
IF WE FAIL TO OBTAIN CONSENT FROM WIRELESS NETWORK OPERATORS TO PROVIDE
ADDITIONAL PRODUCTS AND SERVICES TO USERS, INCLUDING ADVERTISING AND ELECTRONIC
COMMERCE, WE MAY NOT BE ABLE TO SELL NEW AND EXISTING PRODUCTS AND SERVICES AT A
PROFIT.
We generally must obtain the consent of the wireless network operators in
order to offer additional products and services to our users on their networks.
If wireless network operators limit our product and service offerings to their
subscribers, including advertising and electronic commerce, our revenue may not
increase.
BECAUSE OUR DISTRIBUTORS MAY EXPERIENCE A HIGH RATE OF CUSTOMER TURNOVER, OUR
COST OF OPERATIONS COULD INCREASE AND OUR REVENUE COULD DECREASE.
Many providers in the wireless services industry have experienced a high
rate of customer turnover. The rate of customer turnover may be the result of
several factors, including network coverage, reliability issues such as blocked
and dropped calls, handset problems, non-usage of phones, change of employment,
affordability and customer care concerns. Price competition and other
competitive factors could also increase customer turnover rates. When a user
chooses a new wireless services provider, he or she may or may not have the
opportunity to receive our products and services. We have little or no control
over customer turnover of our wireless network operators, and a high rate of
customer turnover could adversely affect our competitive position, results of
operations and our costs of, or losses incurred in, obtaining new subscribers,
including increased marketing costs needed to attract new customers.
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BECAUSE WE DO NOT RECONCILE OUR USER AND SUBSCRIBER COUNTS WITH THOSE OF OUR
DISTRIBUTORS MORE FREQUENTLY THAN ON A QUARTERLY BASIS, THESE COUNTS MAY NOT
REFLECT THE ACTUAL NUMBER OF OUR USERS AND SUBSCRIBERS AT ANY PARTICULAR POINT
IN TIME.
We maintain a database of user profiles created by each user at the time
they register for our services and we derive our user and subscriber counts from
this database. This database is a component of our message delivery system and
is not a part of our financial reporting systems. Our experience indicates that
each month a number of users of our products and services cancel their
agreements with us for a variety of reasons, including termination of their
subscriptions to our distributors' services. We continually update our database
of users and subscribers and generally reconcile our user and subscriber counts
with those of our distributors on a quarterly basis. Accordingly, the number of
users contained in our database at a particular point in time may not reflect
users or subscribers that have recently cancelled their service with their
wireless network operator. As a result, we cannot assure you that the user and
subscriber counts in our database are accurate at any particular date. Because
investors may value our company based on the number of users and subscribers of
our services, our stock price may fluctuate accordingly.
BECAUSE WE MAY LOSE SOME OF OUR WIRELESS NETWORK OPERATOR RELATIONSHIPS DUE TO
CONSOLIDATION IN THE INDUSTRY, WE COULD LOSE A SIGNIFICANT PORTION OF OUR USER
BASE.
The wireless communications industry has experienced significant
consolidation among service providers. If one or more of the wireless network
operators that distribute our products and services were to consolidate with
another entity, the newly consolidated entity may choose to discontinue its
relationship with us or select one of our competitors to provide them with
products and services. This could have a significant negative impact on our
ability to generate revenues.
BECAUSE WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS OR AVOID CLAIMS
THAT WE INFRINGED THE PROPRIETARY RIGHTS OF OTHERS, WE MAY INCUR SUBSTANTIAL
COSTS TO DEFEND OR PROTECT OUR BUSINESS AND INTELLECTUAL PROPERTY.
Our success and competitive position depend, in large part, upon our
ability to develop and maintain the proprietary aspects of our technology. We
have filed applications to register the marks "i3 Mobile," and "Powered by i3
Mobile" and "Powered by III" in the United States but we cannot be certain that
we will be granted this registration. We have registered the marks "Eyes on the
Web," "Village Square," "News Alert Service," "Sports Alert Service," and
"Intelligent Information Incorporated" on the Principal Register of the United
States Patent and Trademark Office. We have filed a patent application for our
information messaging and advertising tagging system, Advanced Data Mining
Advertising Tagging and Transaction system. We also have a license agreement
with Portel Services Network, Inc. for Portel's patented process for transacting
some types of electronic commerce. If we fail to protect our intellectual
property, we may be exposed to expensive litigation or risk jeopardizing our
competitive position. We may have to litigate to enforce our intellectual
property rights, to protect our trade secrets or to determine the validity and
scope of the proprietary rights of others. This litigation could result in
substantial costs and the diversion of our management and technical resources
that would harm our business.
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In addition, we joined the Wireless Application Protocol Forum Ltd., which
is an industry association of wireless service, wireless equipment and software
companies that has developed worldwide standards for wireless information and
telephone services on digital mobile phones and other wireless devices. As a
result of our affiliation with this association we have agreed to license our
intellectual property to other members on fair and reasonable terms to the
extent that the license is required to develop non-infringing products under the
specifications promulgated by the Wireless Application Protocol Forum Ltd. Each
other member of this association has entered into reciprocal agreements.
Although these agreements provide protections to prevent divulgence or
unauthorized use of such information, we cannot assure you that the other
members will take the steps necessary to protect our proprietary information.
Any claim of infringement could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from our business. A party making a claim could secure a judgment
that requires us to pay substantial damages.
BECAUSE WE MAY NOT DEVELOP SIGNIFICANT REVENUES FROM ADVERTISING AND ELECTRONIC
COMMERCE, OUR BUSINESS MAY NOT GROW AS PLANNED.
We anticipate increasing our revenues from advertising and electronic
commerce transactions through our wireless portals. To generate additional
revenues from advertising and electronic commerce, we will have to continue to:
- increase our user base;
- attract users who purchase goods and services;
- obtain licenses, patents and other proprietary rights to use other
parties' intellectual property; and
- develop relationships with advertisers and electronic commerce companies.
BECAUSE WE INTEND TO EXPAND INTERNATIONALLY, WE WILL BE SUBJECT TO RISKS OF
CONDUCTING BUSINESS IN FOREIGN COUNTRIES.
If, as we anticipate, we expand our operations outside North America, we
will be subject to the risks of conducting business in foreign countries,
including:
- our inability to adapt our products and services to local cultural
traits, customs and mobile user preferences;
- our inability to locate qualified local employees, partners and
suppliers;
- the potential burdens of complying with a variety of foreign laws, trade
standards and regulatory requirements, including the regulation of
wireless communications and the Internet and uncertainty regarding
liability for information retrieved and replicated in foreign countries;
and
- general geopolitical risks, such as political and economic instability
and changes in diplomatic and trade relations.
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If we fail to meet any of the foregoing risks, or if we fail to increase
our revenues from advertising and electronic commerce transactions, we will not
grow as anticipated.
IF WE ACQUIRE OR INVEST IN ANOTHER COMPANY, THIS MAY DISRUPT OUR BUSINESS OR
DISTRACT OUR MANAGEMENT.
We have limited experience in acquiring businesses, technologies, services
or products. From time to time, we engage in discussions and negotiations with
companies regarding our acquiring or investing in these companies' businesses,
products, services or technologies. If we acquire or invest in another company,
we could have difficulty assimilating that company's personnel, operations,
products, services, technology and software. In addition, the key personnel of
the acquired company may decide not to work for us. These difficulties could
disrupt our ongoing business, distract our management and employees, increase
our expenses and adversely affect our results of operations. The issuance of
equity securities would be dilutive to our existing stockholders. As of the date
of this prospectus, we have no agreement to enter into any material investment
or acquisition transaction.
RISKS RELATED TO OUR TECHNOLOGY
IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID TECHNOLOGICAL
CHANGE, OUR PRODUCTS AND SERVICES MAY BECOME OBSOLETE AND WE MAY LOSE USERS.
The wireless and data communications industries are characterized by
rapidly changing technologies, industry standards, customer needs and
competition, as well as by frequent new product and service introductions. Our
products and services must also be compatible with the data networks of wireless
carriers. We must respond to technological changes affecting both our users and
suppliers. We may not be successful in developing and marketing, on a timely and
cost-effective basis, new products and services that respond to technological
changes, evolving industry standards or changing customer requirements. Our
research and development efforts may require significant capital and other
resources. In addition, major enhancements or improvements to our technology may
require long development and testing periods. If we fail to develop products and
services in a timely fashion, or if we do not enhance our products and services
to meet evolving user needs and industry standards, we may not remain
competitive.
BECAUSE OUR NETWORK MAY BE VULNERABLE TO SECURITY RISKS, WE MAY INCUR
SIGNIFICANT COSTS TO PROTECT AGAINST THE THREAT OF SECURITY BREACHES OR TO
ALLEVIATE PROBLEMS CAUSED BY ANY BREACHES.
A significant barrier to the growth of wireless data services or
transactions on the Internet or by other electronic means has been the need for
secure transmission of confidential information. Unauthorized access, computer
viruses and other accidental or intentional actions could disrupt our systems.
We may incur significant costs to protect against the threat of security
breaches or to alleviate problems caused by such breaches. If a third party were
able to misappropriate our users' personal or proprietary information, we could
be subject
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to claims, litigation or other potential liabilities that could materially
adversely impact our revenue and may result in the loss of subscribers.
IF WE EXPERIENCE ANY TYPE OF SYSTEMS FAILURE, IT COULD RESULT IN LOWER REVENUES,
INCREASED COSTS OR CLAIMS OF LIABILITY.
Our products and services depend on real-time, continuous information feeds
from our content providers including the Nasdaq Stock Market, Inc., The New York
Stock Exchange, Inc. and others. Our business strategy is focused on subscribers
that typically require timely receipt of information. Any disruption from our
satellite transmissions or backup landline transmissions could result in delays
in our subscribers' ability to receive information. We currently maintain a
backup generator system to deliver messages during power outages. We cannot
assure you that our systems will operate effectively if we experience a hardware
or software failure or if there is an earthquake, fire or other natural
disaster, a power or telecommunications failure, an act of God or an act of war.
A failure in our systems could cause delays in transmitting data, and as a
result we may lose subscribers and users or face litigation that could involve
material costs and distract management from operating our business.
RISKS RELATED TO REGULATION OF THE INTERNET, WIRELESS TELEPHONE
AND SERVICES PROVIDERS
IF NEW LAWS AND REGULATIONS ARE ENACTED OR THE APPLICATION OR INTERPRETATION OF
EXISTING LAWS AND REGULATIONS CHANGES WE COULD INCUR COSTS IN ORDER TO COMPLY.
The wireless network operators who distribute our products and services are
subject to regulation by the Federal Communications Commission and regulations
that affect them could increase our costs or reduce our ability to continue
distributing our products and services. In addition, there are an increasing
number of laws and regulations pertaining to wireless telephones and the
Internet under consideration in the United States and elsewhere. These current
and potential laws or regulations relate to, among other things:
- liability of information providers for the transmission of indecent,
obscene or offensive content over the Internet; and
- liability of information for user privacy in respect of the collection,
distribution, disclosure, security, accuracy and other use of personal
information obtained from individuals accessing Internet sites.
Moreover, the applicability to the Internet of existing laws governing
issues such as intellectual property ownership and infringement, copyright,
trademark, trade secret, obscenity, libel, employment and personal privacy is
uncertain and developing. Any new legislation or regulation, or the application
or interpretation of existing laws, may have a material and adverse effect on
our business, results of operations and financial condition.
CHANGES IN GOVERNMENT REGULATIONS WHICH SUBJECT US TO SALES AND OTHER TAXES FOR
ELECTRONIC TRANSACTIONS COULD DECREASE THE DEMAND FOR OUR PRODUCTS AND SERVICES
AND NEGATIVELY IMPACT OUR RESULTS.
We do not currently collect sales tax or other similar taxes for electronic
commerce transactions executed using a wireless device. A number of legislative
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proposals are under consideration by federal, state, local and foreign
governmental organizations that would impose additional taxes on the sale of
goods and services over the Internet. One or more local, state or foreign
jurisdictions may require that companies located in other jurisdictions collect
sales taxes when engaging in electronic commerce in those jurisdictions.
Imposition of new taxes or fees by one or more states, the Federal government of
the United States or foreign governments on Internet transactions or on the use
of the Internet as a means of communication could adversely affect us.
IF WE ARE HELD LIABLE FOR ONLINE CONTENT PROVIDED BY THIRD PARTIES, OUR
INSURANCE COVERAGE MAY NOT BE ADEQUATE TO PROTECT US AND WE MAY INCUR
SUBSTANTIAL COSTS.
As a distributor of content, we may be liable for claims against us based
on a variety of grounds, including defamation, obscenity, negligence, copyright
or trademark infringement or other grounds based on the nature, publication and
distribution of this content. These types of claims have been brought, sometimes
successfully, against providers of Internet services in the past. It is also
possible that if any information provided through our wireless portals contains
errors or false or misleading information or we fail to provide information to
subscribers on a timely basis, third parties could make claims against us for
losses incurred in reliance on such information or our failure to provide
information on a timely basis. Although we generally require that our content
providers indemnify us for liability based on their content and we carry general
liability insurance, our insurance may not cover potential claims of this type
or the indemnity or insurance limits may not be adequate to cover all costs
incurred in defense of potential claims or to indemnify us for all liability
that may be imposed. If we are found liable in excess of the amount of indemnity
or of our insurance coverage, we could be liable for substantial damages and our
reputation and business may suffer.
We also require our users to accept the terms and conditions of our online
contracts by executing agreements in order to receive our products and services.
Most of the agreements are executed through the use of an electronic signature,
meaning that each subscriber answers a number of questions in which he or she
agrees to be bound by the terms of the subscription agreement. Although
contracts containing electronic signatures have generally been enforced, this
area of the law is relatively new and may be subject to change. Accordingly, if
the law should develop in this area to hold that electronic signatures are not a
valid method of contract execution, we could lose the protections afforded to us
in the limitation of liability and disclaimer of liability provisions contained
in our subscription agreements.
RISKS RELATED TO THIS OFFERING
BECAUSE WE WILL HAVE BROAD DISCRETION IN USING THE NET PROCEEDS OF THIS
OFFERING, WE MAY NOT USE THE PROCEEDS TO THE SATISFACTION OF INVESTORS.
Our management will have broad discretion over the allocation of the net
proceeds from this offering as well as over the timing of their expenditure
without stockholder approval. We intend to use the net proceeds from this
offering for expansion of our sales and marketing operations, further
development of our systems infrastructure, funding operating losses, working
capital and other general corporate purposes, including the development of
technology alliances. In addition,
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we may use a portion of the proceeds for acquisitions or other investments. It
is likely, however, that our spending patterns will change following this
offering. As a result, you will be relying upon management's judgment with only
limited information about its specific intentions for the use of the net
proceeds of this offering. Our failure to apply these proceeds effectively could
cause our business to suffer.
BECAUSE OUR COMMON STOCK PRICE, LIKE THAT OF MANY TECHNOLOGY COMPANIES, IS
LIKELY TO BE HIGHLY VOLATILE, THE MARKET PRICE OF OUR COMMON STOCK MAY BE LOWER
THAN YOU EXPECTED.
The market price of our common stock is likely to be highly volatile,
because the stock market in general, and the market for technology companies in
particular, has experienced significant volume and price fluctuations. You may
not be able to resell your shares following periods of volatility because of the
market's adverse reaction to that volatility. The trading prices of many
technology companies' stocks have reached historical highs within the last year
and have reflected relative valuations substantially above historical levels.
However, during the same period, these companies' stocks have also been highly
volatile and several companies' stocks have recorded lows well below their
historical highs. We cannot assure you that our stock will trade at the same
levels as other technology stocks.
Factors that could cause volatility in our common stock price include,
among other things:
- actual or anticipated variations in quarterly operating results;
- the introduction of new products or services or customer and/or
distributor discontent with our existing products or services;
- conditions or trends generally affecting the wireless services and
Internet industry;
- changes in the market valuations of other wireless services and Internet
companies;
- announcements by us or our competitors of technological developments,
significant acquisitions, or joint ventures;
- capital commitments;
- additions or departures of key personnel; and
- sales of common stock or other equity securities.
These factors may materially and adversely affect the market price of our
common stock, regardless of our operating performance.
BECAUSE OUR EARLY INVESTORS PAID SUBSTANTIALLY LESS THAN THE INITIAL PUBLIC
OFFERING PRICE WHEN THEY PURCHASED THEIR SHARES, NEW INVESTORS WILL INCUR
IMMEDIATE AND SUBSTANTIAL DILUTION OF $10.73 IN THE BOOK VALUE OF THEIR
INVESTMENT.
Investors purchasing shares in this offering will incur immediate and
substantial dilution of $10.73 in net tangible book value per share because the
price that investors pay will be substantially greater than the net tangible
book value per share of the shares acquired. This dilution figure assumes an
initial public offering price of $15.00 per share and is calculated on a pro
forma basis assuming conversion of all of our outstanding shares of preferred
stock and no exercise of
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the underwriters' over-allotment option and deducts the estimated underwriting
discounts and commissions and estimated offering expenses payable by us. This
dilution is due in large part to the fact that our earlier investors paid
substantially less than the initial public offering price when they purchased
their shares. In addition, there are currently options and warrants for the
purchase of 2,843,084 shares of common stock outstanding. To the extent such
options and/or warrants are exercised in the future, there will be further
dilution to new investors.
THE SALE OF ADDITIONAL SHARES OF OUR COMMON STOCK AFTER THIS OFFERING COULD
ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK, AND STOCKHOLDERS WILL
INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
In the event that we require additional capital to fund our operating
needs, we may need to raise funds through public or private equity financings.
As a result of these equity offerings and the increased number of outstanding
shares of common stock, the demand for our common stock could decrease and cause
the market price of our common stock to decline. If funds are raised through the
issuance of equity securities, the percentage ownership of our then-current
stockholders may be reduced and the holders of new equity securities may have
rights, preferences or privileges senior to those of the holders of our common
stock. Furthermore, we may issue equity securities within the next 12 months to
pay for any future acquisitions.
BECAUSE WE EXPECT APPROXIMATELY 11,752,232 SHARES OF COMMON STOCK TO BECOME
AVAILABLE FOR SALE 180 DAYS FROM THE DATE OF THIS PROSPECTUS, OUR SHARE PRICE
MAY BE LOWER THAN YOU EXPECT.
After this offering, we will have 21,487,265 shares of common stock
outstanding. Sales of a substantial number of our shares of common stock in the
public market following this offering or the expectation of such sales could
cause the market price of our common stock to decline. All the shares sold in
this offering will be freely tradable. The remaining shares of common stock
outstanding after this offering will be available for sale in the public markets
as follows:
<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR SALE NUMBER OF SHARES
- ----------------------------- ----------------
<S> <C>
, 2000 (180 days after the date of
this prospectus)................................. 11,752,232
At various times thereafter upon the expiration of
one-year holding periods......................... 5,088,485
</TABLE>
Of these shares, 10,069,756 shares are subject to a limitation on the
number of shares that can be sold in any three-month period. We are required,
however, to register the resale of substantially all of these shares upon demand
beginning six-months after the date of this prospectus. We also intend to file a
registration statement after consummation of this offering to register all
shares of common stock that we may issue to our employees under our stock option
plan. After this registration statement is effective, these shares will be
eligible for resale in the public market without restriction. In addition,
stockholders that own shares available for sale 180 days after the date of this
prospectus following the expiration of lock-up agreements with the underwriters
described in the above table may be released by Deutsche Bank Securities Inc.
from these arrangements
23
<PAGE> 25
at any time and without notice. This would allow for the earlier sale of shares
in the public market.
WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD OR PREVENT AN ACQUISITION AND COULD
ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.
We are a Delaware corporation. Anti-takeover provisions of Delaware law and
provisions contained in our certificate of incorporation and by-laws could make
it more difficult for a third party to acquire control of us, even if a change
in control would be beneficial to stockholders. These provisions include the
following:
- authorizing the board to issue preferred stock;
- prohibiting cumulative voting in the election of directors;
- limiting the persons who may call special meetings of stockholders; and
- establishing advance notice requirements for nominations for election of
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
These provisions could have the effect of delaying, deterring or preventing
a change in the control of our company, could deprive our stockholders of an
opportunity to receive a premium for their common stock as part of a sale of our
company or may otherwise discourage a potential acquirer from attempting to
obtain control of us, which in turn could materially adversely affect the market
price of our common stock.
FORWARD LOOKING STATEMENTS
Many of the statements included in this prospectus contain forward-looking
statements and information relating to our company. We generally identify
forward-looking statements by the use of terminology such as "may," "will,"
"expect," "intend," "plan," "estimate," "anticipate," "believe," or similar
phrases. We base these statements on our beliefs as well as assumptions we made
using information currently available to us. Because these statements reflect
our current views concerning future events, these statements involve risks,
uncertainties and assumptions. Our actual future performance could differ
materially from these forward-looking statements. These forward-looking
statements involve a number of risks and uncertainties. Important factors that
could cause actual results to differ materially from our expectations include
those risks identified in the foregoing "Risk Factors," as well as other matters
not yet known to us or not currently considered material by us.
We caution you not to place undue reliance on these forward-looking
statements. All written and oral forward-looking statements attributable to us
or persons acting on our behalf are qualified in their entirety by those
cautionary statements.
24
<PAGE> 26
USE OF PROCEEDS
We estimate that we will receive approximately $59.2 million in net
proceeds from this offering, or $68.4 million if the underwriters'
over-allotment option is exercised in full, based on an assumed initial public
offering price equal to $15.00 per share and after deducting the underwriting
discounts and commissions and estimated expenses payable by us.
We expect to use the net proceeds from this offering as follows:
- approximately $15.0 million for expansion of our sales and marketing
operations;
- approximately $5.0 million for further development of our systems
infrastructure, including expansion of our data center;
- approximately $39.2 million for funding operating losses, working capital
and other general corporate purposes, including the development of
technology alliances.
In addition, we may use a portion of the net proceeds for acquisitions or other
investments. However, as of the date of this prospectus, we have no agreement
relating to any material acquisition or investment. Further, changing business
conditions and unforeseen circumstances could cause the actual amounts used for
these purposes to vary from these estimates.
Management will have significant flexibility in applying the net proceeds
of the offering. Pending their use, we intend to invest the net proceeds of the
offering in short-term, investment grade interest-bearing instruments.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock. We
intend to retain our earnings for use in the operation of our business and do
not anticipate paying any cash dividends on our common stock in the foreseeable
future.
25
<PAGE> 27
CAPITALIZATION
The following table shows our capitalization as of December 31, 1999, on an
actual basis, a pro forma basis and a pro forma as adjusted basis.
The pro forma information below reflects the conversion of all of our
outstanding preferred stock into 11,316,765 shares of common stock upon the
completion of this offering as though this transaction occurred as of December
31, 1999.
The pro forma as adjusted information adjusts the pro forma information to
give effect to the sale of 4,400,000 shares of common stock offered by us in
this offering, at an assumed initial public offering price of $15.00 per share,
after deducting underwriting discounts and commissions and estimated offering
expenses, and the application of the estimated net proceeds. See Use of
Proceeds.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 28,241 $ 28,241 $ 87,904
======== ======== ========
Mandatorily redeemable preferred stock:
Series B mandatorily redeemable preferred stock, $.01 par
value; 1,705 shares authorized; 1,705 shares issued and
outstanding, actual; no shares issued and outstanding,
pro forma and pro forma as adjusted..................... 1,460 - -
Series D mandatorily redeemable preferred stock, $.01 par
value; 843 shares authorized; 843 shares issued and
outstanding, actual; no shares issued and outstanding,
pro forma and pro forma as adjusted..................... 1,292 - -
Series E mandatorily redeemable preferred stock, $.01 par
value; 9,643.2 shares authorized; 9,643.2 shares issued
and outstanding, actual; no shares issued and
outstanding, pro forma and pro forma as adjusted........ 17,104 - -
Series F mandatorily redeemable preferred stock, $.01 par
value; 8,248.33 shares authorized; 8,248.33 shares
issued and outstanding, actual; no shares issued and
outstanding, pro forma and pro forma as adjusted........ 35,482 - -
-------- -------- --------
Total mandatorily redeemable preferred stock............ $ 55,338 $ - -
-------- -------- --------
Stockholders' equity:
Series C convertible preferred stock at par value, $.01
par value; 2,194 shares authorized; 2,194 shares issued
and outstanding, actual; no shares issued and
outstanding, pro forma and pro forma as adjusted........ - - -
-------- -------- --------
Common stock at par value, $.01 par value; 50,000,000
shares authorized; 7,655,500 shares issued and
outstanding, actual; 18,972,265 shares issued, pro
forma; 23,372,265 shares issued, pro forma as
adjusted................................................ 77 190 234
Additional paid-in capital.................................. 27,253 82,478 141,634
Notes receivable from stockholders.......................... (31) (31) (31)
Deferred compensation....................................... (764) (764) (764)
Accumulated deficit......................................... (45,001) (45,001) (45,001)
Treasury stock at cost, 1,885,000 shares.................... (4,230) (4,230) (4,230)
-------- -------- --------
Total stockholders' equity (deficit)...................... (22,696) 32,642 91,842
-------- -------- --------
Total capitalization...................................... $ 32,642 $ 32,642 $ 91,842
======== ======== ========
</TABLE>
- -------------------------
The outstanding share information shown in the table above excludes:
- 1,929,084 shares of common stock issuable upon the exercise of warrants at
a weighted average exercise price of $3.50 per share;
- an aggregate of 914,000 shares of common stock issuable upon the exercise
of outstanding stock options under our 1995 Stock Incentive Plan at a
weighted-average exercise price per share of $2.71; and
- 100,000 shares of common stock available for future grant under our 1995
Stock Incentive Plan and 1,250,000 shares of our common stock available
for future grant under our 2000 Stock Incentive Plan.
26
<PAGE> 28
DILUTION
Our pro forma net tangible book value at December 31, 1999 was $32.5
million or $1.90 per share of common stock. "Pro forma net tangible book value"
per share represents the amount of our pro forma total tangible assets reduced
by the amount of our total liabilities, divided by the number of pro forma
shares of common stock outstanding as of December 31, 1999. Our pro forma as
adjusted net tangible book value at December 31, 1999, assuming no changes in
our pro forma net tangible book value other than the sale of 4,400,000 shares of
common stock in this offering at an assumed initial offering price of $15.00 per
share and application of estimated net proceeds of $59.2 million from such sale
after deducting the underwriting discounts and commissions and estimated
offering expenses, would have been approximately $91.7 million or $4.27 per
share. This represents an immediate increase in pro forma net tangible book
value of $2.37 per share to existing stockholders and an immediate dilution of
$10.73 per share to new investors. Immediate dilution is the difference between
the purchase price per share paid by a new investor and the net tangible book
value of each share immediately after this offering. The following table
illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........... $15.00
Pro forma net tangible book value per share as of
December 31, 1999..................................... $1.90
Increase per share attributable to new investors....... 2.37
-----
Pro forma as adjusted net tangible book value per share
after this offering.................................... 4.27
------
Dilution per share to new investors....................... $10.73
======
</TABLE>
If the underwriters' over-allotment option is exercised in full, our pro
forma as adjusted net tangible book value at December 31, 1999 would have been
approximately $4.70 per share, representing an immediate increase in net
tangible book value of $2.80 per share to existing stockholders and an immediate
dilution in net tangible book value of $10.30 per share to new investors.
The following table summarizes at December 31, 1999:
- the number of shares of common stock purchased by existing stockholders,
the total consideration and the average price per share paid to us for
those shares;
- the number of shares of our common stock purchased by new investors, the
total consideration and the price paid by them for these shares; and
- the percentage of shares purchased by the existing stockholders and new
investors and the percentages of consideration paid to us for these
shares.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 17,087,265 79.5% $ 52,956,929 45% $ 3.10
New investors................. 4,400,000 20.5% 66,000,000 55% $15.00
----------- ---- ------------ ---- ------
Total.................... 21,487,265 100% $118,956,929 100% $ 5.54
=========== ==== ============ ==== ======
</TABLE>
- -------------------------
The outstanding share information shown in the table above excludes:
- - 1,929,084 shares of common stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price per share of $3.50;
- - an aggregate of 914,000 shares of common stock issuable upon the exercise of
outstanding stock options under our 1995 Stock Incentive Plan, at a
weighted-average exercise price per share of $2.71; and
- - 100,000 shares of common stock available for future grant under our 1995 Stock
Incentive Plan and 1,250,000 shares of our common stock available for future
grant under our 2000 Stock Incentive Plan.
27
<PAGE> 29
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data set forth below as of
December 31, 1998 and 1999 and for the fiscal years ended December 31, 1997,
1998 and 1999 are derived from the audited consolidated financial statements
which are included elsewhere in this prospectus. The selected consolidated
financial data as of December 31, 1997 and as of and for the year ended December
31, 1996 is derived from the audited consolidated financial statements not
included in this prospectus. The selected consolidated financial data as of and
for the fiscal year ended December 31, 1995 is derived from our unaudited
consolidated financial statements.
The selected consolidated financial data should be read along with such
consolidated financial statements and the related notes and the section of the
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................................. $ 387 $ 645 $ 825 $ 1,405 $ 1,734
Cost of revenue............................................. 190 465 700 1,081 1,302
------ ------- ------- ------- --------
Gross profit................................................ 197 180 125 324 432
------ ------- ------- ------- --------
Operating expenses:
Sales and marketing....................................... 110 180 234 584 1,938
General and administrative................................ 856 1,327 2,258 2,306 4,771
Stock compensation........................................ - - - - 253
------ ------- ------- ------- --------
Total operating expenses.................................. 966 1,507 2,492 2,890 6,962
------ ------- ------- ------- --------
Operating loss.............................................. (769) (1,327) (2,367) (2,566) (6,530)
Interest expense (income) - net............................. (22) (8) 81 329 326
------ ------- ------- ------- --------
Loss before extraordinary item.............................. (747) (1,319) (2,448) (2,895) (6,856)
Extraordinary loss on extinguishment of debt................ - - - - (3,434)
------ ------- ------- ------- --------
Net loss.................................................... $ (747) $(1,319) $(2,448) $(2,895) $(10,290)
Dividends on and redemptions of preferred stock............. - (8) (76) (274) (26,580)
====== ======= ======= ======= ========
Loss applicable to common stock............................. $ (747) $(1,327) $(2,524) $(3,169) $(36,870)
====== ======= ======= ======= ========
Net loss per share - basic and diluted...................... $(0.10) $ (0.18) $ (0.33) $ (0.42) $ (6.43)
====== ======= ======= ======= ========
Shares used in computing net loss per
share..................................................... 7,282 7,552 7,554 7,554 5,736
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 139 $ 1,168 $ 215 $ 166 $ 28,241
Working capital.......................................... 229 756 (533) (687) 29,468
Total assets............................................. 262 1,343 375 682 36,241
Long-term debt, less current portion..................... - 646 573 455 -
Mandatorily redeemable preferred stock................... - 1,138 1,412 2,500 55,338
Total stockholders' equity (deficit)..................... 201 (916) (2,488) (3,578) (22,696)
</TABLE>
28
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of our financial condition and results of
operations should be read together with the financial statements and the related
notes included in another part of this prospectus and which are deemed to be
incorporated into this section. This discussion contains forward-looking
statements that involve risks and uncertainties.
OVERVIEW
i3 Mobile, Inc. provides timely personalized information to users of
wireless communications devices in North America. We were founded in February
1991 as Intelligent Information Incorporated and began operations in 1992 with
the launch of our Quote Alert Service, a stock quote and related financial
information service offered directly to our subscribers. A subscriber is a user
who pays for our products and services and a user is an individual who receives
our products and services either at no cost or as a subscriber. Between 1992 and
1996, the primary distribution channel for our products and services was paging
carriers. During this period, we entered into distribution agreements with a
number of the leading paging carriers to distribute our personalized content
services and on-demand products on their networks. In late 1996, we expanded our
product and service focus and signed our first distribution agreement with a
wireless network operator and launched our products and services on the digital
personal communication services network of Omnipoint Communications Services.
The Omnipoint launch included both alert products, which are messages sent to a
subscriber when our network detects that a specific event has occurred based on
that individual's personal profile, and on-demand content products, which are
messages sent to a subscriber shortly after information is requested. A
subscriber can request information from a two-way wireless device, such as a
pager or wireless digital telephone, by sending a text message containing a
request for information, such as a stock quote for a specific company or a
weather forecast for a specific zip code. The request is processed by our
systems and the requested information is sent back to the subscriber via a
wireless network.
Our Omnipoint launch was followed in 1997 by our introduction of tiered
subscription service offerings on the PrimeCo PCS network. Tiered subscription
service offerings are product packages that are differentiated by both price and
service offerings. A higher monthly subscription fee is charged as more services
are included in the package. In 1997, we also deployed our first wireless
microbrowser-based products on AT&T's PocketNet platform in conjunction with
Phone.com. A microbrowser is similar to an Internet browser but runs on data-
capable wireless devices. A microbrowser retrieves information from Web site
servers in a format that conforms to the smaller viewing screens of wireless
devices. In 1998, we expanded our distribution network by entering into
agreements with other digital wireless network operators such as Bell Mobility
Cellular, Inc. (Canada), US Cellular and SBC Communications, Inc., including its
subsidiaries Pacific Bell, Southwestern Bell Mobile Systems, Inc. and its
Cellular One properties in Baltimore, Boston and Washington, D.C. In 1999, we
entered into distribution agreements with AirTouch Cellular, Clearnet PCS, MTT
Mobility (Canada), US West Wireless and AT&T Wireless Services. Under these non-
29
<PAGE> 31
exclusive distribution agreements, we provide the wireless network operators
with personalized content products and services which are marketed to their
subscribers. In 1999, we also introduced electronic commerce through 1-800-
FLOWERS and advertising-supported services through Omnipoint and we began
offering corporate enterprise services with The Weather Channel through its
Weather.com Internet site. Revenue generated from electronic commerce,
advertising-supported services and corporate enterprise services during 1999 was
minimal.
We develop highly personalized, local, timely and interactive wireless
content products and services that meet the needs of our users. We currently
distribute these products and services primarily through wireless network
operators, and, to a lesser extent, through Internet media networks and
corporate enterprises. Our strategy is to position us as the single-source
wireless portal supplier for our distributors by building innovative products
and continually enhancing our proprietary technology. We intend to diversify our
distribution relationships, to further expand our user and subscriber bases and
to develop advertising and transaction revenue streams. We work closely with our
distributors to develop specific content applications and marketing plans and
build and host user provisioning interfaces such as Web sites, telephone systems
and device-based wireless portals. Our distributors typically provide us with
some or all of the following services: marketing, planning and support, Internet
promotion, local sales force and point of sale promotion, and delivery of
messages over their networks.
Our distribution agreements generally are non-exclusive, have terms of one
to three years and may be terminated by either party, with or without cause. We
believe that our distribution model gives us the opportunity to substantially
increase the number of both users and subscribers while minimizing our sales and
marketing expenses. As revenue is generated from non-subscription sources such
as advertising and electronic commerce, we believe that sales and marketing
costs will become a smaller percentage of our total revenue per user.
We believe that our future success will depend on our ability to deliver a
variety of wireless content, advertising and electronic commerce products and
services through our distributors. Our objectives will require significant
capital expenditures and increased operating expenses in the next several years.
Accordingly, we expect to continue operating at a substantial loss for the
foreseeable future. Our objectives include:
- expanding our network of distributors to include additional wireless
network operators, Internet media networks and corporate enterprises,
such as airlines, package delivery companies, banking and financial
services companies, or any company with a need to deliver information to
its employees or customers via wireless devices;
- expanding our product development, sales, marketing and technology staffs
to support emerging demand, opportunities and technologies;
- expanding our focus to include additional international markets;
- expanding our product offerings in content, commerce and technology;
- expanding our advertising and promotional activities; and
30
<PAGE> 32
- further developing our technology platforms, operational capabilities and
infrastructure.
RESULTS OF OPERATIONS
Our products and services are offered to subscribers on a monthly basis
based on pricing models designed to attract a large number of subscribers. We
recognize subscriber revenue when services are rendered. Deferred revenue is
comprised of payments received from our distributors in advance of wireless
information services being rendered.
We derive the majority of our revenue from monthly subscription fees for
personalized news and information products and services delivered to users via
wireless devices, such as digital wireless phones, pagers and personal digital
assistants. Our content services include:
- tiered packages offering users choices from a wide range of news and
information selections to create a personalized content delivery profile,
typically billed on a monthly subscription basis. An example of tiered
packages is AT&T Wireless Services Personal News where all digital
subscribers can receive one complimentary service for free, select an
additional three services for $3.99 per month or select a package of
eight services for $7.99 per month;
- on-demand information products offering users the ability to request
information from and receive information on their wireless devices,
typically billed on a per-request basis;
- complimentary services offering users the ability to receive daily
information on their wireless devices from a limited range of content
providers; and
- wireless portal applications offering users with Internet-enabled devices
the ability to both create personalized content delivery profiles and
receive content on demand, which is billed partially on a subscription
basis and partially on a per-request basis.
We billed wireless network operators directly for over 75% in 1997, 82% in
1998 and 98% in 1999 of our subscription revenues. Where we billed the
subscriber directly, we used two methods, either credit card processing or by
invoice mailed directly to the subscriber. Our more recent agreements, that were
signed in 1999, with wireless network operators require that we bill the user
directly so that the user would receive two bills, one from the wireless network
operator for phone services and another from us for information services. We
expect our individual service offerings to continue to decline in price from
current levels, but expect per subscriber revenue to increase over time as the
number of our products and services purchased by subscribers increases. In 1997,
subscription services accounted for approximately 94% of our revenues. In each
of 1998 and 1999 subscription services accounted for 98%. We may also generate
revenue from other sources including software development services,
advertising-supported services and processing of electronic commerce
transactions although revenue to date for such services has been nominal.
We offer complimentary services to build awareness of our products and
services and to generate revenue. We believe that by offering selected products
and services to users on a complimentary basis we will accelerate the awareness
and usage of our services and migrate users to pay for subscription-based
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<PAGE> 33
products and services. We provide content to wireless network operators who, in
turn, offer this content to their wireless customer base. The prices we charge
to the wireless network operators for this service varies by wireless network
operator based upon, among other things, geography, size, subscriber growth
considerations, and the specific content offering. The wireless network
operators are responsible for determining the price, if any, to be charged to
their customers for this service. Where wireless network operators have
expressed an interest in providing their customers with a complimentary product
offering, we have offered these wireless network operators a limited product
offering at a correspondingly reduced sales price. Under these agreements with
reduced pricing terms, we recognize revenue, albeit at reduced rates, at the
time these services are provided. Since our inception, we have entered into only
one agreement where we agreed to provide a wireless network operator's customers
with our product at no cost to the user. This agreement, which was executed in
November 1998, automatically renews for a one year period unless specifically
terminated by either party. Since we provide our product to this wireless
network operators' customers at no cost to the user, we have not, at any time,
recognized any revenue under this agreement.
As a result of our entry into the personal communications services
marketplace in late 1996 and the expansion of our wireless network operator
distribution base in 1998, we have experienced accelerating user growth. The
number of users of our products and services was approximately 29,000 as of
December 31, 1997, 107,000 as of December 31, 1998 and 450,000 as of December
31, 1999. For the periods ending December 31, 1997 and 1998, the number of
complimentary users was less than 5% of the total number of users. For the
period ending December 31, 1999, the number of complimentary users was over
350,000 or 78% of our total users.
Cost of revenues consists primarily of costs associated with purchasing our
content, direct labor costs, royalty payments, network operations expenses and
distribution fees. We pay our content providers either a flat monthly fee, a fee
based on the number of users requesting the content, a fee based on a percentage
of our revenues generated from the content they provide, a fee based on the
number of on-demand messages requested or a combination of these arrangements.
Distribution fees, which were approximately $197,000 for the year ended December
31, 1999, $103,000 for the year ended December 31, 1998 and $169,000 for the
year ended December 31, 1997, are paid to wireless network operators for
allowing us to use their network to deliver advertising and electronic
commerce-enabling messages and for delivery of content to our direct
subscribers. Management believes that the cost of revenues and gross margin on
our related party revenues are not significantly different from the cost of
revenues and gross margins we earned on our third party revenues.
Sales and marketing expenses consist primarily of advertising and
promotions, sales and marketing personnel, travel and entertainment, and brand
management. Additionally, we pay some of our distributors a marketing fee for
the acquisition and retention of their subscribers. We believe that this is a
cost-effective way to acquire new customers while limiting our sales and
marketing costs. These fees are based on a flat fee per subscriber or on a
percentage of revenue generated from that subscriber. We believe that sales and
marketing expenses will increase as we develop new markets and implement
programs to increase awareness of our products and services.
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<PAGE> 34
General and administrative expenses consist primarily of employee
compensation and related costs for customer care, general corporate and business
development personnel, along with rent, travel and other infrastructure costs.
Depreciation and amortization expenses consist primarily of depreciation
expenses arising from our operations centers and other property and equipment
purchases and amortization of a license agreement with Portel Services Network,
Inc.
Net interest expense is comprised primarily of interest on our indebtedness
to the Connecticut Development Authority and Intelligent Investment Partners,
Inc. Both notes were retired in the fourth quarter of 1999 with proceeds
received from the sale of Series F convertible preferred stock. Interest income
consists primarily of interest earned on cash equivalents.
Our expense levels are based, in part, on our expectations regarding future
revenues. As a result, any changes in revenues relative to our expectations
could cause significant changes in our operating results. We face a number of
risks and uncertainties encountered by companies in the rapidly evolving
wireless telecommunications market and the Internet industries. Due to the
foregoing factors, the following period to period comparisons of our revenue
levels and operating results may not be meaningful and should not be relied on
to predict our future performance.
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1999
Net Revenue. Net revenues increased 23% from $1,405,000 for the year ended
December 31, 1998 to $1,734,000 for the year ended December 31, 1999. This
increase was primarily due to the recognition of revenues from the successful
1998 launches of PrimeCo PCS, Bell Mobility, and SBC Communications and the
growth of our subscriber base as a result of our agreements with other wireless
network operators. The percentage increase in revenue lagged substantially
behind the percentage increase in users due to an increase in users receiving
our new complimentary services and a decrease in the price of individual
subscription services. Subscription fees decreased in 1999 from 1998 levels due
to management's decision to increase market penetration by reducing prices for
our basic and advanced services. Revenue generated by subscribers of Omnipoint
Communications Services, SBC Communications and Bell Mobility together accounted
for approximately 70% of our total revenue for the year ended December 31, 1999
and 52% for the year ended December 31, 1998. In addition, Omnipoint
Communications Services alone accounted for 41% of our total revenue for the
years ended December 31, 1999 and 1998. Net revenues from SkyTel Communications,
Inc., a related party, decreased from $160,000 for the year ended December 31,
1998 to $106,000 for the year ended December 31, 1999. Only $23,000 of the net
revenues from SkyTel in 1999 is included as net revenues from related parties.
In February 1999, SkyTel liquidated its ownership of our common stock and Series
A preferred stock and relinquished its seat on our board of directors.
Subsequent to these actions it was no longer considered a related party.
Cost of Revenue. Cost of revenue increased by 20% from $1,081,000 for the
year ended December 31, 1998, to $1,302,000 for the year ended December 31,
1999. Approximately $54,654 of the increase was related to an increase in the
delivery of stock quote information and an increase in minimum fees associated
with the acquisition of additional general news content. Network operations
costs
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also increased by approximately $100,000 in the year ended December 31, 1999
compared to the year ended December 31, 1998. The increases in content-related
costs and network operations costs were offset by a $64,000 reduction during
this period in distribution fees payable primarily to paging carriers as a
result of our elimination of unprofitable two-way paging services during the
fourth quarter of 1998.
Sales and Marketing Expenses. Sales and marketing expenses increased by
232% from $584,000 for the year ended December 31, 1998 to $1,938,000 for the
year ended December 31, 1999. This increase during 1999 was attributable to
increased compensation expenses, including the hiring of additional sales and
marketing personnel, and the expansion of our marketing programs to increase
market awareness of our company and our products and services.
General and Administrative Expenses. General and administrative expenses
increased by 107% from $2,306,000 for the year ended December 31, 1998 to
$4,771,000 for the year ended December 31, 1999. This increase was primarily due
to increased compensation costs from the addition of corporate and business
development personnel, increased professional fees, rent and other related
infrastructure expenses.
Interest Expense (Income), Net. Net interest expense of $329,000 for the
year ended December 31, 1998 was comparable to net interest expense of $326,000
for the year ended December 31, 1999. The increased interest expense on the
$5,000,000 note payable to Intelligent Investment Partners, Inc. for the year
ended December 31, 1999 was offset by one-time interest charges of $210,000 in
the year ended December 31, 1998 for the issuance of warrants to purchase shares
of common stock in connection with debt obligations.
Extraordinary Loss. In December 1999, we converted two notes into shares
of Series F mandatorily redeemable preferred stock. This debt extinguishment
resulted in an extraordinary loss on redemption of $3,434,000.
Net Loss. We incurred net losses of $2,895,000 for the year ended December
31, 1998 and $10,290,000 for the year ended December 31, 1999. The net loss for
the year ended December 31, 1999 reflects a non-recurring charge of $3,434,000
for a one time loss on the early extinguishment of debt.
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1998
Net Revenue. Net revenue increased from $825,000 for the year ended
December 31, 1997 to $1,405,000 for the year ended December 31, 1998. The
increase in 1998 was primarily attributable to new distribution agreements with
personal communications services wireless network operators and the further
development of our Omnipoint Communications Services relationship. In 1998, we
received 40% of our revenues from Omnipoint Communications Services. Net revenue
from SkyTel Communications, Inc., a related party, was $149,000 for the year
ended December 31, 1997 and $160,000 for the year ended December 31, 1998.
Throughout these periods the prices of subscription services have decreased as a
result of competitive pressures in the marketplace. However, the impact of these
price decreases has been offset by increases in service offerings and increased
subscribers counts.
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Cost of Revenue. The cost of revenue of providing our products and
services increased from $700,000 for the year ended December 31, 1997, to
$1,081,000 for the year ended December 31, 1998. The increase in cost of revenue
for 1998 was attributable to higher subscriber volume partially offset by
reduced content costs as we terminated our higher-cost content agreements.
Sales and Marketing Expenses. Sales and marketing expenses increased from
$234,000 for the year ended December 31, 1997, to $584,000 for the year ended
December 31, 1998. The increase for the year ended December 31, 1998 was
attributable to the initiation of an aggressive marketing program to attract new
users and subscribers and the addition of sales and marketing personnel.
General and Administrative Expenses. General and administrative expenses
increased from $2,258,000 for the year ended December 31, 1997 to $2,306,000 for
the year ended December 31, 1998. This increase was the result of increased
personnel and higher infrastructure costs, including expenditures for network
systems and software.
Interest Expense, Net. Net interest expense increased from $81,000 for the
year ended December 31, 1997 to $329,000 for the year ended December 31, 1998 as
a result of a one-time interest charge of $210,000 in 1998 for the issuance of
warrants to purchase shares of common stock in connection with debt obligations.
Net Loss. We incurred losses of $2,448,000 for the year ended December 31,
1997 and $2,895,000 for the year ended December 31, 1998. Our net loss for each
of these three years increased primarily as a result of increased operating
expenses in those years.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception we have financed our operations primarily through sales
of our equity securities and the issuance of long-term debt, which has resulted
in aggregate cash proceeds of $46,400,000 through December 31, 1999.
Net cash used in operating activities was $2,381,000 for the year ended
December 31, 1997, $2,644,000 for the year ended December 31, 1998 and
$4,589,000 for the year ended December 31, 1999. The principal use of cash in
each of these periods was to fund our losses from operations.
Net cash provided by financing activities was $1,446,000 for the year ended
December 31, 1997, $2,652,000 for the year ended December 31, 1998, and
$34,464,000 for the year ended December 31, 1999. Cash provided by financing
activities in each of these periods was primarily attributable to proceeds from
sales of our equity securities and the issuance of debt.
In February 1999, we sold, 7,714.56 shares of Series E mandatorily
redeemable convertible preferred stock for $12,000,000 to a private investor
group. As the equivalent conversion price per share of common stock related to
the February 1999 issuance is equal to or greater than the estimated fair value
of our shares of common stock at the time of issuance no beneficial conversion
charge is applicable to the February issuance. On November 23, 1999, the same
private investor group, in accordance with its contract with us, purchased an
additional 1,928.64 shares of Series E mandatorily redeemable convertible
preferred stock
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for $3,000,000. We recognized a $3,000,000 deemed dividend as a charge to
additional paid-in capital and an increase to net loss available to common
stockholders for the beneficial conversion feature, calculated as the difference
between the per share conversion price and the estimated fair value of the
common stock into which the preferred stock is convertible, measured at the
commitment date. This beneficial conversion feature is limited to the amount of
the proceeds received, or $3,000,000. The Series E preferred stock is
convertible into 4,821,600 shares of common stock at an equivalent price per
common share of $3.11.
In February 1999, we repurchased 1,885,000 shares of our common stock and
3,770 shares of our Series A preferred stock from a stockholder for $8,000,000
in cash and notes and issued a warrant to purchase 500,000 shares of our common
stock at an exercise price of $3.00 per share. In connection with this
repurchase, we paid $3,000,000 in cash and delivered a $5,000,000 promissory
note. This note was converted into Series F mandatorily redeemable preferred
stock in December 1999.
On December 22, 1999, we issued 8,248.33 shares of Series F mandatorily
redeemable convertible preferred stock at a price of $3,960.40 per share to
private investor groups. The proceeds include $24,850,000 of cash investments,
including $3,000,000 from a related party stockholder, the conversion of a
$5,000,000 outstanding note payable, the conversion of a $317 five-year
convertible note payable and future television advertising rights. In connection
with this issuance we recorded a beneficial conversion charge of $17,504,000, an
extraordinary loss on the redemption of the two notes payable of $3,434,000 and
deferred advertising value of $4,261,000. These charges are calculated as the
difference between the per share value of the conversion feature and the
estimated fair value of the common stock at the commitment date multiplied by
the applicable equivalent shares of common stock. The Series F mandatorily
redeemable preferred stock is convertible into 4,124,165 shares of common stock
at an equivalent price per share of common stock of $7.92.
Upon completion of this offering, each of our shares of preferred stock
will convert into 500 shares of common stock. We believe that the net proceeds
from this offering, together with funding from private financings and our
current cash and cash equivalents, will be sufficient to meet our anticipated
cash needs for working capital and capital expenditures for at least the next 24
months. Additionally, we have sufficient cash to fund operations for the next 12
months without the offering proceeds.
Cash used in investing activities was $17,000 for the year ended December
31, 1997, $57,000 for the year ended December 31, 1998, and $1,800,000 for the
year ended December 31, 1999. Cash used in investing activities relates
primarily to cash purchases of fixed assets. Additionally, we entered into a
license agreement for a technology patent for which we paid $100,000 during
1999.
As of December 31, 1999, our estimated capital expenditures for the next 12
months consist of approximately $3,500,000 for the expansion of our operation
centers in Connecticut and Texas and approximately $1,500,000 for a consulting
project to upgrade our internal billing system and data warehousing system. We
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also plan to increase our sales and marketing and general and administrative
expenses by over $20,000,000 in 2000. We also expect to expend significant
capital resources on operating expenses for day-to-day operations,
infrastructure, general corporate and business development personnel, sales and
marketing personnel and programs and other working capital needs to grow our
business domestically and internationally. The amounts and timing of these
expenditures may vary depending on a number of factors, including the amount of
cash generated by our operations, competitive and technological developments,
the nature of any acquisitions identified and the rate of growth of our
business.
We cannot assure you that the assumptions of revenue and expense on which
our forecasts are based will prove to be accurate. In addition, we are
continually reviewing acquisition opportunities, however, we have no present
understanding or agreement relating to any material acquisition. Our financial
results may vary as a result of a number of factors, many of which are beyond
our control and any of which could cause our business to suffer. In addition,
because the market for wireless data products and services is new and evolving,
it is difficult to predict future financial results. Our expenses are based in
part on our expectations regarding future revenues. As a result, if our revenues
do not meet our expectations, our financial results will likely suffer.
If additional funding is required, we may seek such funding through public
or private financings or other arrangements. Adequate funds may not be available
when needed or may not be available on terms favorable to us. If additional
funds are raised by issuing equity securities, dilution to existing stockholders
may result. If funding is insufficient at any time in the future, we may be
unable to develop or enhance our services, take advantage of business
opportunities, respond to competitive pressures or grow our business as we hope.
This could have a material adverse effect on our business, financial condition
and results of operations.
YEAR 2000 COMPLIANCE ISSUES
Many currently installed computer systems and software products are coded
to accept or recognize only two digits rather than four digits to define the
year in the date code field. These systems and software products will need to
accept four digit year entries to distinguish 21st century dates from 20th
century dates. Systems and products that are not corrected to do this could
cause a disruption of operations including a temporary inability to deliver
messages, process transactions, send invoices or engage in other normal business
activities.
We maintain a significant number of computer software systems and operating
systems across our company that are potentially subject to year 2000 problems.
We have taken extensive steps to prepare for the year 2000 transition. We
believe that we have run all of our applications on hardware and operating
systems that we have determined are year 2000 compliant. We believe that all of
our computer hardware has been inventoried and checked against the
manufacturers' year 2000 compliance declarations. We believe that all
non-compliant hardware has been upgraded, if possible, or replaced. We believe
that all third-party software, including operating systems and applications,
have been inventoried and checked against the manufacturers' compliance
statements. We believe that we have
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upgraded and corrected software as recommended and provided by the
manufacturers.
We are also continuing to seek assurances from third parties on whom we
rely and whose potential year 2000 problems could affect our business. We have
been advised by our data providers, communications providers, device
manufacturers, wireless network operators, and Internet media networks and
corporate enterprises that their systems that might impact our own systems are
year 2000 compliant. We have developed a contingency plan to deal with failures
that may occur during the year 2000 transition which involves alternate ways of
providing mission-critical functions if they fail. The most likely worst case
scenario would be the failure of the landline or wireless networks that carry
data to us or from us to our distributors and users. If this happens, we would
not be able to deliver our products and services to our distributors and users
and we may lose revenue. Although we have taken the steps described above to
make our systems year 2000 compliant, we may experience material problems and
expenses associated with year 2000 compliance that could adversely affect our
business, results of operations and financial condition. If the assurances that
we have received from third parties are false or inaccurate, we may experience
disruption resulting in additional expense and loss of revenue.
We are also subject to outside forces that might generally affect industry
and commerce, such as year 2000 compliance failures by utility or transportation
companies. If our distributors and customers experience disruptions related to
our services and systems, they may initiate litigation against us even if the
disruptions were caused by their own systems or software provided by others.
We have purchased most of our equipment within the last four years, which
has kept the costs of year 2000 compliance efforts to a minimum. All non-
compliant software and equipment has been upgraded or replaced and our total
costs relating to year 2000 compliance have been less than $100,000. Based on
our review of compliance to date, we do not expect any future costs related to
year 2000 compliance to be material.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have limited exposure to financial market risks, including changes in
interest rates. We do not currently transact business in foreign currencies and,
accordingly, are not subject to exposure from adverse movements in foreign
currency exchange rates. Our exposure to market risks for changes in interest
rates relates primarily to corporate debt securities. We place our investments
with high credit quality issuers and, by policy, limit the amount of the credit
exposure to any one issuer. Our general policy is to limit the risk of principal
loss and ensure the safety of invested funds by limiting market and credit risk.
All highly liquid investments with a maturity of less than three months at the
date of purchase are considered to be cash equivalents.
As of December 31, 1999 we had no debt outstanding. We currently have no
plans to incur debt during the next 12 months. As such, changes in interest
rates will only impact interest income. The impact of potential changes in
hypothetical interest rates on budgeted interest income in 2000 has been
estimated at approximately $500,000 or 2% of budgeted net loss for each 1%
change in interest rates.
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use (SOP 98-1). SOP 98-1 provides guidance
for determining whether computer software is internal-use software, and guidance
on accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. The impact of adopting SOP 98-1, which
was adopted for our fiscal year ending December 31, 1999, was minimal.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137 which delays the effective date of
SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 133, as amended, is to be effective for us beginning in 2001. SFAS No. 133
establishes accounting and reporting standards for derivative financial
instruments and hedging activities related to those instruments, as well as
other hedging activities. Because we do not currently hold any derivative
financial instruments and do not engage in hedging activities, the adoption of
SFAS No. 133 is not expected to have any impact on our consolidated financial
position, results of operations or cash flows.
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OUR BUSINESS
COMPANY OVERVIEW
We provide timely personalized information to users of wireless
communications devices, such as mobile phones, pagers and personal digital
assistants, in North America. Personalized information means that our systems
enable a user to provide us with their content preferences and to identify those
services they want to receive and when they want to receive them. We currently
provide individually customized data services such as the delivery of stock
quotes and other financial information, news, weather, sports, entertainment,
traffic and travel information, and, depending on a user's type of wireless
device and network, personal e-mail, calendar and wireless electronic commerce
applications.
We believe that we are positioned to capitalize on the convergence of the
growth in the use of digital wireless communication devices and the rapidly
increasing demand for and availability of real-time content over the Internet
because our technical expertise, business relationships and experience. At
December 31, 1999 we had over 450,000 users of our products and services,
consisting of approximately 100,000 paying subscribers and 350,000 complimentary
users. The Internet has generally increased the demand for access to relevant
real-time information and services. We believe that individuals will want that
same information and service when away from their computers. Our products can
fulfill those needs on a wireless basis. Therefore, as the number of individuals
using the Internet increases, we expect the potential market for our services
will also increase.
We offer our products and services primarily through co-branded
distribution relationships with wireless network operators that offer our
products and services to their users on both a complimentary and subscription
basis. Co-branded distribution relationships are arrangements where the brand
names of the distributor and i3 Mobile are displayed together prominently on the
marketing materials and the distributor's Web sites. We are currently providing
personalized wireless information services, such as "AT&T Personal News" and
Omnipoint's "InfoServices," under agreements with more than 15 wireless network
operators, collectively representing approximately 48 million wireless phone
subscribers at September 30, 1999, or more than 55% of the total North American
market of wireless phone users. These wireless network operators include Bell
Mobility Cellular, Inc. (Canada), Omnipoint Communications Services, and SBC
Communications, including its subsidiaries Southwestern Bell Mobile Systems,
Inc., Pacific Bell and Cellular One properties in Boston, Baltimore and
Washington D.C., all of which, as a group, accounted for 70% of our revenues for
the year ended December 31, 1999. In addition, we have distributor agreements
with AirTouch Cellular and AT&T Wireless Services, Inc. who have the two largest
wireless telephone subscriber bases in North America.
We provide wireless network operators a package of products and services to
enable them to deliver personalized information to their customers through their
networks. This package of products and services consists of technology,
including the systems and communications capabilities, as well as customer
support and other services. We also offer a similar package of products and
services to Internet media networks and corporate enterprises seeking to expand
their Internet- or intranet-based services through wireless communications
networks.
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Currently, we generate most of our revenue from subscriptions for our
products and services, and we expect to generate additional revenue in the
future from advertising sales and wireless electronic commerce transactions. We
believe that distribution capabilities and name recognition of our distributors
will allow us to rapidly develop our business and brand name recognition with
lower capital requirements than would be possible on a direct-to-user basis.
Since we capitalize on the market acceptance of our distributors, we do not need
to establish our own distribution channels or to invest heavily in market
awareness programs. Our distributors have integrated our products with their
other service offerings, enabling a faster and broader distribution of our
products and services than we can realize on a direct-to-user basis.
INDUSTRY BACKGROUND
MARKET OPPORTUNITY: EMERGENCE OF A NEW MEDIUM
We believe that wireless mobile data is emerging as a powerful new medium,
uniquely capable of creating value through the ability to deliver highly
personalized, local, timely and interactive content and services to wireless
devices. According to DataQuest, wireless data subscribers will grow at a
compound annual growth rate of 82% from 3 million subscribers in 1999 to 36
million subscribers in 2003, creating a market with more than $3 billion in
annual revenue. The emergence of the mobile data medium is being driven by the
convergence of four major trends:
- GROWTH IN WIRELESS COMMUNICATIONS
The wireless telephone services market worldwide has grown
significantly in recent years and this growth is expected to continue.
According to International Data Corporation, the number of wireless phone
subscribers in the United States is expected to grow at a compound annual
growth rate of 13.4% from 64.4 million at the end of 1998 to 120.7 million
at the end of 2003. On a global basis, International Data Corporation
expects the number of wireless phone subscribers to increase at a compound
annual growth rate of 28.9%, from 303.4 million at the end of 1998 to 1.08
billion at the end of 2003.
As wireless network coverage has expanded, the availability and
functionality of wireless service has increased significantly. At the same
time, falling prices of wireless services and increased functionality of
handsets have made wireless services widely available for new wireless
users in general. New handsets and other handheld computing devices
designed specifically to manage data applications and access the Internet
have also improved the ease of use of wireless data services.
- GROWTH IN INTERNET SERVICES
The Internet marketplace is also experiencing rapid growth as a medium
for sharing information and conducting business transactions. International
Data Corporation estimates that the number of worldwide Web users reached
approximately 142 million at the end of 1998 and is forecasted to grow at a
compound annual growth rate of 29% to approximately 398 million by the end
of 2002. By 2001, International Data Corporation expects the total value of
transactions conducted over the Web to exceed $398 billion.
With the expanding acceptance of the Internet as a vital personal
resource, there is increased competition among Web sites for users. This
has prompted Internet companies to seek innovative means to increase the
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number of subscribers and subscriber retention. In addition, corporate
intranets have become a vital business communications tool and source of
information for mobile workers. We believe that since individuals and
businesses have become accustomed to and reliant upon accessing various
categories of information easily and immediately through the Internet and
corporate intranets, they are now demanding this information when not
connected to a computer.
- EVOLUTION OF MEDIA
Media is the creation of information and entertainment content
distributed to those who have a need to use it. We believe economic value
has been and will continue to be created by companies that acquire, create
and aggregate information and by companies that distribute it to end-users.
As the number of channels for content distribution has increased, creators
and distributors of content need to distinguish their services from those
of their competitors. As a result, media content has become more targeted
to specific audiences and delivers more specialized information. Now the
Internet offers content to appeal to even more targeted audiences.
We believe that one of the principal drivers of the growth of the
Internet as a commercial medium is its ability to create value through the
delivery of highly specialized, interactive, local and personally relevant
content to users. We also believe that advertisers, businesses and
individuals benefit from the ability to communicate and transact with each
other in more direct and efficient ways on the Internet. With existing
Internet technology, advertising can be directed to specific individuals
based on their demographic profiles. We believe significant additional
value for advertisers, businesses and individuals can be created through
the extension of targeted advertising by utilizing wireless
telecommunications technology.
- TECHNOLOGY, APPLICATIONS AND STANDARDS DEVELOPMENT
New software developments in the area of wireless content delivery
have made it possible for users to demand, retrieve and interact with
personalized content and an expanding range of applications over wireless
devices. The development of standards such as the Wireless Application
Protocol and specific applications and content designed for the wireless
environment have enabled the critical link between information available on
the Internet and wireless networks. The Wireless Application Protocol,
which is commonly referred to as WAP, is a universal technology standard
for wireless devices which enables users to easily access Internet-based
information and services from the screens of their wireless devices, such
as e-mail, news, sports, financial information services, entertainment,
travel and electronic commerce transactions. New generations of wireless
transmission technologies promise to increase the capacity and speed of
wireless networks and expand the functionality and the range of text, audio
and video applications available in the wireless data medium to levels
equal to or exceeding those available from wireline networks.
THE I3 MOBILE SOLUTION
As dependence on access to information, e-mail services, corporate
intranets and other Internet-based services increases, we believe that mobile
individuals will
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continue to seek many of the same benefits provided by the Internet on hand-held
wireless devices. We believe our products and services combine the most useful
features of Internet and wireless telephone technologies to enable the
distribution of personalized information through this new mobile data medium. We
believe that we provide comprehensive product and service offerings for each of
the following groups.
MOBILE INDIVIDUALS
As individuals become more reliant on mobile communications, we believe
their demand for timely access to local, regional, national and global
information of personal value or interest will increase. They will also seek to
receive this information in a convenient manner and on their choice of wireless
device through any wireless network.
Our technology and products and services allow the mobile individual to
demand and receive relevant, personalized information through a wireless device.
Our users create personal profiles when they register for our services on co-
branded Web sites or by telephone. A personal profile containing relevant
information, such as the user's wireless phone number, region and content
preferences, is created as part of the user registration process and is stored
in our database. We believe that creating personal profiles for individual
users, our ability to monitor data streams, and identifying and delivering
information based on those personal profiles provides substantial value to
mobile individuals.
WIRELESS NETWORK OPERATORS
Wireless network operators are seeking to offer data services in addition
to voice telephone in order to increase revenue per unit generated by additional
billable services, differentiate their service offerings from their competitors,
increase customer loyalty and increase minutes of use. To offer these new data
services, carriers need wireless data service expertise, simple implementation
with minimal capital investment, and access to aggregated content and
applications that are tailored to wireless devices and networks. In order to
deliver personalized information and Internet-based services to their wireless
subscribers, wireless network operators must provide personalized data products
as well as customer service and billing.
We offer wireless network operators content aggregation, applications
development and integration, content filtering and parsing, systems for personal
profiling, billing services, customer care services, and delivery of messages in
volume. This allows wireless network operators to outsource these services,
thereby minimizing their time and capital expenditures required to provide these
services. We have agreements with over 50 providers of news, financial, weather,
sports and other sources of information and can bundle these products and offer
them in packages customized for wireless network operators.
Effective wireless data systems must function seamlessly over diverse
networks, devices and operating systems. We support and develop applications for
a wide variety of wireless protocols that allow wireless devices to display
Internet-based information, including applications for Wireless Application
Protocol. Further, because our technology allows messaging to devices using new
technologies, we provide wireless network operators with a migration path to
Internet browsing
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capabilities as equipment, content availability, and networks evolve to support
this new functionality.
INTERNET MEDIA NETWORKS AND CORPORATE ENTERPRISES
Internet media networks and corporate enterprises need to deliver the
content they provide through new distribution channels in order to create
enhanced value for existing Web services to generate additional revenue. In
order to create this new revenue and enhanced value, Internet media networks and
corporate enterprises need access to wireless distribution channels and the
ability to publish their content on multiple wireless data platforms. We provide
digital content providers with access to our distribution relationships with
wireless network operators. Our technology can deliver a message initiated by
any of our Internet media networks or corporate enterprise distributors to any
digital handset capable of receiving Short Message Service, commonly referred to
as SMS. Short Message Service is a globally accepted wireless service that
enables the transmission of alpha-numeric messages between mobile users and
wireless networks, such as e-mail, paging and voice mail systems. We also
provide digital content providers with the means to repackage their content for
delivery through a wide variety of wireless data protocols such as Short Message
Service applications, Wireless Application Protocol, browser applications and
various voice applications.
ADVERTISERS AND ELECTRONIC COMMERCE COMPANIES
Advertisers and electronic commerce companies are seeking additional
channels to market their products and/or services. We believe that advertisers
will benefit from the wireless data medium's ability to expand their
distribution reach and to target specific advertisements and product messages to
specific users. We also believe that electronic commerce companies will benefit
as the increased convenience and ease of use of wireless devices results in
higher transaction volume.
We provide advertisers and electronic commerce companies with the ability
to target messages to large numbers of individuals based on their specific user
profiles. Prior to the Internet, this could not be accomplished on such a large
scale without considerable cost and expense. According to the 1999 Yankee Group
Mobile User Survey, more than half of the respondents indicated that they would
accept advertisements and promotions in order to receive complimentary wireless
content. We have developed a patent-pending engine system, Advanced Data Mining
Advertising Tagging and Transaction system, that matches personal profile and
demographic data with advertising targeting information. In addition, we are
developing electronic commerce applications and have licensed patented
technology that will allow mobile users to conduct electronic commerce
transactions on a secure, interactive basis. In the future, we expect our
advertising and electronic commerce applications to be enhanced with location
specific applications, which are offerings that deliver content or services
specifically targeted to the user's location.
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The following diagram illustrates how our technology creates a bridge
between content providers and wireless network operators to deliver personalized
information to the mobile individual:
[i3 Mobile, Inc. FLOW CHART]
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STRATEGY
Our objective is to be the leading provider of personalized wireless data
products and services that provide information, entertainment and electronic
commerce. The key elements of our strategy are:
POSITION I3 MOBILE AS THE SINGLE-SOURCE WIRELESS PORTAL FOR OUR DISTRIBUTORS
We intend to become our distributors' principal data services provider and
the integrator of content services to the distributors' customer base. Our
distribution relationships allow us to access our distributors' customers,
leverage the name recognition of our distributors in local markets and deliver
value to advertisers, Internet media networks and corporate enterprises through
our large base of established users. We intend to provide our users and
distributors with the ability to migrate to new technologies as they develop,
including Wireless Application Protocol and Internet browsing capabilities.
CONTINUE TO BUILD INNOVATIVE PRODUCTS
We will continue to build innovative products by aggregating and delivering
relevant content to the mobile user in a manner that is cost effective and
beneficial to our distributors. In order to satisfy the needs of the mobile
individual, we will continue to develop our product offerings in a variety of
personal and commercial information categories that are appealing, relevant and
personalized to mobile individuals and that address the local and regional
interests of individual users. We intend to continue to develop innovative,
interactive and electronic commerce applications that enhance the functionality
of the wireless data medium for our users.
GROW OUR USER BASE AND BUILD I3 MOBILE BRAND AWARENESS
We will continue to leverage our distribution relationships and diversify
our marketing initiatives to increase our user base and build awareness of our
services and our brand. As users become accustomed to and realize the benefit of
receiving information on their wireless devices, we believe they will subscribe
for additional services. We actively seek to migrate our complimentary users to
subscription services through direct and co-operative marketing efforts with our
distributors. We also intend to increase our brand awareness independently and
by capitalizing on our co-branding "Powered by i3 Mobile" marketing strategy
which leverages the extensive marketing and advertising resources and efforts of
our wireless network operator and Internet media network and corporate
enterprise distributors.
EXPAND AND DIVERSIFY OUR DISTRIBUTION RELATIONSHIPS
We will continue to seek to increase the number of our distribution
relationships in North America and begin to establish distribution relationships
in Europe, Latin America and the Pacific Rim in the latter part of 2000 in order
to increase our user base and develop diversified distribution channels. We
believe that we can leverage our relationships with our existing distributors to
migrate our products and services to other distribution channels. We believe
that our capabilities and relationships provide us with industry credibility
when we market our products and services to other distribution channels. In this
regard, we believe that both Internet media and corporate enterprises will
utilize our proprietary
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technologies, know-how and services to enable wireless delivery of their
content. We currently have agreements with four enterprises and engage in
ongoing discussions with additional enterprises, including banking and financial
services, portal and stock-trading Web sites, air travel and package delivery
services, that have expressed an interest in offering our services. We believe
that we can enable these businesses to communicate and interact with their
customers via wireless devices.
DEVELOP ADVERTISING AND TRANSACTIONAL REVENUE
We believe that advertising and wireless electronic commerce transactions
represent a significant revenue generating opportunity. We currently have the
capacity to deliver in excess of 12 million targeted advertising impressions per
month through the use of our patent-pending wireless advertising engine. As the
wireless mobile data medium matures with technological advances and increased
user awareness, we believe that users will desire to transact business on a
wireless basis. We intend to continue to develop and license technology to offer
users access to a wide variety of electronic commerce opportunities. We have an
exclusive license with Portel Services Network whereby we have exclusive rights
to its process patent enabling selected three-party wireless electronic commerce
transactions. We have a non-exclusive license from Diversinet Corp. that enables
us to use Diversinet's technology to serve as an authentication site for
wireless electronic commerce transactions. The technologies underlying these
licenses include security and authentication capabilities.
ADVANCE OUR TECHNOLOGY AND CONTENT DELIVERY SYSTEMS
We will continue to invest in our underlying proprietary filtering
capabilities and content delivery abilities to ensure that we are capable of
meeting the growing demand for our products and services. Our strategy is to
continue to maintain our platform's compliance with all major data standards for
delivery of our products and services on wireless networks and devices. We
believe that our technology enables us to rapidly adapt our platforms to new
technology, devices and protocols. We have dedicated resources in anticipation
of and to capitalize on the emergence of these new technologies, including
Wireless Application Protocol based Internet browsing. In this regard, we
utilize our own research and development efforts as well as the research and
development performed by many of our business relationships, including handset
manufacturers, wireless network operators and content and electronic commerce
companies.
PRODUCTS AND SERVICES
We create products and services targeted to the mobile individual. We are
focused on providing personalized content, advertising and electronic commerce
services to the wireless users' devices such as mobile phones, pagers and
personal digital assistants. Our products and services are offered on both a
one-way and interactive basis. Interactive products and services are available
on both digital telephones and two-way pagers that operate on wireless networks
that are enabled for two-way messaging or browsing. For example, a user can
request information by sending a text-message containing a request to complete
an electronic commerce transaction. The request is processed by our systems and
a text message response is sent back to the user upon confirmation of the
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transaction. Through our distribution relationships we offer individual wireless
subscribers the ability to determine the type, amount and frequency of
information they desire. We have developed a portfolio of products and services
that allow our distributors to add value to their businesses and customer
relationships by providing personalized content and information to mobile
individuals through wireless devices.
CURRENT PRODUCTS AND SERVICES
Our interactive wireless portals are designed to provide mobile individuals
with personalized information regardless of the type of wireless device, network
infrastructure or protocol chosen by or for them. Information can be accessed in
either our notification/alert or interactive/on-demand content delivery formats.
We believe that a key element of our wireless portals is the creation of
personal profiles that detail each user's unique interests. Our users create
personal profiles through Web sites, phone-based browsers or by calling us or a
distributor by telephone. Content requested by the user is transmitted from our
operations center to a wireless network operator's switching facility and on
from there to the customer's wireless device. We believe that our technology's
capability to monitor data streams and identify and deliver information which is
based on to those personal profiles provides substantial value to users.
Our distributors offer our products and services in a mix of complimentary
and subscription service packages as follows:
Complimentary Service. We offer our users the opportunity to receive a
limited product selection free of charge. We provide complimentary services for
an unlimited period of time to the customers of our wireless network operators.
Our wireless network operators, however, may limit the time period of this
complimentary service. This service enables users to receive daily messages from
a basic tier of content providers. For example, all AT&T Digital PCS subscribers
are entitled to select one content provider from among news, sports, finance,
entertainment and weather. Users must first register for our service by either
visiting a distributor's Web site which we co-brand and host or by telephone.
Our experience indicates that complimentary service enables us to demonstrate
the value of our services, including personalized content, to mobile individuals
and provides a base from which to generate subscriptions. We also have the
capacity to add advertising taglines to complimentary services messages, thereby
generating additional revenues for ourselves and our distributors. In some
cases, we are also compensated by wireless network operators for complimentary
services at a rate of $0.10 per month for each complimentary user.
Subscription Services. We generally offer two paid subscription levels,
basic service and advanced service. By subscribing to either service level for a
monthly fee, subscribers are able to receive personalized messages throughout
the day. For example, a subscriber who has chosen to receive New York Yankees
scores might receive updated scores from a current game at the end of the fifth
inning and as the game ends. We estimate that the typical basic service
subscriber receives between 10 and 30 messages per selected content provider per
month, or an average of 30 to 90 total subscription messages per month in
addition to complimentary messages. We estimate that the typical advanced
service
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subscriber receives between 10 and 30 messages per selected content provider per
month, or an average of 80 to 240 total subscription messages per subscriber per
month in addition to complimentary messages. Currently, the price of our basic
service ranges from $2.99 to $4.99 per month, and the price of our advanced
service ranges from $5.99 to $12.99 per month.
CONTENT DELIVERY FORMATS
Our technology allows us to tailor message formats to maximize the message
length permitted by a user's particular wireless device. Messages typically
range between 40 characters and 240 characters but we can format the messages to
be as brief as 20 characters or as long as permitted by the user's wireless
device and wireless network carrier. Our technology permits subscribers to
select from two distinct message formats:
Notification Services. Triggered Alert/Notification Messages are sent to a
subscriber when our network detects a specific event has occurred which is time-
sensitive and relevant to that subscriber's information profile. For example, a
subscriber might request that we send an alert if there is a severe weather
watch issued for Topeka, Kansas, if IBM's stock price moves 2%, or if traffic
information becomes available for a specific street or highway at a particular
time of day.
Timed Notification Messages allow each subscriber to individually determine
the designated time for message delivery. Subscribers can tailor their message
delivery format to maximize the utility of each message. For example, a
subscriber may request to receive the weather forecast for Fairfax, Virginia
every day before getting dressed in the morning, local news for Sacramento,
California mid-morning or the winning lottery numbers immediately after the
drawing.
Interactive Services. Our subscribers can interact with their wireless
device to quickly access content on demand depending on the type of wireless
network and device. Under the interactive services model, content is sent at the
request of subscribers and we send a response to the wireless network operator
within seconds to be distributed to the user. Wireless users can interact by
two-way Short Message Service and menu-driven browser capabilities, including
Wireless Application Protocol, on their wireless devices. For example, a
subscriber may request a real-time stock quote for a company that is in the
news, or a weather forecast for a city while traveling there, or a report on the
score for a sporting event in progress.
CONTENT CATEGORIES
We deliver global and national as well as regional and local content which
is available in selected locations based on the content's relevance to the
regional markets. For example, the results of a curling tournament are available
to interested users in Western Canada and subscribers in New York may obtain
scores for the New York Mets. In addition, local traffic conditions and weather
can be provided for both of those markets.
Similar to established Internet portals, we offer users access to diverse,
popular information that is categorized by major topical headings. Most of our
content is offered in English. Some of our products and services are also
offered in French and Spanish. We currently offer content to over 40,000
Canadian subscribers in both French and English. We are currently evaluating
Spanish
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content services aimed at the United States market. Our systems have the
capability to process content in additional languages as demand requires.
Our content is categorized into a number of product groups, including news,
weather, sports, business and finance, travel, entertainment and others. The
availability of particular content categories depends on the wireless network to
which our users subscribe. The following are the product groups and services
that we offer:
NEWS PRODUCTS
As-issued Breaking News
Headline News
Canadian Headline News
Local News
International News
Political News
Technology News
Health/Medical News
Real Estate News
WEATHER PRODUCTS
Daily Weather Forecasts
Severe Weather Alerts
3-day Forecasts
Travel Weather (multi-city)
Regional Weather Headlines
Marine Forecasts
TRAVEL PRODUCTS
Traffic Conditions
Flight Arrival and Departure
Information
SPORTS PRODUCTS
Real-time Scores
Score Roundups (timed/on-demand)
Pro Sports Stats and Standings
Auto/Truck Racing Results
Sports News Headlines
Pro Sports Team News
Breaking Sports News
Golf Leaderboards
Skiing/Snowboarding Reports
Horse Racing Results
Sports Trivia
Tennis Results
BUSINESS AND FINANCE PRODUCTS
Real-time Stock Price Movement Alerts
Real-time Stock Quotes
Mutual Fund Quotes
Market Indices
Breaking Financial News
Business News Headlines
Industry News Headlines
Company News Alerts by ticker
TRANSACTIONAL APPLICATIONS
Reminder Service
Interactive Advertising
On-demand Stock Quotes
MESSAGING APPLICATIONS
E-mail Gateway
Web-Messaging Gateway
ENTERTAINMENT PRODUCTS
Entertainment News Headlines
Horoscopes
Joke of the Day
Lottery Results
Soap Opera Updates
Movie Reviews From Roger Ebert
Concert Updates
"News Of The Weird" from C. Shepard
Roxy Roxborough's Sports Odds
Celebrity Birthdays
This Day in History
Thought for Today
Quote of the Day
Daily Trivia Question
Bible Quotes
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CONTENT RELATIONSHIPS
We have agreements with media and information companies pursuant to which
they provide high-quality content to our users. We offer content providers the
opportunity to leverage their existing information in a new medium at little or
no incremental cost to them and with significant co-branding opportunities.
While each of our content agreements contain varying terms, our standard form of
content agreement has an initial term of three years and automatically renews
for continuous one year terms unless one of the parties provides notice that it
does not intend to renew the agreement. The amount we pay to the content
provider is either a flat monthly fee, a fee based on the number of subscribers,
a fee based on percentage of revenue received by us derived from revenue
generated from the content they provide, the number of content messages
requested or a combination of the four. The content providers with which we have
existing relationships are:
American Stock Exchange
AccuWeather
Associated Press:
- AP Wire
- LATAM (Latin American)
Canadian Exchange Group
Canadian Press
COMTEX Scientific Corporation
- Agence France Presse
- Business Wire
- Knight Ridder
- PRNewswire
- Thomson Publishing
- Ziff-Davis Wire
Dow Jones
Environment Canada
FlyteComm
GTE/NOAA (weather)
infoUSA
InteliHealth
Interactive Sports Wire
L.A. Times
Lottery Canada
Lotto Net
Metro Network
NASDAQ
New York Stock Exchange
News America Digital Publishing
- Fox News
- Fox Sports
- Fox Market Wire
Reuters Health Information Services
Inc.
SkyWords
SportsTicker
Sports Wire
Street Software Technology, Inc.
Tampa Tribune
Tourdates
TravInfo
Trustar Limited
Universal New Media:
- Eugenia Last
- Roger Ebert
University Wire
The Weather Channel
EMERGING PRODUCTS AND SERVICES
We are continually expanding our products and services based on perceived
market opportunities. We believe all of these products and services represent
additional potential sources of revenue. We are currently offering advertising
taglines, basic electronic commerce transactions and e-mail on a limited basis
and intend to begin offering additional services in the future, including
personal information management applications, location-based services, voice
recognition and text-to-speech applications and in-vehicle applications.
Advertising. In many cases, we have the capacity to attach advertising
taglines to the end of content messages being delivered to individuals. Our
patent-pending Advanced Data Mining Advertising Tagging and Transaction system,
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matches personal profile and demographic data with targeted advertising
information. We currently have the capacity to deliver in excess of 12 million
targeted advertising impressions per month. For example, when a user in Denver,
Colorado receives a message from The Weather Channel with the weather forecast
for Vail, Colorado, we have the capability to tag the weather message with a
short advertisement for a local ski area ticket discount or a sale at a local
ski shop. We also plan to offer non-targeted, broadly distributed advertisements
marketed towards wireless device users in general.
Initially, we believe we have established our advertising rates to compare
favorably with average Internet portal cost-per-thousand impressions rates. As
advertisers accept this new advertising medium, we believe that we will be able
to charge them a premium rate based on our ability to reach a large number of
mobile individuals with highly targeted and location specific messages.
Electronic Commerce. Our current electronic commerce platform offers
personal calendar alert functions and permits users to place an order for a
product or service from their wireless device. This capability not only provides
us with an opportunity to share in the revenue from an electronic commerce sale,
but it also motivates the user to use the wireless device to contact the vendor.
In addition, we believe this results in increased usage over the wireless device
and, accordingly, additional revenues for the wireless network operator. We have
secured a mix of exclusive and non-exclusive licenses and anticipate securing
additional licenses to enable us to deliver secure wireless electronic commerce
solutions.
Although our electronic commerce platform is in the early stage of
development, we have existing technology which is capable of enabling wireless
electronic commerce transactions. We are engaged in creating advanced wireless
electronic commerce applications which include mobile banking, stock trading,
online auction, travel service bidding and online shopping solutions. Although
the revenues we have received from electronic commerce to date have been
minimal, we believe revenue from enabling electronic commerce companies for
wireless transactions will include fee-based development activities,
per-transaction pricing, and receiving a portion of revenue generated from goods
or services sold.
Through our relationships with 1-800-FLOWERS and Vermont Teddy Bear, a user
may set up a reminder for a friend's birthday through the Internet. At a pre-
set date and time prior to the event, a message is transmitted to his or her
wireless device which alerts him or her of the upcoming birthday. This alert
message contains the details of the friend's birthday, along with a tagline
providing a gift suggestion and a special toll-free number to call to initiate a
transaction. Under this arrangement, we will receive a portion of the revenues
generated from this electronic commerce transaction.
We believe that the electronic commerce market presents significant revenue
potential for us and we are currently in discussions with a number of additional
companies that conduct electronic commerce on the Internet.
E-mail and Personal Information Management Applications. We believe that
e-mail and personal calendar information are among the most important content
services for mobile individuals. Our e-mail development efforts are focused on
adding new features to our e-mail gateway platform, such as the ability to have
messages automatically forwarded from one location to the user's wireless device
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e-mail address and automatic replies. We are now developing the technology to
allow a user to direct his or her e-mail normally received at a workstation
location, such as an office, to his or her wireless device. We are also
developing the technology to allow the user to remotely interact with his or her
desktop e-mail/ scheduling applications to enable the remote receipt of and
response to e-mail messages.
Location-Based Services. We are working to provide services that are based
on the user's geographical location as he or she travels. We have conducted a
successful trial of location-coded notification services with a wireless network
operator, and intend to utilize new location technologies to enhance our ability
to provide more localized information for mobile individuals. For example, a New
York subscriber could receive Arizona weather reports while he or she is
traveling in Phoenix. Other services that may be useful to a user's specific
location include traffic, restaurant/business/ATM location information, as well
as targeted advertising and electronic commerce programs.
Voice Recognition and Text-to-Speech Applications. We are developing a
system that allows a user to interact with our products and services using voice
recognition and text-to-speech technology. These applications allow users to
access our services through the voice channel on their wireless phones, rather
than the data channel. We believe that voice-based services can provide an
effective means for on-demand content delivery and triggered notification. To
support our efforts in this area, we are working with several industry leaders
on voice product prototypes, including serving as a development partner for
Nuance's Voyager voice browser platform.
In-Vehicle Applications. We are participating with major automotive
manufacturers in the development of and trials of various platforms and services
for in-vehicle applications. We are developing systems that will allow a user to
obtain critical information while travelling in a car, including directions and
traffic information. We intend to combine this functionality with our voice
recognition product to allow a user to speak to an in-vehicle device to request
information.
DISTRIBUTION RELATIONSHIPS
WIRELESS NETWORK OPERATORS
We have entered into relationships with a number of leading
telecommunications carriers and wireless network operators in order to
facilitate widespread distribution of our services and to grow our user base.
Marketing fee arrangements provide incentives to our wireless network operator
distributors to promote our products and services. Although the terms of each
wireless network operator distribution agreement differ, the standard agreement
we use is non-exclusive, has a term of one to three years, automatically renews
for continuous one year terms and may be terminated by either party on notice,
with or without cause.
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The following are the wireless telephone network operators with which we
have distribution agreements:
<TABLE>
<S> <C>
AT&T Wireless Services PrimeCo PCS
- AT&T Digital PCS SBC Communications Inc.
- AT&T PocketNet - Southwestern Bell Mobile
AirTouch Cellular Systems, Inc.
Bell Mobility Cellular, Inc. (Canada) - Pacific Bell
Cellular One of Amarillo - Cellular One (Boston,
Cellular One of Oregon Baltimore, Washington, D.C.)
CFW Wireless TeleCorp
Clearnet PCS Triton PCS
MTT Mobility (Canada) United States Cellular
Omnipoint Communications Services U.S. West Wireless
</TABLE>
In addition, we have a number of distribution agreements with paging
network operators. In 1999, we received 98% of our subscriber revenues from
these wireless network operators.
ENTERPRISES
We believe that we provide a powerful enabling technology that allows
Internet media networks and corporate enterprises to extend the reach of their
services through the use of wireless devices. We can derive revenue from this
service for Internet media networks and corporate enterprises in a number of
ways, including fees for development services, licensing fees and
transaction-based pricing and per user subscription fees. We currently have
Internet media network agreements with RotoNews and The Weather Channel/Wireless
Weather. The RotoNews Agreement has a one year term and The Weather
Channel/Wireless Weather Agreement has a two year term. Under these agreements
we provide all of the technology and support including customer support, billing
services, Web site design and hosting, software development, personal profiling
and content delivery, allowing these enterprises to provide their content to
their subscribers via wireless devices. We derive revenue through subscription
fees from the wireless device users. We are in discussions with additional
businesses such as banking and financial services companies, portal and
stock-trading Web sites, airlines and package delivery services companies that
have indicated their interest in having us enable their enterprises to
communicate with their customers when they are not at their desktops.
Internet Media Networks. We believe that these enterprises have begun to
consider wireless as a viable vehicle to deliver Web site content to their
users. Because our platform is compatible with all major data standards and
wireless transmission protocols we are capable of creating, hosting and
maintaining a product offering that allows Internet media networks to deliver
wireless portal services. For example, Weather.com uses our technology to
provide subscribers with branded weather content, formerly only available on the
Internet, via their wireless devices.
Corporate Enterprises. Our technology can also enable corporations to
extend their information and services to customers and employees using wireless
devices. This can include e-mail, calendar and inventory applications,
notifications and corporate intranet access. Enterprise data can be supplemented
with our
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news and information content based on the needs of service users. Although we
have not entered into any definitive agreements to date, we are in discussions
with numerous companies to provide these types of services. We believe this
market will provide us with additional opportunities to facilitate and expand
the use of electronic commerce. We believe enterprises that might use our
services to provide solutions to their employees and/or customers include
banking and financial services, portal and stock trading Web sites, airlines and
package delivery services. For example, an enterprise could notify a user on
their wireless device that a package was delivered to the recipient, or, in the
case of an airline company, users could use their wireless devices to request
information regarding flight delays. We can derive revenues by charging fees to
complete a transaction even in those cases where we may not receive a portion of
the revenues of the actual sale.
OUR DISTRIBUTOR PRODUCT OFFERINGS
We provide wireless data services to wireless network operators, Internet
media networks and corporate enterprise distributors by offering a package of
technology and services enabling the delivery of personalized information. We
offer these distributors several critical components with which to build
co-branded wireless portals. We offer all of the following services to our
wireless network operator relationships and offer the messaging gateway,
personalization and software development components to our Internet media
network and corporate enterprise relationships:
- Content Aggregation. We acquire content from over 50 content providers
who deliver general, broad-based information as well as locale and user
profile specific content.
- Content Filtering and Parsing. Our proprietary technology is designed to
extract only that content which is relevant to our users from the data we
receive. We send specific messages on a timely basis to specific users
based on their personal profiles or interactive requests.
- Personal Profiling. We maintain individual information, network, and
device profiles for each of our more than 450,000 users. These personal
profiles contain data reflecting each user's individual content
preferences. Our content filtering and parsing engines work in
conjunction with our profiling system to provide personalized information
to our users.
- Messaging Gateway. Our products work with every major network protocol
for transmission of messages between our operating center and the systems
of our wireless network operator distributors. We currently maintain
connectivity to over 600 messaging switches around North America,
including but not limited to those of our wireless network operator
distributors.
- Operations, Billing, Customer Care and Reporting. We ensure timely and
accurate delivery of our services through our operations center, which is
staffed continuously. We provide user billing and live-operator customer
care services on behalf of our distributors and provide them with
detailed reporting on user numbers and behavior.
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- Software Development. We typically create customized co-branded Web-
based systems in conjunction with each of our distributors which allow
users to create individual profiles and subscribe for services over the
Internet. We also develop interactive voice response systems with many of
our distributors, which are automated telephone systems that allows users
to register and manage their personal profiles by telephone. In addition,
we can create communications software to accommodate a distributor's
systems infrastructure and high message volume.
STRATEGIC RELATIONSHIPS
To strengthen our position in the market, we have formed strategic
relationships with two of our investors, NBC Interactive Media, Inc. and Sony
Corporation of America. Under our agreement with NBC Interactive Media, Inc. we
will make our wireless distribution services available to NBC Interactive Media,
Inc. and its affiliates for use in connection with their interactive content
offerings. Our agreement with Sony Corporation of America allows it or its
affiliates to offer their content for delivery as part of our product offerings.
Each of these agreements has a term of two years. We believe these relationships
will enable us to capitalize on the growing market for the delivery of content
on a wireless basis and integrate our product offerings into the products and
services provided by our strategic alliances.
SALES AND MARKETING
Our sales and marketing activities are focused on entering into additional
agreements with wireless network operators, Internet media networks and
corporate enterprises who will market our products and services using our
"Powered by i3 Mobile" co-branding campaign. Our marketing efforts have also
been targeted towards accelerating the adoption of our services by mobile
individuals. By relying on the sales and marketing strength of our wireless
network operators, we are able to focus our capital on broadening our product
offering and incorporating technological advances. We currently employ 20 sales
and marketing professionals and intend to expand this group significantly during
2000.
We have implemented a number of initiatives supporting our distributors'
retail sales efforts and accelerating adoption of our services by mobile
individuals. These initiatives include:
- Cooperative Advertising Program. We offer a cooperative advertising
program for distributors who offer our services under the "Powered by i3
Mobile" brand. Through this program, we provide reimbursement for up to
3% of actual amounts invoiced for pre-approved advertising and
promotional materials used to support the sale of our services to mobile
individuals.
- Market Development Funds. We make available market development funds at
the discretion of management for use by our distributors to promote
specific products and services and to increase sales in targeted markets.
We work with our distributors to identify appropriate media and geography
for the efforts we fund.
- On-Device Promotions. We have begun promoting our services to mobile
individuals directly on their wireless devices. We currently send service
availability notification messages including instructions on selected
networks
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on how to activate our services to our distributors' subscribers who have
not yet signed up for our services. For some of our complimentary service
users we have begun attaching periodic promotional messages to content
messages aimed at selling subscription services to these customers. To
date, we have not paid any fees to our distributors for these promotional
messages.
- "Powered by i3 Mobile" Advertising. As an additional means of increasing
customer awareness and demand for our services we intend to continue to
implement advertising and promotional campaigns addressed directly to
mobile individuals. For example, we plan to advertise in markets where we
have a high density of potential customers such as California or South
Florida, each of which has three wireless network operators offering our
services.
TECHNOLOGY AND SYSTEMS
We believe that one of our principal strengths is our proprietary
internally developed technology. Our systems have been designed to provide a
network and device independent platform for creation and delivery of all of our
products. We acquire, filter and parse data streams for content, advertising and
commerce applications, provide user personal profile systems, and our wireless
delivery gateway.
Our various components run on a number of operating systems to satisfy the
requirements of our content providers and distributors, but all are integrated
in a common network architecture. Each component has been designed for expansion
so that our current systems can accommodate more content without compromising
performance, advertising and commerce relationships and greater messaging
volume.
CONTENT ACQUISITION, FILTERING AND PARSING SYSTEMS
Our engines for content aggregation and filtering have been designed to
accept virtually any type of data formatting and volume of data. We offer our
content providers the option to provide us their data in almost any content
format. We retrieve data from content providers under license through third
parties and our own proprietary filtering technologies. We can also accept data
delivery through established two-way connectivity with our content providers. In
the case of our stock quote alert products, for example, we receive data through
satellite on over 300,000 securities on a constant basis from our financial
content providers, with a dedicated network connection for backup purposes.
Our filtering and parsing engines determine relevance of information by
screening for key words in the data we receive and create various types of
messages for our end users' devices. We have created proprietary technology to
efficiently monitor the large volume of data entering our operating system and
to identify particular information that is relevant to our individual end users.
Our parsing engines then use proprietary algorithms to transform relevant data
into messages of various lengths and formats. For example, our engines create
100, 140, 150 and 240 character messages targeted for different types of message
displays on various devices. In addition, our engines create full-word 3-day
weather forecasts, and 50 character same day weather forecast messages with
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word abbreviations, such as "t-stms" instead of "thunderstorms", from the same
data. Our systems have been refined over time to handle high data volume and
rapid message creation, and we tag messages with expiration designations and
priority of delivery. These expiration designations indicate to our wireless
network operator distributors' system how long a message should try to be
delivered, and which messages, such as on-demand stock quotes, should be
delivered first.
We have developed a patent-pending Advanced Data Mining Advertising Tagging
and Transaction system, our advertising and electronic commerce platform. This
system matches advertising tags and commerce opportunity tags with specific
messages based on user information profiles and the content of the messages. For
example, our system can monitor weather data for temperature and humidity and
can insert into a weather forecast message an advertising tag for a soft drink
when the temperature exceeds 85 degrees. In addition, the system can monitor a
user's commerce preferences to insert electronic commerce opportunity tags into
our reminder system. For example, if a user chooses to be reminded of a child's
birthday, our system will insert an embedded phone number for a children's gift
manufacturer into the reminder message. This system is designed to work with
high volumes of messages and multiple vendors and to provide data on user
preferences to our electronic commerce distributors.
PERSONAL PROFILING SYSTEM
We allow our users to create personal profiles through the Internet,
interactive voice response systems and, depending on its capabilities, a user's
wireless device. We update user profiles in each of these systems to
automatically reflect user-initiated changes.
Our Web and interactive voice response systems currently utilize load-
balanced hardware integrated into our Web server environment for redundancy and
to manage rapid growth. Our next generation Internet-based system will employ a
distributed application model for even greater scalability and performance.
Each user's personal profile is queried by our content parsing engines to
determine appropriate message delivery. For example, we monitor our sports
information data for a user's selected team and when scores appear for that
team, create a message for that user's device characteristics and deliver that
message through appropriate protocols to that user's wireless network operator.
Our personalization engines have been designed for expansion without
compromising performance.
WIRELESS DELIVERY GATEWAY AND NETWORK OPERATIONS
Our wireless delivery gateway provides the means to send customized content
to most types of mobile handheld devices. Our gateway provides message transport
utilizing several paging protocols and various protocols for Short Message
Services. The gateway also supports the protocols and languages compatible with
microbrowsers and the Wireless Application Protocol servers. Our gateway
provides delivery through all major wireless networks.
We have written applications in a number of languages to work with new
microbrowser gateways and protocols and emerging voice browser platforms. These
new applications provide the basis for the next generation of our wireless
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information portals and are focused on enhancing the Internet functionality of
wireless devices. For example, our technology enables a Wireless Application
Protocol-enabled handset to become a platform for two-way interactive services
such as directory searches and remote personal information manager connectivity.
Handling a high volume of message input and output is crucial to our end
users and wireless network operator distributors. Our operating center currently
handles approximately 800,000 messages per day and is capable of providing
message transport of five times that volume. We are also in the process of
building a new data center in Connecticut which is expected to provide capacity
for 20,000,000 messages per day. We currently anticipate that our new data
center will be operational during the second quarter of 2000 at an aggregate
cost of approximately $1.2 million.
Our data center is designed to utilize mirrored server technology, load-
balancing components, backup power supplies, backup generator systems and
redundant network interfaces to eliminate service interruptions because of
single points of failure. In addition, in order to provide service to our
subscribers if a disaster should occur in our Connecticut facility, we are
upgrading our redundant data center in Hurst, Texas, with plans for this
upgraded facility to be operational during the second quarter of 2000. Each
system component in the Connecticut and Texas facilities has been designed to
scale for significantly larger service volume.
RESEARCH AND DEVELOPMENT
Our research and development strategy is to anticipate market needs and to
implement the technological advancements necessary to meet these needs. This
strategy is consistent with our history. In the early stages of our development,
we created the proprietary platforms that allowed us to provide deliverable
wireless products when the wireless data market began to develop. We believe we
developed one of the first profile-based stock quote alert products in North
America, one of the first applications for capturing user profiles for wireless
delivery and one of the first notification applications for Phone.com's
microbrowser and many other innovations. We have senior level management who are
specifically assigned to direct our research and development efforts. In
addition, a team of individuals from a number of different departments is
selected to develop and implement each research and development project. We
actively solicit feedback from wireless network operators, content providers,
and Internet media networks and corporate enterprises to determine changes in
market needs and user demands. Our research and development strategy consists of
the following:
INDUSTRY STANDARDS
As an active participant in the development of the wireless data industry,
we share our expertise with various industry groups and with technology
alliances. As a result, we share in the benefits from research performed by many
of our industry contemporaries, including wireless network operators, content
providers, technology vendors, and electronic commerce providers. For example,
as a member of the Wireless Application Protocol Forum, we have agreed to
license our intellectual property to other members on fair and reasonable terms
to the extent that the license is required to develop non-infringing products
under the specifications
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<PAGE> 61
promulgated by the Wireless Application Protocol Forum. Each other member has
entered into a reciprocal agreement.
PROTOTYPE DEVELOPMENT
Our research and development group develops prototypes of new products and
systems. Prototypes are created in response to specific wireless network
operator trials, new technology relationships and our ongoing product
development efforts. When a prototype is targeted for production, our research
and development group transfers information and strategy to our systems and
technology group for implementation into commercial products.
OTHER RESEARCH AND DEVELOPMENT INITIATIVES
In support of our strategy of network and device independence, we continue
to develop applications that will allow us to offer our products and services to
any user, regardless of his or her selected wireless device. We are also
concentrating our efforts on new wireless telephones, pagers and personal
digital assistants, and on creation of products that work in conjunction with
Wireless Application Protocol, the Palm OS and associated network browsing
solutions, Windows CE, EPOC and other applications. We believe this strategy
will allow us to remain competitive when and if a major protocol achieves market
dominance.
RESEARCH RELATIONSHIPS
In support of our research and development efforts, we have formed various
types of strategic relationships with wireless software and infrastructure
companies and with the Wireless Application Protocol Forum and Wireless Data
Forum trade organizations. We have established these alliances to gain early
awareness of emerging wireless device and Internet technologies by sharing our
research and development efforts with these companies. For example, we seek to
ensure that our products work with the hardware and protocols of leading
wireless data infrastructure providers. These include Short Message Service
Center manufacturers Logica Aldiscon, ADC NewNet and Comverse, and Wireless
Application Protocol gateway and microbrowser manufacturers Nokia, Phone.com,
Motorola and CMG. In the case of the Short Message Service Center manufacturers,
we test the compliance of our respective products and are listed as certified
developers for their platforms. In the case of the Wireless Application Protocol
gateway manufacturers, we work with the companies to ensure that our products
are compliant with their programming languages, servers and, in some cases,
wireless handsets. These companies also include our services among their
demonstration Web sites for handset microbrowsers. For example, we were one of a
limited number of Nokia's initial North American Wireless Application Protocol
application development partners. As part of that relationship, we jointly
showcase our offerings at major industry trade fairs.
In addition, we have cooperative development relationships with other
wireless technology and services vendors. We have a cooperative development
relationship with SignalSoft to build products that work with SignalSoft's
location-based technology, and we have a non-exclusive licensing arrangement
with transaction security provider Diversinet to use Diversinet's secure
transactions software for our electronic commerce product offerings. We also
have a cooperative relationship agreement with voice recognition and browser
technology provider Nuance
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Communications to test products we developed that run on Nuance's Voyager
voice-browsing platform. In most of these relationships, we test compliance of
our respective products, but do not market products together. We have also
established original equipment manufacturer distribution relationships with
Neopoint and Motorola. For example, Neopoint's MyAladdin product and Motorola's
iKno product include content services we provide, and we have developed several
products for Motorola's wireless information services prototype platforms. Each
of these relationships has been developed in order to further our understanding
of our partners' technology and product offerings. We anticipate that these
development relationships will translate into distribution agreements for our
products.
COMPETITION
The market for our services is becoming increasingly competitive. The
potential adoption of an industry standard may make it easier for new market
entrants to offer some or all of the services we offer and may make it easier
for existing competitors to introduce some or all of the services they do not
now provide, or improve the quality of their services. We expect that we will
compete primarily on the basis of the functionality, price, breadth and quality
of our products and services.
Our current competitors include:
- wireless data providers and portals, such as InfoSpace.com, Saraide.com,
MSN Mobile, Datalink, Airflash, Inc., Phone.com, Yahoo!, Inc., AirMedia,
@mobile.com and CNN Mobile; and
- wireless financial services providers, such as Aether Systems, Inc.,
SmartServ Online, Inc., Strategy.com and 724 Solutions, Inc.
Our potential competitors include:
- entities that have announced their intentions to become wireless data
providers, such as America Online, Inc. and TIBCO Software Inc.; and
- wireless network operators, such as AT&T Wireless, Bell Atlantic Mobile,
Metricom, Inc., Nextel Communications, Inc., Omnipoint Communications
Services and Sprint PCS, any of which may decide to develop in-house
resources to provide similar services themselves.
Many of our existing and potential competitors have substantially greater
financial, technical, marketing and distribution resources than we do.
Additionally, many of these companies have greater name recognition and more
established relationships with our target customers. Furthermore, these
competitors may be able to adopt more aggressive pricing policies and offer
customers more attractive terms than we can.
GOVERNMENT REGULATION
We are not currently subject to direct federal, state or local government
regulation, other than regulations that apply to businesses generally. The
wireless network operators with which we contract to provide airtime are subject
to regulation by the Federal Communications Commission. Therefore, indirectly,
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changes in Federal Communications Commission regulations could affect the
availability of wireless coverage these carriers are willing or able to sell to
us.
We could also be adversely affected by developments in regulations that
govern or may in the future govern the Internet, the allocation of radio
frequencies or the placement of cellular towers. Due to the increasing
popularity and use of the Internet, there is an increasing number of laws and
regulations pertaining to the Internet. In addition, a number of legislative and
regulatory proposals are under consideration by various agencies and commissions
in the United States and elsewhere. Laws or regulations may be adopted, and in
some countries have already been adopted, with respect to the Internet relating
to liability for information retrieved from or transmitted over the Internet,
online content regulation, user privacy, taxation and quality of products and
services. Moreover, the applicability to the Internet of existing laws governing
issues such as intellectual property ownership and infringement, copyright,
trademark, trade secret, obscenity, libel, employment and personal privacy is
uncertain and developing. Uncertainty and new regulations could increase our
costs and prevent us from delivering some or all of our services.
DATA PROTECTION
Legislative proposals have been made in the United States that would afford
broader protection to owners of databases of information such as stock quotes
and sports scores. If enacted, this legislation could result in an increase in
the price of services that provide data to wireless communications devices and
could create potential liability for unauthorized use of this data.
INTERNET TAXATION
A number of legislative proposals have been made at the federal, state and
local level that would impose additional taxes on the sale of goods and services
over the Internet and certain states have taken measures to tax Internet-related
activities. Although Congress recently placed a three-year moratorium on state
and local taxes on Internet access or on discriminatory taxes on electronic
commerce, existing state or local laws were expressly excepted from this
moratorium. Further, once this moratorium is lifted, some type of federal and/or
state taxes may be imposed upon electronic commerce. This legislation, or other
attempts at regulating commerce over the Internet, may substantially impede the
growth of commerce on the Internet and, as a result, adversely affect our future
opportunity to derive financial benefit from those activities.
INTELLECTUAL PROPERTY RIGHTS
We have filed applications to register the marks "i3 Mobile," "Powered by
i3 Mobile," and "Powered by iii" in the United States. In addition, we have
registered the marks "Eyes on the Web," "Village Square," "News Alert Service,"
"Sports Alert Service" and "Intelligent Information Incorporated" on the
Principal Register of the United States Patent and Trademark Office. We also
have pending applications to register the marks "Eyes on the Web," "Village
Square" and "Powered by iii" in Canada. This prospectus also includes trade
names, service marks and trademarks of other companies. All other brand names or
trademarks appearing in this prospectus are the property of their respective
holders.
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We rely on a combination of copyright, trademark, service mark, trade
secret laws and contractual restrictions to establish and protect certain
proprietary rights in our services. We have applied for a patent covering
Advanced Data Mining Advertising Tagging and Transaction system, which is a
system that matches personal profile and demographic data against advertising
targeting information to attach advertising taglines to the end of content
messages being delivered to users. We have also entered into a license agreement
with Portel Services Network, Inc. for its method patent, which allows us to
involve a third party processing center or clearinghouse that authenticates user
orders in each electronic commerce transaction. Under the terms of this
agreement, we paid Portel Services Network $175,000 to date. In addition, we
have agreed to pay a royalty equal to five percent of gross revenue related to
electronic commerce through March 29, 2005 and May 8, 2007 for sales in the
United States and Canada, respectively.
The steps we have taken to protect our intellectual property may not prove
sufficient to prevent misappropriation of our technology or to deter independent
third-party development of similar technologies. The laws of certain foreign
countries may not protect our services or intellectual property rights to the
same extent as do the laws of the United States. We also rely on certain
technologies that we license from third parties including data feeds and related
software. These third-party technology licenses may not continue to be available
to us on commercially attractive terms. The loss of the ability to use such
technology could require us to obtain the rights to use substitute technology,
which could be more expensive or offer lower quality or performance, and
therefore have a material adverse effect on our business, financial condition or
results of operations.
Third parties could claim infringement by us with respect to current or
future services. As the number of entrants into our market increases, the
possibility of an infringement claim against us grows. We may be inadvertently
infringing a patent of which we are unaware. In addition, because patent
applications can take many years to issue, there may be a patent application now
pending of which we are unaware, which will cause us to be infringing when it
issues in the future. Any infringement claim, whether meritorious or not, could
be time-consuming, result in costly litigation, cause service installation
delays or require us to enter into royalty or licensing agreements. Royalty or
licensing agreements might not be available on terms acceptable to us or at all.
As a result, any claim could have a material adverse effect upon our business,
financial condition or results of operations.
As a member of the Wireless Application Protocol Forum, we have agreed to
license our intellectual property to other members on fair and reasonable terms
to the extent that the license is required to develop non-infringing products
under the specifications promulgated by the Wireless Application Protocol Forum.
Each other member has entered into a reciprocal agreement.
EMPLOYEES
As of February 15, 2000, we had 84 full-time employees and 1 part-time
employee. Management considers its relations with our employees to be good. None
of our employees are represented by a union.
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PROPERTIES
Our principal executive office is located at 181 Harbor Drive, Stamford,
Connecticut. We currently operate four facilities under leases as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE ANNUAL RENT LEASE
LOCATION SQUARE FOOTAGE IN 1999 EXPIRATION DATE
- -------- -------------- ----------- ---------------
<S> <C> <C> <C>
181 Harbor Drive.................... 20,000 $63,000(1) March 2008
Stamford, CT
One Dock Street..................... 5,047 $81,000 March 2002
Stamford, CT
1237 Southridge Court............... 1,000 $25,000 February 2002
Hurst, TX
305 N.E. Loop....................... 10,035 $ --(2) January 2010
Hurst, TX
</TABLE>
- -------------------------
(1) The annual rent for 2000 is expected to be approximately $511,325.
(2) The annual rent for 2000 is expected to be approximately $110,385.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings. However, we may from
time to time become a party to various legal proceedings arising in the ordinary
course of our business.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The names and ages of our executive officers, directors and key employees
as of February 15, 2000 are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS AGE POSITION
- -------------------------------- --- --------
<S> <C> <C>
Stephen G. Maloney.............. 42 President, Chief Executive Officer
and Director
Robert M. Unnold................ 52 Chairman of the Board
Michael P. Neuscheler........... 39 Vice President and Chief Financial
Officer
Michael Forbes.................. 38 Vice President, Marketing
Richard J. Rutkowski............ 48 Vice President, Technology and
Systems
Alan Katzman.................... 40 Vice President and General Counsel
Kevin W. Ryan................... 53 Vice President, Human Resources and
Administration
Jeffrey N. Klein................ 50 Vice President, Research and
Development
Donald G. Rossi................. 43 Vice President, Sales
Kerry J. Dale................... 43 Director
James A. Johnson................ 61 Director
J. William Grimes............... 58 Director
Donald F. Christino............. 42 Director
W. Peter Daniels................ 45 Director
<CAPTION>
KEY EMPLOYEES AGE POSITION
- ------------- --- --------
<S> <C> <C>
Robert Coletti.................. 45 Controller
Timothy S. Manny................ 29 Director, Product Development
Richard C. Haylon............... 37 Director, Operations
</TABLE>
There is no family relationship between any director and executive officer
of i3 Mobile except that Robert Coletti is married to Stephen G. Maloney's
sister.
STEPHEN G. MALONEY has served as our Chief Executive Officer since
September 1999. He has been our President and a director since he co-founded i3
Mobile with Mr. Unnold in 1991. From February 1987 to April 1994, Mr. Maloney
was Senior Vice President for Operations of Our Lady of Mercy Medical Center, a
teaching hospital located in the Bronx, New York. Prior to that, from February
1984 until January 1987, he served as Vice President, Ancillary Services at
Misericordia Medical Center.
ROBERT M. UNNOLD has been the Chairman of the Board since September 1999
and a director since 1991. Mr. Unnold co-founded i3 Mobile with Stephen G.
Maloney in 1991 and served as our Chief Executive Officer from such time until
September 1999. From 1989 until 1991 he served as a General Manager for Bell
South/Mobilecomm for the New York market. Mr. Unnold also founded Mincron SBC
Corporation, a software company, of which he was President and a director from
1979 to 1989 until its sale in 1999.
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MICHAEL P. NEUSCHELER has served as our Vice President and Chief Financial
Officer since January 10, 2000. From June 1999 to December 1999, Mr. Neuscheler
was Chief Financial Officer of International Telecommunications Data Systems,
Inc., a provider of billing solutions to the wireless telecommunications
industry. From January 1998 to June 1999, he was Vice President and Chief
Financial Officer of Collegiate Health Care, Inc., a provider of management
services to student health centers at colleges and universities. From May 1994
to December 1997, he was Executive Vice President and Chief Financial Officer of
Professional Sports Care Management, Inc., a provider of outpatient orthopedic
rehabilitation services. From 1982 to 1994, Mr. Neuscheler served in various
capacities with Ernst & Young LLP. Mr. Neuscheler is a Certified Public
Accountant.
MICHAEL FORBES has served as our Vice President of Marketing since February
1999. From August 1996 until February 1999, Mr. Forbes was our Director of
Marketing. Prior to joining us, from August 1989 to July 1996, Mr. Forbes worked
for Columbia House Company, a direct retailer of various entertainment products
in a number of capacities, including Creative Director for Columbia House's
Video Club and Director of Sales Promotion for Columbia House's Music Club.
RICHARD J. RUTKOWSKI has served as our Vice President of Technology and
Systems since March 1999. From June 1996 to December 1998, Mr. Rutkowski was the
Director, Software Systems Development at Gerber Coburn, Inc., a company that
provides production equipment software systems for the ophthalmic industry. From
January 1986 to May 1996, he served in a number of capacities at Pitney Bowes,
Inc., a provider of fax and copier systems, business outsourcing and digital
document management, including Director of Engineering-Product Development,
Engineering Manager-Scale Based Products and Engineering Manager-Systems.
ALAN KATZMAN has served as our Vice President and General Counsel since
March 1999. From April 1996 to February 1999, Mr. Katzman served as corporate
counsel and business development executive to Corechange, Inc., a technology
company with a focus on building information portals for Fortune 500 companies.
From January 1993 to January 1996, he served in similar capacities at Candle
Corporation, an independent software vendor.
KEVIN W. RYAN has been our Vice President of Human Resources and
Administration since February 1999. From July 1996 until February 1999 he was
our Manager of Health Information Services. Prior to joining us, from April 1994
to July 1996, he was President of Kevin Ryan Ltd., a management consulting firm.
From September 1990 to April 1994, Mr. Ryan served as President and Chief
Executive Officer at Franciscan Children's Hospital, located in Brighton,
Massachusetts.
JEFFREY N. KLEIN has been our Vice President of Research and Development
since January 1999. From June 1992 to December 1998, he served as our Vice
President of Technical Development. From September 1989 to May 1992, Mr. Klein
was President of Jeff Klein Aviation, a company that developed the Pilot Weather
Service, the predecessor of i3 Mobile's Weather Alert Service.
DONALD G. ROSSI has been our Vice President of Sales since September 1999.
Prior to joining us, from August 1998 until September 1999, Mr. Rossi was a
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Director of Sales and then Vice President of Sales for RTS Wireless, a leading
provider of gateways and infrastructure to the wireless industry. From March
1998 to August 1998, Mr. Rossi was a Director of Sales for Unwired Planet, now
known as Phone.com. From March 1994 to March 1998, Mr. Rossi was Vice President,
Sales and Marketing for AirMedia, Inc., a wireless data solutions company.
KERRY J. DALE was elected a director of i3 Mobile in August 1996. Since
1989, Mr. Dale has been a General Partner of Keystone Venture Capital, a venture
capital investment company. Mr. Dale is a board member of a number of non-
public Keystone Venture Capital portfolio companies. Mr. Dale also serves on the
advisory board of Jefferson Bank.
JAMES A. JOHNSON was elected a director of i3 Mobile in August 1998. Since
1987, Mr. Johnson has been a managing general partner of Apex Investment
Partners, a Chicago-based venture capital firm, which he co-founded in 1987.
Prior to 1987, he was one of the three founding partners of Knightsbridge
Partners, a private investment firm. Previously, Mr. Johnson was associated with
Beatrice Foods, serving in a number of positions, including Chief Financial
Officer of the parent corporation and Senior Vice President of the US Foods
operating subsidiary. Mr. Johnson currently serves on the board of director
White Cap Industries, Inc., a retailer to professional contractors, and a number
of private companies.
J. WILLIAM GRIMES was elected a director of i3 Mobile in February 1999.
Since 1996, Mr. Grimes has been a Member of BG Media Investors LLC, a company he
founded. BG Media Investors LLC is a private equity capital firm specializing in
investments in media and telecommunications companies. From 1994 until 1996, Mr.
Grimes was the Chief Executive Officer of Zenith Media, a media services agency.
From 1991 until 1993, he served as Chief Executive Officer of Multimedia, Inc.,
a diversified media company which merged into Gannett Co., Inc. in 1995. From
1988 through 1991, Mr. Grimes was President and Chief Executive Officer of
Univision Holdings, Inc., the largest Spanish language media company in the
United States. From 1982 through 1988, Mr. Grimes was President and Chief
Executive Officer of ESPN, Inc. Mr. Grimes serves on the board of directors of
InterVU, Inc. and is an Executive Director of the New School University's "Media
Management Program."
DONALD F. CHRISTINO was elected a director of i3 Mobile in July 1991. Since
1987, Mr. Christino has been the President of Green Mountain Enterprises Inc., a
computer consulting company he founded.
W. PETER DANIELS was elected a director of i3 Mobile in July 1991. In
November 1999, Mr. Daniels became the President and Chief Executive Officer of
Southampton Hospital in Southampton, New York. From January 1995 until November
1999, Mr. Daniels was the Chief Operating Officer of Winthrop University
Hospital in Mineola, New York.
ROBERT COLETTI has been our Controller since February 1995. From November
1993 to February 1995, he was a financial consultant to i3 Mobile. Prior to
that, from July 1987 to October 1993, Mr. Coletti held a number of different
positions, including Finance Manager, with Weyerhaeuser Co./Shemin Nurseries, a
nursery wholesaler to landscape contractors. From 1981 to 1986, he was the plant
controller for The Allen Group/G&O Manufacturing, a company that manufactured
and distributed heat transfer units.
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TIMOTHY S. MANNY has served as our Director of Product Development since
December 1, 1999. Prior to that, from March 1999 until December 1999, he was our
Manager of Business Development. Prior to joining us, from April 1996 to October
1998, Mr. Manny was Director of Operations for the Knowledge Group of
CareData.com, a company that markets Internet research software and search
engines. From April 1995 to April 1996, Mr. Manny was the Manager of Business
Development at Big Top Productions, a multimedia software publisher.
RICHARD C. HAYLON has served as our Director of Operations since March
1999. Prior to joining us, Mr. Haylon served as manager of Application
Development and Support at G.E. Capital from 1993 until March 1999.
BOARD COMMITTEES
COMPENSATION COMMITTEE
Our compensation committee currently consists of Messrs. Christino, Dale,
Grimes and Maloney. The compensation committee recommends, reviews and oversees
the salaries, benefits and stock options for our employees, directors and other
individuals compensated by us. The compensation committee also administers our
incentive compensation and benefit plans.
AUDIT COMMITTEE
Our audit committee currently consists of Messrs. Dale, Daniels and
Johnson. The audit committee reviews, acts on and reports to the board of
directors with respect to various auditing and accounting matters, including the
recommendation of our independent public accountants, the results and scope of
the audits and other services provided by our independent public accountants,
the performance of and the fees to be paid to our independent public
accountants, our accounting procedures and the adequacy of our internal
controls.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Christino, Dale, Grimes and Unnold, our Chief Executive Officer
until September 1999 and currently our Chairman of the Board, served as members
of our compensation committee during the 1999 fiscal year. None of our executive
officers has served as a member of the compensation committee, or other
committee serving an equivalent function, of any other entity, whose executive
officers served as a director of or a member of our compensation committee.
BOARD COMPOSITION
Our board of directors consists of seven individuals. Each director is
elected for a one-year term at our annual meeting of stockholders and serves
until the next annual meeting or until his successor is duly elected and
qualified. The executive officers serve at the discretion of the board of
directors.
DIRECTOR COMPENSATION
We have no established compensation arrangements with our directors, but
directors may be reimbursed for their reasonable expenses incurred in connection
with the attendance at board and committee meetings. Directors are eligible to
receive options to purchase common stock under our option plans.
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EXECUTIVE COMPENSATION
The following table shows all compensation earned for services rendered to
us by our chief executive officer and our three other most highly paid executive
officers whose annual salary and bonus exceeded $100,000 in the fiscal years
ended December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------- ----------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS
- --------------------------- ---- -------- ------------ ----------------------
<S> <C> <C> <C> <C>
Stephen G. Maloney............... 1999 $150,000 $12,000 --
President and Chief Executive 1998 126,810 7,500 12,500(3)
Officer(1) 1997 122,533 -- 12,500(4)
Robert M. Unnold................. 1999 $150,000 $12,000 --
Chairman of the Board(2) 1998 126,810 7,500 12,500(3)
1997 124,080 -- 12,500(4)
Jeffrey N. Klein................. 1999 $125,000 $ -- 25,500(5)
Vice President, 1998 114,000 7,000 18,100(6)
Research and Development 1997 96,000 7,680 17,000(7)
Kevin W. Ryan.................... 1999 $111,833 -- 20,500(8)
Vice President, Human 1998 96,000 -- 9,000(6)
Resources and Administration 1997 96,000 -- 9,000(7)
</TABLE>
- -------------------------
(1) Mr. Maloney was appointed Chief Executive Officer in September 1999.
(2) Mr. Unnold was our Chief Executive Officer until September 1999.
(3) Represents options to purchase shares of our common stock at $2.61 per
share.
(4) Represents options to purchase shares of our common stock at $1.94 per
share.
(5) Represents options to purchase 13,500 shares of our common stock at $4.00
per share and 12,000 shares of our common stock at $2.37 per share.
(6) Represents options to purchase shares of our common stock at $2.37 per
share.
(7) Represents options to purchase shares of our common stock at $1.76 per
share.
(8) Represents options to purchase 7,000 shares of our common stock at $2.37 per
share and 13,500 shares of our common stock at $4.00 per share.
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OPTION GRANTS IN 1999
The following table shows information regarding options granted to the
named executive officers during the year ended December 31, 1999. We have not
granted any stock appreciation rights. None of the named executive officers
exercised any stock options during 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(6)
OPTION IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED(1) YEAR(2) SHARE(3)(4) DATE(5) 5% 10%
- ---- ---------- ------------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen G. Maloney............. -- -- -- -- $ -- $ --
Robert M. Unnold............... -- -- -- -- -- --
Jeffrey N. Klein............... 25,500 4.7% $3.23 2009 473,776 720,117
Kevin W. Ryan.................. 20,500 3.8% $3.44 2009 367,525 558,786
</TABLE>
- -------------------------
(1) All options were granted under our 1995 Stock Incentive Plan. All options
were incentive stock options which vest in annual installments over either
four or five years, subject to immediate vesting in the event of a change in
control of our company.
(2) Based upon options to purchase an aggregate of 540,500 shares of our common
stock granted to employees in 1999.
(3) Certain of these options resulted in deferred compensation that will be
recognized over the vesting period.
(4) This figure represents the weighted average exercise price per share.
(5) The options have ten year terms, subject to earlier termination upon death,
disability or termination of employment.
(6) We recommend caution in interpreting the financial significance of the
figures representing the potential realizable value of the stock options.
They are calculated by multiplying the number of options granted by the
difference between a future hypothetical stock price and the option exercise
price and are shown pursuant to rules of the SEC. They assume that the fair
value of the common stock appreciates 5% or 10% each year based on the
assumed initial public offering price of $15.00 per share, compounded
annually, for ten years (the term of each option). They are not intended to
forecast possible future appreciation, if any, of our stock price or to
establish a present value of options. Also, if appreciation does occur at
the 5% or 10% per year rate, the amounts shown would not be realized by the
recipients until the year 2009. Depending on inflation rates, these amounts
may be worth significantly less in 2009, in real terms, than their value
today.
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<PAGE> 72
YEAR-END OPTION VALUES
The following table provides information about options held as of December
31, 1999 by the named executive officers. No options were exercised by any
officer or director during 1999. The value of unexercised in-the-money options
at year-end is based on the assumed initial public offering price of $15.00 per
share, less the exercise price per share, multiplied by the number of shares
underlying the options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR END
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stephen G. Maloney.......... 12,500 12,500 $162,450 $160,925
Robert M. Unnold............ 12,500 12,500 162,450 160,925
Jeffrey N. Klein............ 57,340 46,760 805,486 587,207
Kevin W. Ryan............... 13,100 25,400 171,771 297,699
</TABLE>
1995 STOCK INCENTIVE PLAN AND 2000 STOCK INCENTIVE PLAN
We adopted the 1995 Stock Incentive Plan on November 7, 1995 and the 2000
Stock Incentive Plan on February 9, 2000. The plans provide for grants of
options to our designated employees, officers, directors and consultants.
GENERAL. The 1995 Stock Incentive Plan, as amended, authorizes options to
purchase up to 1,014,000 shares of our common stock. The 2000 Stock Incentive
Plan authorizes options to purchase up to 1,250,000 shares of our common stock.
If options granted under these plans expire or are terminated for any reason
without being exercised, the shares of common stock underlying such grant will
again be available for grant under the plans.
ADMINISTRATION OF THE PLANS. The Board of Directors administers and
interprets the plans. The Board has the sole authority to:
- determine the employees and officers and consultants to whom grants will
be made under the plans;
- determine the type, size and terms of the grants to be made to each
optionee;
- determine the time when the grants will be made, the vesting period and
the duration of any applicable exercise or restriction period, including
the criteria for vesting; and
- deal with any other matters arising under the plans.
TYPES OF GRANTS. Grants under the plans may consist of:
- options intended to qualify as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code;
- nonqualified stock options that are not intended to so qualify;
- stock appreciation rights; and
- stock bonus awards.
The 2000 Stock Incentive Plan also permits the grant of phantom stock
awards.
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<PAGE> 73
ELIGIBILITY FOR PARTICIPATION. Grants may be made to any of our employees,
officers, directors and consultants. As of February 15, 2000, there were options
to purchase 914,000 shares of our common stock granted under the 1995 Stock
Incentive Plan at a weighted average exercise price of $2.71 per share. No
options have been issued to date under the 2000 Stock Incentive Plan.
The option exercise price will be determined by the Board and may be equal
to or greater than the fair market value of a share of the Company's common
stock on the date of grant.
- the exercise price of an incentive stock option may be no less than the
fair market value of a share of our common stock on the date of grant;
and
- the exercise price of an incentive stock option granted to an employee
who owns more than 10% of our common stock will be no less than 110% of
the fair market value of a share of our common stock on the date of
grant.
The participant may pay the exercise price:
- by certified or bank cashier's check;
- by the surrender and delivery to us of shares of our common stock having
a fair market value equal to the purchase price of the stock issuable
upon exercise of the options are being exercised; or
- by delivery of a promissory note secured by a pledge of stock.
The board will determine the term of each option, except that the term of
an incentive stock option granted to an employee who owns more than 10% of the
common stock may not exceed five years from the date of grant.
Under the 2000 Stock Incentive Plan, options to purchase no more than
300,000 shares of our common stock may be granted during any one fiscal year to
any one person.
STOCK APPRECIATION RIGHTS. The board may grant a right to receive a number
of shares or, in the discretion of the board, an amount in cash or a combination
of shares and cash, based on the increase in the fair market value of the shares
underlying the right during a stated period specified by the board. The board
may approve the grant of these stock appreciation rights related or unrelated to
stock options. Upon exercise of a stock appreciation right that is related to a
stock option grant, the holder of the related option will surrender the option
for the number of shares as to which the stock appreciation right is exercised
and will receive payment of an amount computed as provided in the stock
appreciation right award.
STOCK BONUS AWARDS. The board may also award cash and/or shares of common
stock to participants. These stock awards may be conditioned on the achievement
of performance goals and/or continued employment with us through a specified
period.
PHANTOM STOCK AWARDS. The board may grant awards denominated in stock-
equivalent units. These units are credited to a bookkeeping reserve account for
accounting purposes and do not give the grantee any rights of a stockholder. The
board may settle phantom stock awards in cash and/or shares of our common stock.
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<PAGE> 74
AMENDMENT AND TERMINATION OF THE PLANS. The board may amend or terminate
the plans at any time, except that it may not make any amendment without
stockholder approval that:
- increases the maximum number of shares as to which options may be granted
under the plans (except in the case of a merger, reorganization or
similar event);
- expands the class of employees or consultants entitled to receive
options, rights or awards under the plans;
- decreases the minimum purchase price at which options or rights may be
granted;
- extends the maximum term of options or rights granted under the plans;
- extends the term of the plans; or
- materially increases the benefits accruing to participants under the
plans who are subject to liability under Section 16(b) of the Exchange
Act.
The board may terminate the plans at any time; provided, however, that the
term of the plans may not be longer than ten years from its commencement date.
TAX CONSEQUENCES. The following description of the tax consequences of
awards under the plans is based on present federal tax laws and does not purport
to be a complete description of the tax consequences of the plans. There are
generally no federal tax consequences as to the optionee or to us upon the grant
of an option. On the exercise of an incentive stock option, the optionee will
not recognize any income, and we will not be entitled to a deduction for tax
purposes, although such exercise may give rise to liability for the optionee
under the alternative minimum tax provisions of the Internal Revenue Code.
However, if the optionee disposes of shares acquired upon the exercise of an
incentive stock option within two years of the date of grant or one year of the
date of exercise, the optionee will recognize ordinary income, and we will be
entitled to a deduction for tax purposes in the amount of the excess of the fair
market value of the shares of common stock on the date of exercise over the
option exercise price (or the gain on sale, if less); the remainder of any gain,
and any loss, to the optionee will be treated as capital gain or loss to the
optionee. On the exercise of a nonqualified stock option, the amount by which
the fair market value of common stock on the date of the exercise exceeds the
option exercise price will generally be taxable to the optionee as ordinary
income and will generally be deductible for tax purposes by us. The disposition
of shares acquired upon exercise of a non-qualified option, or an incentive
stock option, if after the one year and two year periods described above, will
generally result in capital gain or loss to the optionee but will have no tax
consequences to us.
SECTION 162(m). Under Section 162(m) of the Internal Revenue Code, we may
be precluded from claiming a federal income tax deduction for total remuneration
in excess of $1,000,000 paid to the chief executive officer or to any of the
other four most highly compensated officers in any one year. Total remuneration
would include amounts received upon the exercise of stock options. An exception
exists, however, for "performance-based compensation," including amounts
received upon the exercise of stock options pursuant to a plan approved by
stockholders that meets certain requirements. The plans has been approved by
stockholders and it is intended that grants of options thereunder meet the
requirements of "performance-based compensation."
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<PAGE> 75
FOUNDERS INCENTIVE PLAN
Our Founders Incentive Plan was adopted in May 1999 and is administered by
our compensation committee. The purpose of the plan is to reward our President
and Chief Executive Officer and Chairman of the Board if we meet certain
specific performance goals. In setting those goals, the compensation committee
will specify the applicable performance criteria and targets it will use for the
performance period. Each executive eligible under the plan may receive a cash
incentive of up to 80% of his annual salary upon the achievement of these goals
and objectives. The performance criteria and targets will measure the following
performance measures:
- the achievement of a specified number of total subscribers and a
specified number of paying customers;
- the achievement of revenue targets;
- the signing of contracts with carriers;
- the obtaining of specified levels of financing; and
- the achievement of infrastructure initiatives.
EMPLOYMENT AGREEMENTS
We entered into employment agreements dated as of January 1, 1999 and
amended as of September 1, 1999, with each of Stephen G. Maloney, our Chief
Executive Officer and Robert M. Unnold, our Chairman of the Board. Both
agreements will expire on December 31, 2002 but automatically renew for
additional one year periods unless we give notice of termination at least 90
days before the expiration of the term. Pursuant to their respective agreements,
Mr. Maloney is employed as our President and Chief Executive Officer at an
annual salary of not less than $150,000, and Mr. Unnold is employed as Chairman
of the Board at an annual salary of not less than $150,000. If they meet certain
performance goals, Messrs. Maloney and Unnold are entitled to receive incentive
compensation of up to 35% of their respective base salaries. We maintain
separate key-man insurance policies of $2,000,000 for each of Messrs. Maloney
and Unnold. We have the right to terminate each agreement at any time and for
any reason. If we do so without cause, or if either individual terminates his
agreement for "good reason," however, we must continue to pay salary and
benefits until the later of 18 months from the date of termination or the
balance of the term. We are also obligated to pay a similar severance benefit
upon the disability of each individual.
We entered into an employment agreement dated as of January 10, 2000 with
Michael P. Neuscheler, our Vice President and Chief Financial Officer. The
agreement will expire on January 9, 2003 but automatically renews for additional
one year periods unless we give notice of termination at least 90 days before
the expiration of the term. Pursuant to his agreement, Mr. Neuscheler is
employed as our Vice President and Chief Financial Officer at an annual salary
of $150,000. If he meets certain performance goals, Mr. Neuscheler is entitled
to receive incentive compensation of up to 50% of his base salary. We maintain a
key-man insurance policy of $500,000 for Mr. Neuscheler. We have the right to
terminate Mr. Neuscheler's employment agreement at any time and for any reason.
If we do so without cause, or if Mr. Neuscheler terminates his agreement for
"good reason", however, we must continue to pay salary and benefits until the
later of 18 months from the date of termination or the balance of the term. We
are also obligated to pay a similar severance benefit upon the disability of Mr.
Neuscheler.
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<PAGE> 76
We entered into an Employment and Royalty Agreement with Jeffrey N. Klein
on October 27, 1998 for a term beginning January 1, 1999 and ending on December
31, 2001. Pursuant to this agreement, Mr. Klein is employed as Vice President of
Research and Development at an annual salary of $125,000 with annual increases
of no less than 5%. Mr. Klein is also entitled to a monthly royalty payment of
2% of all of our gross revenues, including the revenues of any wholly-owned
subsidiary, until he or his estate has received an aggregate of $500,000, of
which he has received $35,000 as of December 31, 1999. Either we or Mr. Klein
may terminate the agreement at any time upon 60 days notice. If we do so without
cause or if the agreement is terminated as a result of Mr. Klein's death or
disability, we must continue to pay salary and benefits until the earlier to
occur of 18 months and the remainder of the term. The royalty payment maximum
must be paid regardless of Mr. Klein's termination, death or disability.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SALES OF OUR SECURITIES
Pursuant to a stock purchase agreement dated February 12, 1999, we sold a
total of 7,714.56 shares of our Series E mandatorily redeemable convertible
preferred stock to BG Media Investors L.P. for $3.11 per share of common stock,
or an aggregate purchase price of $12,000,000 in February 1999. In November
1999, we sold an additional 1,928.64 of Series E mandatorily redeemable
convertible shares to BG Media Investors L.P. for $3.11 per share of common
stock, or an aggregate purchase price of $3,000,000. The value of these shares,
based on the assumed initial public offering price of $15.00 per share, is
$72,324,000. Mr. Grimes, one of our directors, is a member of BG Media Investors
LLC, the General Partner of BG Media Investors L.P. Each share of the Series E
mandatorily redeemable convertible preferred stock will convert into 500 shares
of our common stock immediately upon the completion of this offering.
In June 1998, we issued warrants to purchase 350,000 shares of our common
stock at an exercise price of $3.50 per share to Keystone Venture IV, L.P. in
consideration for services rendered in connection with our 1998 financings. In
addition, pursuant to a stock purchase agreement dated December 22, 1999, we
sold 757.5 shares of Series F mandatorily redeemable convertible preferred stock
to Keystone Venture V, L.P. for $7.92 per share of common stock, or an aggregate
purchase price of $3,000,000. The value of these shares, based on the assumed
initial public offering price of $15.00 per share, is $5,681,250. Mr. Dale, one
of our directors, is Vice President of Keystone IV MCGP, Inc., the General
Partner of Keystone Venture IV Management Company, L.P., which is the General
Partner of Keystone Venture IV, L.P. and Managing Director of Keystone V
Management Company, Inc., the General Partner of Keystone V Partners, L.P.,
which is the General Partner of Keystone Venture V, L.P. Each share of the
Series F mandatorily redeemable preferred stock will convert into 500 shares of
our common stock immediately upon the completion of this offering.
Pursuant to a stock purchase agreement dated as of August 11, 1998, we
issued a total of 843 shares of our Series D mandatorily redeemable convertible
preferred stock to Apex Investment Fund III, L.P. and Apex Strategic Partners,
LLC for $2.37 per share of common stock, or an aggregate purchase price of
$1,001,000 in cash and notes payable. The value of these shares, based on the
assumed initial public offering price of $15.00 per share, is $6,322,500. In
consideration for the notes payable, we issued warrants to purchase an aggregate
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<PAGE> 77
of 195,984 shares of our common stock at an exercise price of $3.00 per share to
the purchasers. In addition, in connection with our Loan Incentive Warrant Plan
which was established in September 1998, we issued warrants to purchase an
aggregate of 20,235 shares of our common stock to the purchasers at an exercise
price of $3.50 per share on March 8, 1999 in consideration of their loans of
$200,000 to us on November 18, 1998. This Loan Incentive Warrant Plan was
established to issue warrants to purchase shares of our common stock to our
lenders in consideration of loans made by them to us. Mr. Johnson, one of our
directors, is President of Stellar Investment Co., the Managing Member of Apex
Management III, LLC, which is the General Partner of Apex Investment Fund III,
L.P. He is also the Managing Member of Apex Strategic Partners, LLC. Each share
of the Series D mandatorily redeemable convertible preferred stock will convert
into 500 shares of our common stock immediately upon the completion of this
offering.
In connection with the preferred stock financings and issuance of common
stock to our founders, we granted registration rights to our preferred
stockholders and Messrs. Unnold, Maloney, Christino and Daniels, among others.
Upon exercise of these registration rights, these stockholders can require us to
file registration statements covering the sale of shares of common stock held by
them and may include the sale of their shares in registration statements
covering our sale of shares to the public.
LOANS FROM US
On May 12, 1999, we loaned Mr. Maloney, our President and Chief Executive
Officer, $100,000 evidenced by a promissory note bearing interest at a rate of
10% per annum. The entire balance of the note plus interest was repaid by Mr.
Maloney on May 26, 1999.
On September 29, 1999, we loaned Mr. Unnold, our Chairman of the Board,
$100,000 evidenced by a promissory note bearing interest at a rate of 10% per
annum. The entire principal balance of the note plus interest was repaid by Mr.
Unnold on October 4, 1999.
LOANS TO US
Mr. Coletti, our Controller, loaned us $40,000 on July 30, 1997 and $25,000
on October 10, 1997 pursuant to promissory notes bearing interest at a rate of
18% per annum. In August 1998, as a condition for us to receive financing in
connection with the Series D mandatorily redeemable preferred stock offering,
the interest rates were adjusted from 18% to 10%. These interest adjustments
were applied retroactively to January 1, 1998. The entire principal balance of
the notes plus interest was repaid to Mr. Coletti on February 16, 1999. In
connection with our Loan Incentive Warrant Plan, we issued to Mr. Coletti and
his designee warrants to purchase 31,805 shares of our common stock at an
exercise price of $3.50 per share on March 8, 1999.
Mr. Unnold, our Chairman of the Board, loaned us $22,000 on July 30, 1997,
$10,000 on April 3, 1998 and $17,000 on April 20, 1998 pursuant to promissory
notes which accrue interest at a rate of 18% per annum. In August 1998, as a
condition for us to receive financing in connection with the Series D
mandatorily redeemable preferred stock offering, the interest rates were
adjusted from 18% to 10%. These interest adjustments were applied retroactively
to January 1, 1998. The entire principal balance of the notes plus interest was
repaid to Mr. Unnold on February 16, 1999. In connection with our Loan Incentive
Warrant Plan, we issued
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<PAGE> 78
to Mr. Unnold's designees warrants to purchase 18,708 shares of common stock
at an exercise price of $3.50 per share on March 8, 1999.
Mr. Christino, one of our directors, loaned us $30,000 on July 30, 1997,
pursuant to a promissory note bearing interest at a rate of 18% per annum. In
August 1998, as a condition for us to receive financing in connection with the
Series D mandatorily redeemable preferred stock offering, the interest rates
were adjusted from 18% to 10%. These interest adjustments were applied
retroactively to January 1, 1998. The entire principal balance of the note plus
interest was repaid to Mr. Christino on February 16, 1999. In connection with
our Loan Incentive Warrant Plan, we issued to Mr. Christino warrants to purchase
15,429 shares of common stock at an exercise price of $3.50 per share on March
8, 1999.
In June 1998, we issued two notes payable totaling $400,000 to Apex
Investment Fund III, L.P. and Apex Strategic Partners, LLC. The notes bore
interest at a rate of 7% per annum and were due and payable on demand. In
connection with this issuance, two warrants were issued for the purchase of
195,984 shares of our common stock for $3.00 per share. These notes payable were
converted in August 1998 into Series D mandatorily redeemable convertible
preferred stock in connection with the issuance of the Series D mandatorily
redeemable preferred stock.
On November 18, 1998, we executed two promissory notes with Apex Investment
Fund III, L.P. and Apex Strategic Partners, LLC providing financing totaling
$200,000. The promissory notes bore interest at a rate of 10% per annum and were
due and payable on December 31, 1998. We repaid the note in February 1999. In
consideration for these notes, we issued two warrants to purchase 20,235 shares
of common stock at an exercise price of $3.50 per share to the holders on March
8, 1999.
OTHER TRANSACTIONS
Pursuant to a stock purchase agreement dated February 27, 1992, as amended,
we purchased all of the outstanding capital stock of Quotes Plus . . . , Inc., a
Colorado corporation, from Michael J. Pryslak and Dennis M. Roland. The payment
terms, as amended, provide that Messrs. Pryslak and Roland will collectively
receive a payment equal to 2.5% of our gross revenues on a monthly basis, but in
no event less than $3,000 per month. If, prior to January 1, 2003, the aggregate
of all monthly payments made to Messrs. Pryslak and Roland equals $6,000,000,
then we will have no further payment obligations to Messrs. Pryslak and Roland.
Otherwise, we must continue to make the monthly payment to Messrs. Pryslak and
Roland. If we pay $7,000,000 to Messrs. Pryslak and Roland before January 1,
2004, then our payment obligations to Messrs. Pryslak and Roland will cease. If,
however, we fail to pay to Messrs. Pryslak and Roland $7,000,000 prior to
January 1, 2004, then we must continue to make the monthly payment until we pay
a total of $8,000,000 to Messrs. Pryslak and Roland. In November 1998, we loaned
Messrs. Pryslak and Roland $53,000 in the aggregate on an unsecured basis to
purchase 42 shares of our Series C convertible preferred stock. The payments
generated under the agreement will initially be used to reduce the principal on
this outstanding loan. As of September 30, 1999, the loan had been reduced by
$16,000.
We believe that the transactions discussed above were made on terms no less
favorable to us than would have been obtained from unaffiliated third parties.
We have adopted a policy that requires all future transactions between us and
our officers, directors and affiliates to be on terms no less favorable than
could be obtained from unrelated third parties. These transactions were approved
by a majority of the disinterested members of our board of directors.
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<PAGE> 79
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
our common stock, as of February 15, 2000, by:
- each person known to us to own beneficially more than 5% of our
outstanding common stock;
- each of our directors;
- each of our executive officers named in the summary compensation table;
and
- all of our directors and executive officers as a group.
Share ownership is based on 17,087,265 shares of common stock outstanding
immediately prior to this offering and assumes conversion of all outstanding
shares of preferred stock into shares of common stock. Share ownership in each
case includes shares issuable upon exercise of outstanding options and warrants
that are exercisable within 60 days of February 15, 2000, as described in the
footnotes below. Unless otherwise indicated, the address for each stockholder is
c/o i3 Mobile, Inc., 181 Harbor Drive, Stamford, Connecticut 06902.
<TABLE>
<CAPTION>
PERCENT OF SHARES
BENEFICIALLY OWNED
NUMBER --------------------------------
NAME AND ADDRESS OF SHARES BEFORE OFFERING AFTER OFFERING
- ---------------- ---------- --------------- --------------
<S> <C> <C> <C>
Robert M. Unnold...................... 2,176,208(1) 12.7% 10.1%
Stephen M. Maloney.................... 1,484,166(2) 8.7 6.9
Donald F. Christino................... 1,080,429(3) 6.3 5.0
W. Peter Daniels...................... 220,000 1.3 1.0
Jeffrey N. Klein...................... 57,340(4) * *
Kevin W. Ryan......................... 13,100(4) * *
Kerry J. Dale......................... 2,089,073(5) 11.8 9.5
c/o Keystone Venture IV, L.P.
1601 Market Street
Suite 2500
Philadelphia, PA 19103
James A. Johnson...................... 637,719(6) 3.7 2.9
c/o Apex Management III, LLC
233 Wacker Drive, Suite 900
Chicago, IL 60606
J. William Grimes..................... 4,821,600(7) 28.2 22.4
c/o BG Media Investors L.P.
399 Park Avenue, 19th Floor
New York, NY 10022
Keystone Venture IV, L.P. ............ 1,710,323(8) 9.7 7.8
1601 Market Street
Suite 2500
Philadelphia, PA 19103
BG Media Investors L.P. .............. 4,821,600 28.2 22.4
399 Park Avenue, 19th Floor
New York, NY 10022
MCI WorldCom, Inc..................... 1,131,250(9) 6.4 5.3
500 Clinton Center Drive Clinton, MS
39056
All directors and officers as a group
(13 persons)........................ 12,611,875 69.9 56.2
</TABLE>
- -------------------------
* less than 1% (one percent).
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<PAGE> 80
(1) Includes 2,000,000 shares of common stock issued to RMU Management LLC, an
entity controlled by Mr. Unnold, 18,708 shares of common stock issuable upon
the exercise of warrants at an exercise price of $3.50 per share held by Mr.
Unnold as custodian for the benefit of his two minor children and options to
purchase 12,500 shares of common stock.
(2) Includes options to purchase 12,500 shares of common stock.
(3) Includes 15,429 shares of common stock issuable upon the exercise of
warrants at an exercise price of $3.50 per share.
(4) Consists of shares of common stock issuable upon the exercise of stock
options.
(5) Consists of 1,063,000 shares of common stock and 584,465 shares of common
stock issuable upon the exercise of warrants at a weighted average exercise
price of $3.30 per share held by Keystone Venture IV, L.P. and 378,750
shares of common stock held by Keystone Venture V, L.P. Mr. Dale is a
director of i3 Mobile and Vice President of Keystone IV MCGP, Inc., the
General Partner of Keystone Venture IV Management Company, L.P., which is
the General Partner of Keystone Venture IV, L.P. Mr. Dale is also Managing
Director of Keystone V Management Company, Inc., the General Partner of
Keystone V Partners, L.P., which is the General Partner of Keystone Venture
V, L.P. Mr. Dale disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest therein.
(6) Consists of 421,500 shares of common stock and 216,219 shares of common
stock issuable upon the exercise of warrants at a weighted average exercise
price of $3.05 per share held by Apex Investment Fund III, L.P. and Apex
Strategic Partners, LLC. Mr. Johnson is a director of i3 Mobile and
President of Stellar Investment Co., the Managing Member of Apex Management
III, LLC, which is the General Partner of Apex Investment Fund III, L.P. and
the Managing Member of Apex Strategic Partners, LLC. Mr. Johnson disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest therein.
(7) Consists of 4,821,600 shares of common stock held by BG Media Investors L.P.
Mr. Grimes is a director of i3 Mobile and Managing Member of BG Media
Investors LLC, the General Partner of BG Media Investors L.P. Mr. Grimes
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(8) Includes 234,465 shares of common stock issuable upon the exercise of
warrants at an exercise price of $3.00 per share and 350,000 shares of
common stock issuable upon the exercise of warrants at an exercise price of
$3.50 per share.
(9) Consists of 631,250 shares of common stock and 500,000 shares of common
stock issuable upon the exercise of warrants at an exercise price of $3.00
per share.
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<PAGE> 81
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 50,000,000 shares of common stock,
of which 17,087,265 shares were issued and outstanding immediately prior to this
offering, and 50,000 shares of preferred stock, of which no shares will be
issued and outstanding upon completion of this offering.
COMMON STOCK
Each share of common stock may be uncertificated or represented by a
certificate signed by an authorized officer of i3 Mobile. Holders of our common
stock are entitled to one vote for each share held of record on all matters on
which stockholders may vote, including the election of directors, and do not
have cumulative voting rights. Holders of our common stock are entitled to
receive, if declared, such dividends and other distributions in cash, stock or
property from our assets or funds legally available for such purposes subject to
any dividend preferences that may be attributable to preferred stock that may be
authorized. Registered stockholders may transfer their shares by surrendering to
us or to our transfer agent their share certificates duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer. If the shares are uncertificated, we must receive proper transfer
instruments from the registered owner of uncertificated shares before we cancel
those shares and issue new shares to the transferee. Annual meetings of
stockholders are held on the first Tuesday in July or at such other date and
time as designated by the board of directors. At the annual meeting, the
stockholders elect the directors by a plurality vote. There are no preemptive,
conversion, redemption or sinking fund provisions applicable to our common
stock. All outstanding shares of common stock are fully paid and non-assessable.
In the event of our liquidation, dissolution or winding up, holders of common
stock are entitled to share ratably in the assets available for distribution.
PREFERRED STOCK
Our board of directors, without further action by the stockholders, is
authorized to issue an aggregate of 50,000 shares of preferred stock. Following
completion of this offering, no shares of preferred stock will be outstanding.
Our board of directors may, without stockholder approval, issue preferred stock
with dividend rates, redemption prices, preferences on liquidation or
dissolution, conversion rights, voting rights and any other preferences, which
rights and preferences could adversely affect the voting power of the holders of
common stock. Issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions or other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or could
discourage or delay a third party from acquiring, a majority of our outstanding
common stock. We currently have no plans for new issuances of preferred stock.
The ability of the board of directors to establish the rights of, and to
issue, substantial amounts of preferred stock without the need for shareholder
approval, may have the effect of discouraging, delaying or preventing a change
in control. Such preferred stock, among other things, may be used to create
voting impediments with respect to any changes in control or to dilute the stock
ownership of holders of common stock seeking to obtain control.
80
<PAGE> 82
REGISTRATION RIGHTS OF STOCKHOLDERS
Following the offering, holders of an aggregate of 15,121,431 shares of our
outstanding common stock will be entitled to rights with respect to registration
of these shares of common stock under the Securities Act.
We have an agreement with these stockholders that gives them registration
rights. Subject to limitations provided in the agreement, including those in
lock-up agreements that these stockholders have signed relating to this
offering, these stockholders have the right, six months after this offering,
upon request of the holders and under certain circumstances and conditions, to
require us to register their shares of common stock under the Securities Act. We
have granted one demand registration right to each of the following:
- Robert M. Unnold, Stephen G. Maloney, Donald F. Christino and W. Peter
Daniels, as a group;
- BG Media Investors L.P.;
- Apex Investment Fund II L.P. and Apex Strategic Partners, LLC, as a
group; and
- Keystone Venture IV, L.P.
We have also granted up to two demand registration rights to the purchasers of
Series F mandatorily redeemable preferred stock as a group for their shares of
common stock issuable upon conversion of their Series F mandatorily redeemable
preferred stock. In addition to these demand registration rights, and subject to
conditions and limitations provided in the applicable agreement, these
stockholders may require us to file an unlimited number of registration
statements on Form S-2 or Form S-3 under the Securities Act when either form is
available for our use, generally one year after this offering.
If we propose to register our securities under the Securities Act after
this offering, these stockholders and the holder of warrants to purchase up to
123,725 shares of our common stock will be entitled to notice of the
registration and to include their shares in the registration provided that the
underwriters of the proposed offering will have the right to limit the number of
shares included in the registration. We must pay for all expenses in connection
with these registrations, other than any underwriters' discounts and
commissions.
OPTIONS
As of the date of this prospectus, options to purchase up to 1,014,000
shares of common stock may be granted under the 1995 Stock Incentive Plan and up
to 1,250,000 shares of common stock may be granted under the 2000 Stock
Incentive Plan. There are 914,000 options outstanding under the 1995 Stock
Incentive Plan at a weighted average exercise price of $2.71 per share, of which
344,707 will be exercisable upon the completion of this offering. Other than
these options, we have not granted any other options. Upon completion of this
offering, we intend to file a registration statement on Form S-8 to register all
shares of common stock that we may issue under our stock option plans.
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<PAGE> 83
WARRANTS
As of the date of this prospectus, the following warrants were outstanding
for the purchase of 1,929,084 shares of common stock at a weighted average
exercise price of $3.50:
<TABLE>
<CAPTION>
NAME NO. OF SHARES
- ---- -------------
<S> <C>
Keystone Venture IV, L.P. .................................. 584,465
G-II Family Partnership..................................... 37,455
Glenville Capital Partners, L.P. ........................... 401,278
Apex Investment Fund III, L.P. ............................. 205,703
Apex Strategic Partners L.L.C. ............................. 10,516
Intelligent Investment Partners, L.P. ...................... 500,000
Robert and Elizabeth Coletti................................ 29,805
Donald Christino............................................ 15,429
Mary Elizabeth Coletti...................................... 2,000
Robert Unnold f/b/o Christine Unnold........................ 9,354
Robert Unnold f/b/o Nicholas Unnold......................... 9,354
Allen & Company Incorporated................................ 123,725
</TABLE>
Warrants to purchase up to an additional 110,000 shares of our common stock may
also be granted to each of NBC Interactive Media, Inc. or its affiliates and
Sony Corporation of America or its affiliates in connection with any definitive
distribution agreements which may be entered into in the future between NBC
Interactive Media, Inc. or its affiliates and us and Sony Corporation of America
or its affiliates and us. These investors will receive warrants to purchase
20,000 shares of our common stock for each content distribution agreement we
enter into with them or any of their affiliates. If we enter into a content
distribution agreement by March 31, 2000, the number of warrants will increase
to 30,000. These warrants will expire three years after they are issued.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
Section 203 of the Delaware General Corporation Law generally prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
interested stockholder attained such status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's outstanding voting stock. This statute could prohibit or delay
a change in control of i3 Mobile and could discourage potential acquisition
proposals.
INDEMNIFICATION
Our certificate of incorporation provides that no director of i3 Mobile
shall have any personal liability to i3 Mobile or its stockholders for breach of
fiduciary duty as a director, except for liability:
- for breach of the director's duty of loyalty to i3 Mobile or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
82
<PAGE> 84
- for payment of dividends or stock purchases or redemptions by the
corporation in violation of Section 174 of the Delaware General
Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
As a result of this provision, i3 Mobile and our stockholders may be unable
to obtain monetary damages from a director for certain breaches of his or her
fiduciary duty. This provision does not, however, eliminate the directors'
fiduciary responsibilities and, in appropriate circumstances, equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
Our bylaws provides for the indemnification of our directors and officers
to the fullest extent authorized by the Delaware General Corporation Law. Such
indemnification may include, if we so decide, the right of the indemnified party
to be paid expenses in advance of any proceeding for which indemnification may
be had, provided that the payment of these expenses incurred by a director or
officer in advance of the final disposition of a proceeding may be made only
upon delivery to us of an undertaking by or on behalf of the director or officer
to repay all amounts paid in advance if it is ultimately determined that the
director or officer is not entitled to be indemnified. In addition, our
certificate of incorporation provides that our employees and other agents, may
be indemnified in accordance with the Delaware General Corporation law to the
extent determined by our board of directors in its sole discretion.
LIMITATIONS ON STOCKHOLDER ACTION BY WRITTEN CONSENT
Our certificate of incorporation also provides that any action required or
permitted to be taken at a stockholders' meeting may be taken without a meeting,
without prior notice and without a vote, if the action is taken by persons who
would be entitled to vote at a meeting and who hold shares having voting power
equal to not less than the minimum number of votes of each class or series that
would be necessary to authorize or take the action at a meeting at which all
shares of each class or series entitled to vote were present and voted.
AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION
Under the Delaware General Corporation Law, the affirmative vote of a
majority of the shares entitled to vote on any matter is required to amend our
certificate of incorporation.
TRANSFER AGENT
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.
LISTING
We have applied to list our shares of common stock on the Nasdaq National
Market under the symbol "IIIM."
83
<PAGE> 85
SHARES ELIGIBLE FOR FUTURE SALE
Following this offering, we will have 21,487,265 shares of common stock
outstanding. If the underwriters exercise their over-allotment option in full,
we will have 22,147,265 shares of common stock outstanding. All the shares we
sell in this offering will be freely tradable without restriction or further
registration under the Securities Act, except that any shares purchased by our
affiliates, as that term is defined in Rule 144, may generally only be sold in
compliance with the limitations of Rule 144 described below.
The remaining 17,087,265 shares of common stock outstanding following this
offering will be "restricted securities" as the term is defined under Rule 144.
We issued and sold these restricted securities in private transactions in
reliance on exemptions from registration under the Securities Act. Restricted
securities may be sold in the public market only if they are registered or if
they qualify for an exemption under Rule 144 or Rule 701 under the Securities
Act, as summarized below.
Taking into account the lock-up agreements, and assuming Deutsche Bank
Securities Inc. does not release stockholders from these agreements, the
following shares will be eligible for sale in the public market at the following
times:
- on the date of this prospectus, the 4,400,000 shares sold in the offering
and an additional 246,548 shares held by current shareholders will be
immediately available for sale in the public market;
- 180 days after the date of this prospectus, approximately 11,752,232
shares will be eligible for sale, 10,069,756 of which will be subject to
volume, manner of sale and other limitations under Rule 144; and
- the remaining 5,088,485 shares will be eligible for sale under Rule 144
from time to time upon the expiration of various one-year holding periods
after the expiration of the lock-up period applicable to those shares.
We have agreed with the underwriters that we will not issue any additional
shares of common stock or securities convertible into, exercisable for or
exchangeable for shares of common stock for a period of 180 days after the date
of this prospectus, except that we may grant options to purchase shares of
common stock under our 1995 Stock Incentive Plan and 2000 Stock Incentive Plan
or in connection with the acquisition of companies, and issue shares of common
stock upon the exercise of outstanding options and warrants and in connection
with the acquisition of companies.
Our officers and directors and some of our other stockholders, who will
hold an aggregate of 16,840,717 shares of common stock upon completion of this
offering, have agreed that they will not, without the prior written consent of
Deutsche Bank Securities Inc., offer, sell, pledge or otherwise dispose of any
shares of our common stock or any securities convertible into or exercisable or
exchangeable for, or any rights to acquire or purchase, any of our common stock,
or publicly announce an intention to effect any of these transactions, for a
period of 180 days after the date of this prospectus without the prior written
consent of Deutsche Bank Securities Inc., except that nothing will prevent any
of them from exercising outstanding options and warrants.
84
<PAGE> 86
Following the expiration of the lock-up period, shares issuable upon
exercise of options we granted prior to the date of this prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of these shares beginning 90 days after
the date of this prospectus by persons other than affiliates.
In general, under Rule 144, a stockholder who owns restricted shares that
have been outstanding for at least one year is entitled to sell, within any
three-month period, a number of these restricted shares that does not exceed the
greater of:
- one percent of the then outstanding shares of common stock, or
approximately 214,873 shares immediately after this offering; or
- the average weekly trading volume in the common stock on the Nasdaq Stock
Market during the four calendar weeks preceding the sale.
In other words, our affiliates must comply with the restrictions and
requirements of Rule 144, other than the one-year holding period requirement, to
sell shares of common stock which are not restricted securities.
Under Rule 144(k), a stockholder who is not currently, and who has not been
for at least three months before the sale, an affiliate of ours and who owns
restricted shares that have been outstanding for at least two years may resell
these restricted shares without compliance with the above requirements. The one-
and two-year holding periods described above do not begin to run until the full
purchase price is paid by the person acquiring the restricted shares from us or
an affiliate of ours.
As of the date of this prospectus, we have granted options to purchase
914,000 shares of common stock to specified persons pursuant to our 1995 Stock
Incentive Plan. We intend to file, after the effective date of this offering, a
registration statement on Form S-8 to register 2,264,000 shares of common stock
reserved for issuance under our stock option plans. The registration statement
on Form S-8 will become effective automatically upon filing.
Shares issued under our 1995 Stock Incentive Plan and 2000 Stock Incentive
Plan, after the filing of a registration statement on Form S-8 may be sold in
the open market, subject, in the case of some holders, to the Rule 144
limitations applicable to affiliates, the lock-up agreements and vesting
restrictions imposed by us. In addition, following this offering, the holders of
15,121,431 shares of outstanding common stock will, under some circumstances,
have rights to require us to register their shares for future sale.
85
<PAGE> 87
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., Chase Securities Inc. and Credit Suisse First Boston Corporation, have
severally agreed to purchase from us the following respective number of shares
of common stock at the initial public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Deutsche Bank Securities Inc. ..............................
Chase Securities Inc. ......................................
Credit Suisse First Boston Corporation......................
--------
Total.................................................. 4,400,000
========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all of
the shares of common stock offered hereby, other than those covered by the over-
allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the initial public offering price set forth on the cover page of this
prospectus and to certain dealers at that price less a concession not in excess
of $ per share. The underwriters may allow, and these dealers may re-allow,
a concession of not more than $ per share to other dealers. After the
initial public offering, the offering price and other selling terms may be
changed by the representatives of the underwriters.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to 660,000 additional
shares of common stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the common stock offered in
this offering. To the extent that the underwriters exercise this option, each of
the underwriters will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above table bears
to the total number of shares of common stock offered in this offering. We will
be obligated, pursuant to this option, to sell these additional shares of common
stock to the underwriters to the extent the option is exercised. If any
additional shares of common stock are purchased, the underwriters will offer the
additional shares on the same terms as those on which the 4,400,000 shares are
being offered.
86
<PAGE> 88
The underwriting fee is equal to the initial public offering price per
share of common stock less the amount paid by the underwriters to us per share
of common stock. The underwriting fee is currently expected to be 7% of the
initial public offering price. We have agreed to pay the underwriters the
following fees, assuming either no exercise or full exercise by the underwriters
of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
TOTAL FEES
--------------------------------
WITHOUT WITH FULL
EXERCISE OF EXERCISE OF
FEE PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTION OPTION
------- -------------- --------------
<S> <C> <C> <C>
Fees paid by i3 Mobile.......
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $2.2 million.
We have agreed to indemnify the underwriters against certain specified
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers and directors, certain stockholders and certain
holders of options and warrants to purchase our stock, has agreed not to offer,
sell, sell short, contract to sell, transfer, hypothecate, pledge or otherwise
dispose of, or enter into any transaction that is designed to, or could be
expected to, result in the disposition of any shares of our common stock or
other securities convertible into or exchangeable or exercisable for shares of
our common stock or derivatives of our common stock for a period of 180 days
after the effective date of the registration statement of which this prospectus
is a part, directly or indirectly, without the prior written consent of Deutsche
Bank Securities Inc. This consent may be given at any time without public
notice. We have entered into a similar agreement with the representatives of the
underwriters.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
87
<PAGE> 89
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 220,000 shares for our directors, officers,
employees, and their family members and other individual associates, vendors,
customers and other business associates. The number of shares of our common
stock available for sale to the general public will be reduced to the extent
these reserved shares are purchased. Any reserved shares that are not purchased
by these persons will be offered by the underwriters to the general public on
the same basis as the other shares in this offering. Other than our directors,
officers and key employees, participants in the sale of reserved shares will not
be subject to any lock-up arrangements with the underwriters.
In December 1999, we issued and sold 252.5 shares of our Series F
mandatorily redeemable preferred stock to BT Investment Partners, Inc., an
affiliate of Deutsche Bank Securities Inc., at $3,960.40 per share, or $7.92 per
common share, for an aggregate purchase price of $1,000,000. Upon completion of
this offering, the Series F mandatorily redeemable preferred stock held by BT
Investment Partners, Inc. will convert into 126,250 shares of our common stock
on the same terms as other investors in this Series F financing. In connection
with this preferred stock financing, we granted registration rights to the
holders of the Series F mandatorily redeemable preferred stock, including BT
Investment Partners, Inc. The difference between the amount that BT Investment
Partners, Inc. originally paid for the Series F mandatorily convertible
preferred stock and the value of the Series F mandatorily convertible preferred
stock based upon the assumed initial public offering price of $15.00 equals
$893,750. The National Association of Securities Dealers, Inc. may deem this
amount to be additional underwriting compensation received in connection with
this offering. If this is deemed to be underwriting compensation, these shares
of Series F mandatorily convertible preferred stock and the common stock issued
upon the conversion thereof could not be sold, transferred, assigned, pledged or
hypothecated by any person for a period of one year after the effective date of
this offering, except to officers or partners of the underwriters and members of
the selling group and their officers or partners.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiation among us and the representatives of the
underwriters. Among the primary factors to be considered in determining the
public offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stage of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
- estimates of our business potential.
88
<PAGE> 90
The estimated initial public offering price range set forth on the cover of this
preliminary prospectus is subject to change as a result of market conditions and
other factors.
EXPERTS
The consolidated financial statements as of December 31, 1999 and 1998 and
for each of the three years in the period ended December 31, 1999 included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Piper Marbury Rudnick & Wolfe LLP, New York, New York. Certain legal matters
in connection with the offering will be passed upon for the underwriters by
Morrison & Foerster LLP, New York, New York.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and any amendments with
respect to the common stock we are offering hereby. This prospectus is a part of
the registration statement and includes all of the information which we believe
is material to you in considering whether to make an investment in our common
stock. We refer you to the registration statement for additional information
about us, our common stock and this offering, including the full texts of the
exhibits, some of which have been summarized in this prospectus. The
registration statement is available for inspection and copying at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information about the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet
site that makes available the registration statement. The address of the SEC's
Internet site is http://www.sec.gov.
REPORTS TO STOCKHOLDERS
We intend to distribute to our stockholders annual reports containing
audited financial statements and will make available copies of quarterly reports
for the first three quarters of each fiscal year containing unaudited interim
financial information.
89
<PAGE> 91
I3 MOBILE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statement of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... F-4
Consolidated Statement of Stockholders' Deficit for the
years ended December 31, 1997, 1998 and 1999.............. F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 92
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
i3 Mobile, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' deficit and of cash
flows present fairly, in all material respects, the financial position of i3
Mobile, Inc. at December 31, 1998 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 14, 2000
F-2
<PAGE> 93
I3 MOBILE, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- PRO FORMA
1998 1999 (NOTE 2)
---- ---- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 166 $ 28,241 $ 28,241
Accounts receivable, net of allowances (Note 2)........... 441 397 397
Deferred advertising (Note 13)............................ - 4,261 4,261
Prepaid expenses and other current assets................. 11 168 168
------- -------- --------
Total current assets............................... 618 33,067 33,067
Fixed assets, net (Note 4)................................ 50 1,942 1,942
Intangible assets, net (Note 2)........................... - 158 158
Other non-current assets.................................. - 634 634
Deposits.................................................. 14 440 440
------- -------- --------
Total assets....................................... $ 682 $ 36,241 $ 36,241
======= ======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 169 $ 724 $ 724
Accrued liabilities (Note 5).............................. 244 2,775 2,775
Deferred revenue (Note 2)................................. 131 100 100
Deferred revenue -- related parties (Note 9).............. 49 - -
Current portion of long-term debt (Note 6)................ 118 - -
Notes payable -- trade (Note 6)........................... 250 - -
Notes payable -- related parties (Note 9)................. 344 - -
------- -------- --------
Total current liabilities.......................... 1,305 3,599 3,599
Long-term debt (Note 6)..................................... 455 - -
------- -------- --------
Commitments and contingencies (Note 8)
Total liabilities.................................. 1,760 3,599 3,599
------- -------- --------
Mandatorily redeemable convertible preferred stock (Note
10)....................................................... 2,500 55,338 -
------- -------- --------
Stockholders' deficit:
Convertible preferred stock (Note 10)..................... - - -
Common stock; $.01 par value, 50,000,000 shares
authorized, 7,554,000, 7,655,500 and 18,972,265 shares
issued.................................................. 76 77 190
Additional paid-in capital................................ 4,530 27,253 82,478
Notes receivable from stockholders (Note 9)............... (53) (31) (31)
Deferred compensation..................................... - (764) (764)
Accumulated deficit....................................... (8,131) (45,001) (45,001)
Treasury stock at cost, 1,885,000 shares.................. - (4,230) (4,230)
------- -------- --------
Stockholders' deficit..................................... (3,578) (22,696) 32,642
------- -------- --------
Total liabilities, mandatorily redeemable
convertible preferred stock and stockholders'
deficit.......................................... $ 682 $ 36,241 $ 36,241
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 94
I3 MOBILE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net revenue -- trade....................................... $ 676 $ 1,245 $ 1,711
Net revenue -- related parties............................. 149 160 23
------- ------- --------
Net revenue................................................ 825 1,405 1,734
Cost of revenue (excluding $14 of stock compensation)...... 700 1,081 1,302
------- ------- --------
Gross profit............................................... 125 324 432
------- ------- --------
Operating expenses:
Sales and marketing (excluding $94 of stock
compensation)......................................... 234 584 1,938
General and administrative (excluding $145 of stock
compensation)......................................... 2,258 2,306 4,771
Stock compensation....................................... - - 253
------- ------- --------
Operating expenses......................................... 2,492 2,890 6,962
------- ------- --------
Operating loss............................................. (2,367) (2,566) (6,530)
Interest income............................................ (15) (6) (213)
Interest expense........................................... 88 323 491
Interest expense -- related parties........................ 8 12 48
------- ------- --------
Loss before extraordinary item............................. (2,448) (2,895) (6,856)
Extraordinary item -- loss on extinguishment of debt....... - - (3,434)
------- ------- --------
Net loss................................................... (2,448) (2,895) (10,290)
------- ------- --------
Redemption of preferred stock.............................. - - (3,665)
Beneficial conversion feature of preferred stock........... - - (20,504)
------- ------- --------
Dividends on mandatorily redeemable preferred stock........ (76) (274) (2,411)
------- ------- --------
Loss applicable to common stock............................ $(2,524) $(3,169) $(36,870)
======= ======= ========
Net loss per share -- basic and diluted:
Loss before extraordinary item........................... $ (0.33) $ (0.42) $ (5.83)
Extraordinary item....................................... - - (0.60)
------- ------- --------
Net loss................................................. $ (0.33) $ (0.42) $ (6.43)
======= ======= ========
Shares used in computing net loss per share.............. 7,554 7,554 5,736
======= ======= ========
Pro forma net loss per share -- basic and diluted
(unaudited):
Pro forma loss before extraordinary item................. $ (0.57)
Extraordinary item....................................... (0.29)
--------
Net pro forma loss....................................... $ (0.86)
========
Shares used in computing pro forma net loss per share.... 11,948
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 95
I3 MOBILE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SERIES A SERIES C NOTES
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
--------------- ---------------- ------------------ PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS
------ ------ ------ ------ --------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1997...... 3,770 - - - 7,554,000 76 1,447 -
Issuance of Series C preferred
stock........................... - - 864 - - - 879 -
Issuance of warrants to preferred
stockholders.................... - - - - - - 52 -
Issuance of warrants to debt
holders......................... - - - - - - 20 -
Accretion of preferred
dividends....................... - - - - - - - -
Net loss......................... - - - - - - - -
------ -- ----- ------- --------- --- -------- ----
Balance at December 31, 1997..... 3,770 - 864 - 7,554,000 76 2,398 -
Issuance of Series C preferred
stock........................... - - 1,330 - - - 1,579 -
Issuance of warrants to debt
holders......................... - - - - - - 158 -
Extension of warrants............ - - - - - - 213 -
Accretion of preferred
dividends....................... - - - - - - - -
Issuance of warrants for
financing fees.................. - - - - - - 182 -
Notes receivable from
shareholders.................... - - - - - - - (53)
Net loss......................... - - - - - - - -
------ -- ----- ------- --------- --- -------- ----
Balance at December 31, 1998..... 3,770 - 2,194 - 7,554,000 76 4,530 (53)
Repurchase of shares............. (3,770) - - - - - (105) -
Issuance of common stock......... - - - - 101,500 1 174 -
Repayment of notes receivable
from shareholders............... - - - - - - - 22
Issuance of warrants............. - - - - - - 1,133 -
Accretion of preferred stock
dividends....................... - - - - - - - -
Deferred compensation - stock
options......................... - - - - - - 1,017 -
Beneficial conversion feature -
Series E........................ - - - - - - 3,000 -
Beneficial conversion feature-
Series F........................ - - - - - - 17,504 -
Amortization of deferred
compensation.................... - - - - - - - -
Net loss......................... - - - - - - - -
------ -- ----- ------- --------- --- -------- ----
Balance at December 31, 1999..... - $- 2,194 $ - 7,655,500 $77 $ 27,253 $(31)
====== == ===== ======= ========= === ======== ====
<CAPTION>
DEFERRED ACCUMULATED TREASURY
COMPENSATION DEFICIT STOCK TOTAL
------------ ----------- -------- -----
<S> <C> <C> <C> <C>
Balance at January 31, 1997...... - (2,438) - (915)
Issuance of Series C preferred
stock........................... - - - 879
Issuance of warrants to preferred
stockholders.................... - - - 52
Issuance of warrants to debt
holders......................... - - - 20
Accretion of preferred
dividends....................... - (76) - (76)
Net loss......................... - (2,448) - (2,448)
------- -------- ------- --------
Balance at December 31, 1997..... - (4,962) - (2,488)
Issuance of Series C preferred
stock........................... - - - 1,579
Issuance of warrants to debt
holders......................... - - - 158
Extension of warrants............ - - - 213
Accretion of preferred
dividends....................... - (274) - (274)
Issuance of warrants for
financing fees.................. - - - 182
Notes receivable from
shareholders.................... - - - (53)
Net loss......................... - (2,895) - (2,895)
------- -------- ------- --------
Balance at December 31, 1998..... - (8,131) - (3,578)
Repurchase of shares............. - (3,665) (4,230) (8,000)
Issuance of common stock......... - - - 175
Repayment of notes receivable
from shareholders............... - - - 22
Issuance of warrants............. - - - 1,133
Accretion of preferred stock
dividends....................... - (2,411) - (2,411)
Deferred compensation - stock
options......................... (1,017) - - -
Beneficial conversion feature -
Series E........................ - (3,000) - -
Beneficial conversion feature-
Series F........................ - (17,504) - -
Amortization of deferred
compensation.................... 253 - - 253
Net loss......................... - (10,290) - (10,290)
------- -------- ------- --------
Balance at December 31, 1999..... $ (764) $(45,001) $(4,230) $(22,696)
======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 96
I3 MOBILE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(2,448) $(2,895) $(10,290)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 45 19 139
Amortization of debt discount........................... 23 35 19
Issuance of common stock purchase warrants.............. 6 392 100
Stock compensation expense.............................. - - 253
Loss on extinguishment of debt.......................... - - 3,434
Interest on extinguished debt........................... - - 311
Other................................................... 84 67 133
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable............ (106) (390) (88)
(Increase) decrease in other current assets and other
assets............................................... 3 2 (1,217)
Increase (decrease) in accounts payable............... 76 31 166
(Decrease) increase in accrued liabilities............ 31 149 2,531
Increase (decrease) in deferred revenue............... (95) (54) (80)
------- ------- --------
Net cash used in operating activities....................... (2,381) (2,644) (4,589)
------- ------- --------
Cash flows from investing activities:
Purchase of intangible asset.............................. - - (100)
Purchase of fixed assets.................................. (17) (57) (1,700)
------- ------- --------
Net cash used in investing activities....................... (17) (57) (1,800)
------- ------- --------
Cash flows from financing activities:
Proceeds from sales of preferred stock, net............... 1,129 2,154 38,136
Proceeds from issuance of notes payable - trade........... 200 650 -
Proceeds of issuance of notes payable - related parties... 117 227 -
Issuance of common stock.................................. - - 175
Repurchase of common and preferred stock.................. - - (3,000)
Repayments of notes payable............................... - (326) (869)
Issuance of notes receivable - related parties............ - (53) (200)
Repayments of notes receivable - related parties.......... - - 222
------- ------- --------
Net cash provided by financing activities................... 1,446 2,652 34,464
------- ------- --------
Increase (decrease) in cash and cash equivalents............ (952) (49) 28,075
Cash and cash equivalents at beginning of period............ 1,167 215 166
------- ------- --------
Cash and cash equivalents at end of period.................. $ 215 $ 166 $ 28,241
======= ======= ========
Supplemental disclosures of cash flow and non cash
activities:
Interest paid in cash..................................... $ 63 $ 88 $ 136
Conversion of debt to mandatorily redeemable
preferred stock......................................... $ - $ 400 $ 5,317
Deferred advertising received for preferred stock......... $ - $ - $ 4,261
Accretion of mandatorily redeemable preferred stock
dividends............................................... $ 76 $ 274 $ 2,411
Common stock warrants issued in Series F preferred stock
offering................................................ $ - $ - $ 1,033
Liability for fixed asset purchases....................... $ - $ - $ 314
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 97
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
NOTE 1 -- FORMATION AND OPERATIONS OF THE COMPANY:
i3 Mobile, Inc., "i3" or the "Company", formerly known as Intelligent
Information Incorporated, was incorporated in Delaware on June 28, 1991. The
Company provides personalized information to wireless phone and other wireless
device users. Their services enable wireless device users to have access to
personalized information and electronic commerce. The Company offers a range of
individualized information products, including customized stock quotes, news,
weather, sports, entertainment, traffic and travel information as well as
personal e-mail, calendar and commerce applications.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Significant accounting policies followed in the preparation of these
financial statements are as follows:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and a majority-owned subsidiary acquired in 1996. This subsidiary was disposed
of in 1997 (see Note 3). All significant intercompany accounts and transactions
have been eliminated in consolidation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The markets
for the Company's services are characterized by intense competition, rapid
technological development, regulatory changes, and frequent new service
introductions, all of which could impact the future value of the Company's
assets.
UNAUDITED PRO FORMA BALANCE SHEET:
Upon the closing of the Company's anticipated initial public offering, each
outstanding share of preferred stock will automatically convert into 500 shares
of common stock, with the aggregate number of shares of common stock to be
issued to each stockholder to be rounded up to the nearest whole share. These
transactions have been reflected in the unaudited pro forma balance sheet as if
they occurred on December 31, 1999.
CASH AND CASH EQUIVALENTS:
Cash equivalents consist of highly liquid investments purchased with an
initial maturity of three months or less.
F-7
<PAGE> 98
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
FIXED ASSETS:
Fixed assets are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, which are between 1 and 3
years. Maintenance and repairs are charged to expense as incurred.
RESEARCH AND DEVELOPMENT:
Research and development costs are charged to expense as incurred. All
costs incurred to establish the technological feasibility of the Company's
products and services have been expensed as general and administrative expenses.
Costs incurred subsequent to the establishment of technological feasibility and
prior to the general release of the product have not been capitalized as such
amounts are not significant.
LONG-LIVED ASSETS:
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,
requires that long-lived assets and certain intangible assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. In such an event, the carrying value of
intangible assets is reviewed by management to determine if the value(s) may be
impaired. If this review indicates that the carrying amount(s) will not be
recoverable, as determined based on the estimated undiscounted cash flows
attributable to such asset(s) over the remaining amortization period, management
will reduce the carrying amount to recognize the impairment and recognize an
impairment loss. The measurement of the impairment losses to be recognized is to
be based on the difference between the fair values, as defined above, and the
carrying amounts of the assets.
At each balance sheet date, the Company evaluates the realizability of
goodwill and other long-term assets based on estimates of future non-discounted
cash flows. In November 1997, the Company suspended the funding of and,
correspondingly, the operations of its majority-owned subsidiary, Strategic
Communications Corporation, "SCC". Since the carrying amount of the assets of
SCC at that date exceeded the estimate of the expected future cash flows
associated with such assets, a goodwill impairment loss of $64 was recognized.
In 1999, the Company acquired a license to a technology patent. Under the
terms of the agreement, the Company paid the patent holder $100 in cash on
signing the agreement and will pay an additional $75 in January 2000. In
addition, the Company has agreed to pay a royalty equal to 5% of gross revenue
related to electronic commerce through March 29, 2005 and May 8, 2007 for sales
in the United States and Canada, respectively. The license is being amortized
using the straight-line method over the remaining life of the patent, 4.5 years.
At December 31, 1999, the accumulated amortization for the intangible asset was
$17.
F-8
<PAGE> 99
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
REVENUE RECOGNITION:
The majority of the Company's revenues relate to their subscription based
services provided to individual users, wireless network operators and others.
The Company derives subscriber revenue from the delivery of personalized
information to wireless phones and other wireless devices. Subscriber revenue
consists of fixed monthly usage charges, transactional fees based on the
information delivered, or a combination of the two arrangements. The Company
recognizes subscriber revenue when services are rendered to subscribers or
resellers. The Company does not offer refund privileges to its customers.
Deferred revenue is comprised of payments received from the Company's resellers
in advance of wireless information services being rendered. As a part of its
subscription based revenue, the Company also provides software design and
customization services to its resellers and charges fees on a time and material
basis for these services. These revenues are recognized as services are
rendered. Revenues are net of volume discounts to customers. Advertising
revenues, which are nominal to date, are recognized in the month that the
advertisement messages are sent.
COST OF REVENUES:
Cost of revenues consists primarily of costs associated with purchasing
content, royalty payments, direct labor costs of our operations center and
distribution fees. Content providers are paid either a flat monthly fee, a fee
based on the number of users requesting the content, a fee based on a percentage
of the Company's revenues generated from the content they provide, a fee based
on the number of on-demand messages requested or a combination of these
arrangements. Distribution fees are paid to wireless network operators to use
their network to deliver advertising and electronic commerce enabling messages
and for delivery of content to direct subscribers. Management believes that the
cost of revenues and gross margins on related party revenues are not
significantly different from the cost of revenues and gross margins earned on
third party revenues.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts receivable.
The Company controls this risk through credit approvals, credit limits and
monitoring procedures. The Company does not require collateral or other forms of
security. The Company can, however, limit the amount of information services
provided to its customers in the event of nonperformance.
Total net revenue for the year ended December 31, 1997 from Bank of
America, SkyTel Communications, Inc., Omnipoint Communications, Inc. and
PageMart Wireless, Inc. was $160, $149, $112 and $86, respectively. Each of
these customers comprised over 10% of total net revenues in 1997.
Total net revenue for the year ended December 31, 1998 from Omnipoint
Communications, Inc. and SkyTel Communications, Inc. was $566 and $160,
respectively. Each of these customers comprised over 10% of total net revenues
in 1998.
F-9
<PAGE> 100
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
Total net revenue for the year ended December 31, 1999 from Omnipoint
Communications, Inc., Bell Mobility Cellular, Inc. and SBC Communications, Inc.
was $723, $246 and $229 respectively. Each of these customers comprised over 10%
of total net revenues for the period.
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
The Company maintained an allowance for doubtful accounts of $110 and $143
at December 31, 1998 and 1999, respectively.
INCOME TAXES:
The Company uses the liability method of accounting for income taxes, as
set forth in Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities and net
operating loss carryforwards, all calculated using presently enacted tax rates.
SEGMENT INFORMATION:
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS No. 131). SFAS No. 131 supersedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise, replacing the "industry segment" approach
with the "management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. The
Company operates in one segment: wireless information provider services. SFAS
No. 131 also requires disclosures about products and services, geographic areas,
and major customers. The adoption of SFAS No. 131 had no impact on the Company's
financial statements for the periods presented.
STOCK COMPENSATION:
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related interpretations in
accounting for its stock option plan and stock awards with the disclosure
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS 123). Under APB 25, compensation expense is
computed to the extent that the fair value of the underlying stock on the date
of grant exceeds the exercise price of the employee stock option or stock award.
Compensation so computed is deferred and then recognized over the vesting period
of the stock option or award.
No stock compensation expense was recorded for the years ended December 31,
1997 and 1998. Stock compensation expense was $253 for the year ended December
31, 1999.
F-10
<PAGE> 101
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
The Company applies SFAS 123, Emerging Issues Task Force Abstract No.
96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services (EITF 96-18)
and related interpretations in accounting for issuances of stock awards to non-
employees. Under SFAS 123 these equity transactions are accounted for based on
the fair value of the consideration received or the fair value of the equity
instruments issued, which ever is more reliably measurable. The value of the
equity instruments is calculated under a fair value based method using a Black-
Scholes pricing model. EITF 96-18 defines the measurement date for determining
fair value as the earlier of the date at which a commitment for performance by
the counterparty to earn the equity instruments is reached or the date at which
the counterparty's performance is complete.
EARNINGS (LOSS) PER SHARE:
The Company computes net loss per share pursuant to Statement of Financial
Accounting Standards No. 128, Earnings Per Share, and SEC Staff Accounting
Bulletin No. 98. Basic net loss per share is computed by dividing loss
applicable to common stockholders by the weighted average number of shares of
the Company's common stock outstanding during the period. Diluted net loss per
share is determined in the same manner as basic net loss per share except that
the number of weighted average shares is increased assuming exercise of dilutive
stock options and warrants using the treasury stock method and dilutive
conversion of the Company's preferred stock.
For the years ended December 31, 1997, 1998 and 1999, options to purchase
229,100, 387,250, and 914,000 shares of common stock, respectively, preferred
stock convertible into 3,169,500, 4,256,000, and 11,316,765 shares of common
stock, respectively, and warrants to purchase 510,875, 1,206,859, and 1,929,084
shares of common stock, respectively, were excluded from the calculation of
diluted earnings per share since their inclusion would be antidilutive for all
periods presented.
Pro forma basic and diluted earnings per share have been calculated
assuming the conversion of all outstanding shares of preferred stock that are
mandatorily convertible upon the Company's anticipated initial public offering
into 11,316,765 shares of common stock, as if the shares had converted
immediately upon their issuance. Dividends on mandatorily redeemable preferred
stock, deemed dividends for beneficial conversion features on mandatorily
redeemable preferred stock and loss on redemption of preferred stock have been
excluded from the calculation of pro forma basic and diluted earnings per share
as the related shares are assumed to have converted to common upon issuance.
COMPREHENSIVE INCOME:
The Company has adopted, in 1999, the accounting treatment prescribed by
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
F-11
<PAGE> 102
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
Income. The adoption of this statement had no impact on the Company's financial
statements for the periods presented.
RECLASSIFICATIONS:
Certain reclassifications have been made for consistent presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In 1999, the Company adopted the American Institute of Certified Public
Accountants' Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SoP 98-1). SoP 98-1 provides
guidance for determining whether computer software is internal-use software, and
guidance on accounting for the proceeds of computer software originally
developed or obtained for internal use and then subsequently sold to the public.
It also provides guidance on capitalization of the costs incurred for computer
software developed or obtained for internal use. The adoption of SoP 98-1 did
not have a material impact on the Company's financial statements.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137 which delays the effective date of
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 133, as amended, is to be effective for the Company beginning in 2001. SFAS
No. 133 establishes accounting and reporting standards for derivative financial
instruments and hedging activities related to those instruments, as well as
other hedging activities. Because the Company does not currently hold any
derivative financial instruments and does not engage in hedging activities, the
adoption of SFAS No. 133 is not expected to have any impact on the consolidated
financial position, results of operations or cash flows of the Company.
NOTE 3 -- DISPOSAL OF BUSINESS:
In November 1997, the Company suspended its funding of and,
correspondingly, the operations of Strategic Communications Corporation ("SCC")
. In connection with the decision to terminate the operations of SCC, the
remaining goodwill of $64 at December 31, 1997 was written off. In January 1998,
the Company sold its interest in SCC for nominal consideration.
NOTE 4 -- FIXED ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
----- ------
<S> <C> <C>
Furniture and fixtures............................... $63 $ 63
Equipment and computers.............................. 8 218
Construction in progress............................. - 1,804
--- ------
71 2,085
Less - Accumulated depreciation...................... 21 143
--- ------
$50 $1,942
=== ======
</TABLE>
F-12
<PAGE> 103
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
Depreciation expense related to fixed assets for the years ended December
31, 1997, 1998 and 1999 was $19, $19 and $122, respectively.
Construction in progress at December 31, 1999 relates to the expenditures
for leasehold improvements, furniture, equipment and computers for the Company's
new operations center and headquarters in Stamford, Connecticut. As of December
31, 1999 these assets were not yet placed in service and, as such, were not
being depreciated. Capitalized costs will be amortized over the estimated useful
life of the asset beginning when the asset is ready for its intended use.
NOTE 5 -- ACCRUED LIABILITIES:
The following table provides the major components of accrued liabilities:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
---- ------
<S> <C> <C>
Accrued stock issuance and professional fees.......... $108 $2,045
Accrued salaries and wages............................ 38 250
Other accrued liabilities............................. 98 480
---- ------
$244 $2,775
==== ======
</TABLE>
NOTE 6 -- DEBT:
Debt and notes payable - trade consisted of the following at December 31,
1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
----- -----
<S> <C> <C>
CURRENT PORTION OF LONG-TERM DEBT:
Five-year convertible note........................ $ 137 $ -
Unamortized discount........................... (19) -
----- -----
$ 118 $ -
===== =====
NOTES PAYABLE - TRADE:
Demand note - February 1998....................... 150 -
Demand note - April 1998.......................... 100 -
----- -----
$ 250 $ -
===== =====
LONG-TERM DEBT:
Five-year convertible note.......................... $ 493 $ -
Unamortized discount.............................. (38) -
----- -----
$ 455 $ -
===== =====
</TABLE>
F-13
<PAGE> 104
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
In December 1996, the Company executed a five-year convertible note with
the Connecticut Development Authority ("CDA"), which provided financing totaling
$750. In connection with this agreement, a warrant was issued to purchase
101,500 shares of common stock for $1.72 per share (Note 11). The relative fair
value of these warrants of $95 was recorded as a debt discount and was amortized
over the term of the loan.
The fair value of the warrant was determined using the Black-Scholes
pricing model utilizing a volatility rate of 40% and a risk free, rate of return
of 6.2%. The gross proceeds of the debt financing were then allocated between
the debt and the warrants based on the estimated fair values of both
instruments. The note earned interest at a rate equal to the federal reserve
rate for five year treasury securities plus 2.5%. The note had an effective
interest rate of 11%.
In December 1999, the Company entered into an agreement with the CDA to
exchange its five-year convertible note payable for 79.96 shares of Series F
preferred stock at a conversion price of $3,960.40 per share (convertible into
common stock at a conversion rate of 500 to 1), and to exercise its warrant to
purchase 101,500 shares of common stock at a price of $1.72 per share. This debt
extinguishment resulted in an extraordinary loss on redemption of $260.
In December 1997, the Company executed a promissory note with a private
investor, providing financing totaling $200. The promissory note bears interest
at the rate of 10% per annum and was due and payable in February 1998. This note
was repaid in full in August 1998. In connection with the issuance, the private
investor received a warrant to purchase 100,000 shares of common stock for $3.00
per share (Note 11). The relative fair value of this warrant of $20 has been
recorded as a debt discount and is being amortized over the term of the note.
The fair value of the warrant was determined using the Black-Scholes pricing
model utilizing a volatility rate of 40% and a risk free rate of return of 5.7%.
The gross proceeds of the debt financing were then allocated between the debt
and the warrants based on the estimated fair values of both instruments. The
effective interest rate on the note is 20%.
In February and April 1998, the Company executed promissory notes with a
private investor, providing financing totaling $150 and $100, respectively. The
promissory notes bear interest at a rate of 10% and were due and payable in
March 1998 and April 1998, respectively. In December 1998 the Company issued a
warrant to purchase 150,000 shares of common stock at $3.50 per share to the
noteholders (Note 11). As a result of the issuance, the Company has recorded the
fair value of the warrant of $75 as a charge directly to interest expense. The
fair value of the warrant was determined using the Black-Scholes pricing model
utilizing a volatility rate of 40% and risk free rate of return of 4.5%. In
February 1999 the notes were repaid in full. Repayment of these notes was
guaranteed by the holder of the Company's Series B mandatorily redeemable
preferred stock, a related party. The effective interest rate on these notes is
10%.
F-14
<PAGE> 105
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
In June 1998, the Company issued two notes payable totaling $400 to a
private investor group. The notes bore interest at a rate of 7% per annum and
were due and payable on demand in cash or Series D preferred stock. In
connection with this issuance, two warrants were issued in August 1998 for the
purchase of 195,984 shares of the Company's common stock for $3.00 per share
(Note 11). The value of these warrants of $83 has been charged directly to
interest expense. The fair value of the warrant was determined using the Black-
Scholes pricing model utilizing a volatility rate of 40% and risk free rate of
return of 4.8%. These notes payable were converted in August 1998 into Series D
mandatorily redeemable convertible preferred stock ("Series D Preferred Stock")
in connection with the issuance of the Series D Preferred Stock.
In February 1999, the Company issued a $5,000 promissory note, a warrant to
purchase 500,000 shares of common stock and $3,000 of cash to redeem 3,770
shares of its Series A convertible preferred stock and 1,885,000 shares of its
common stock owned by Intelligent Investment Partners, Inc. Intelligent
Investment Partners, Inc. is a wholly owned subsidiary of SkyTel Communications,
Inc., SkyTel, a significant customer. The promissory note, which matures on
February 12, 2004, pays interest at a rate of 10% per annum beginning after the
first year. Interest is payable semiannually thereafter until maturity. The
long-term note payable becomes immediately due and payable upon the Company's
anticipated initial public offering or a sale of the Company. The effective
interest rate on this note is 9.8%. The warrants allow the holder to purchase
500,000 shares of the Company's common stock at a price of $3.00 per share (Note
11). The fair value of the warrant was determined using the Black-Scholes
pricing model utilizing a volatility rate of 40% and risk free rate of return of
5.0%.
On December 29, 1999, the Company entered into an agreement with MCI
WorldCom, Inc., parent company to SkyTel to convert SkyTel's five-year $5,000
note payable into 1,262.5 shares of Series F mandatorily redeemable preferred
stock at a conversion price of $3,960.40 per share (convertible into common
stock at a conversion rate of 500 to 1). This debt extinguishment resulted in an
extraordinary loss on redemption of $3,174.
NOTE 7 -- INCOME TAXES:
No provision for federal or state income taxes has been made for the years
ended December 31, 1997, 1998 and 1999 given the Company's loss position in each
year. At December 31, 1999, the Company had net operating loss carryforwards of
$16,454 which expire through the year 2018. Net deferred tax assets at December
31, 1998 and 1999 have been fully reserved due to the uncertainty of
realization.
F-15
<PAGE> 106
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
The Company's gross deferred tax assets at December 31, 1998 and 1999 were
comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
------- -------
<S> <C> <C>
GROSS DEFERRED TAX ASSET:
Net operating loss carryforwards................. $ 3,074 $ 7,275
Warrant issuances................................ 172 216
Interest accretion............................... 26 187
Other............................................ 5 104
------- -------
3,277 7,782
Valuation allowance.............................. (3,277) (7,782)
------- -------
Net deferred taxes............................... $ - $ -
======= =======
</TABLE>
Under provisions of the Tax Reform Act of 1986, if certain substantial
changes in the Company's ownership should occur, there would be an annual
limitation on the amount of net operating loss carryforwards which could be
utilized. Due to this potential annual limitation, the net operating loss
carryforwards may expire prior to when otherwise utilizable.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES:
LEASE AGREEMENTS:
The Company leases space in several buildings which is used for offices and
development facilities as well as various equipment, all subject to operating
leases. As of December 31, 1999, the minimum annual rental payments under the
terms of such noncancelable leases which expire at various dates through 2008
are as follows:
<TABLE>
<S> <C>
2000.................................................. $ 715
2001.................................................. 730
2002.................................................. 708
2003.................................................. 685
2004.................................................. 685
Thereafter............................................ 1,922
------
Total minimum lease payments.......................... $5,445
======
</TABLE>
Rent expense for the years ended December 31, 1997, 1998 and 1999 amounted
to $109, $165, and $211, respectively.
During 1999, in connection with one of the Company's office leases, the
Company was required to provide a $400 security deposit.
F-16
<PAGE> 107
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
LITIGATION:
The Company, in the ordinary course of business, is subject to various
legal proceedings. While it is impossible to determine the ultimate outcome of
these matters, it is management's opinion that the resolution of these matters
will not have a material adverse effect on the financial position or results of
operations of the Company.
COMMITMENTS:
At December 31, 1999, the Company had entered into contracts committing the
Company to approximately $2,100 worth of expenditures for construction,
furniture and equipment related to their new operations center and headquarters
in Stamford, Connecticut.
EMPLOYMENT AGREEMENTS
The Company maintains employment agreements with its key officers. These
agreements expire on December 31, 2002 but automatically renew unless notice of
termination is given at least 90 days prior to expiration. These agreements
provide minimum salary levels $150 per annum and compensation guidelines for
each employee. Additionally, the Company maintains separate key-man insurance
policies of $2,000 for two of its executives.
OTHER AGREEMENTS:
The Company has agreements with wireless network operators who act as
resellers of III's products and services to their customers. These contracts
generally have one to three-year terms and are nonexclusive.
The Company maintains agreements with various content providers. The
content agreements frequently have one-year terms, are nonexclusive and can be
canceled by either party without notice.
The Company is a member of an industry association of wireless service,
wireless equipment and software companies that develops worldwide standards for
wireless information and telephony services on digital mobile phones and other
wireless devices. As a result of their affiliation with the organization, the
Company has agreed to license its intellectual property to other members on fair
and reasonable terms to the extent that the license is required to develop
noninfringing products under the specifications promulgated by the organization.
Each other member has entered into reciprocal agreements.
The Company maintains royalty agreements with certain individuals. These
agreements are discussed in further detail in Note 9.
F-17
<PAGE> 108
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
NOTE 9 -- RELATED PARTY TRANSACTIONS:
REVENUE/DEFERRED REVENUE:
The Company had revenue and deferred revenue for services provided to
SkyTel Communications, Inc. Intelligent Investment Partners, Inc., a wholly
owned subsidiary of Skytel, was a holder of common and Series A preferred shares
of the Company. In February 1999, Intelligent Investment Partners, Inc.'s equity
holdings in the Company were redeemed (see Note 6), and its seat on the Board of
Directors was relinquished. Subsequent to February 1999, they are no longer
considered a related party of the Company.
NOTES PAYABLE TO RELATED PARTIES:
The Company had outstanding borrowings totaling $144 as of December 31,
1998, payable to the Chairman of the Board of Directors of the Company, an
employee/officer of the Company, and a director of the Company. These notes bore
interest at a rate of 18% per annum and repayment could be required at any time.
In August 1998, as a condition for the Company to receive financing in
connection with the Series D mandatorily redeemable preferred stock offering,
the interest rates on these related party notes were adjusted from 18% to 10%.
These interest rate adjustments were applied retroactively to January 1, 1998
and remained in effect through the repayment of the notes. The note holders
forgave $7 of related party interest expense in 1998 related to this retroactive
adjustment. These notes payable were repaid in full in February 1999.
On November 18, 1998, the Company executed two promissory notes with a
stockholder of the Company providing financing totaling $200. The promissory
notes bore interest at a rate of 10% per annum and were due and payable on
December 31, 1998. In March 1999, the Company issued a warrant to purchase
20,235 shares of common stock at $3.50 per share to the noteholder under the
Company's Loan Incentive Warrant Plan (Note 11). The Company repaid the note in
February 1999.
NOTE RECEIVABLE FROM RELATED PARTIES:
On May 12, 1999, the Company loaned the President and Chief Executive
Officer $100 at an interest rate of 10% per annum. The entire balance, plus
interest, was repaid on May 26, 1999.
On September 30, 1999, the company loaned the Chairman of the Board of
Directors $100 at an interest rate of 10% per annum. The entire balance, plus
interest was repaid on October 4, 1999.
ROYALTY AGREEMENTS:
The Company maintains a royalty agreement with two current stockholders of
the Company. The agreements provide for the payment of royalties of 2 1/2% of
gross revenues on a monthly basis, but in no event less than $3 per month, with
a
F-18
<PAGE> 109
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
maximum aggregate payment of $6,000 adjustable up to a maximum of $8,000 as
defined in the agreement. Total royalties expensed under the terms of the
agreement were, $39, $32, and $46 for the years ended December 31, 1997, 1998
and 1999, respectively. In November 1998, the Company loaned the two
shareholders $53 on an unsecured basis to purchase Series C convertible
preferred stock. The royalties generated under the agreement subsequent to
November 1998 will be used to reduce the loan outstanding to the Company. The
balance outstanding on these loans were $53 and $31 at December 31, 1998 and
1999, respectively.
The Company maintains a royalty agreement with a current employee. The
original agreement provided for the payment of royalties based on the number of
subscribers with a maximum royalty payment of $750. In 1999, in connection with
an employment agreement, the royalty agreement was amended to be based on a
percentage of gross revenues, as defined in the agreement. The maximum royalty
was also reduced by $250 for the cumulative salary paid to the employee. The
employee is entitled to a monthly royalty payment of 2% of gross revenues. Total
royalties expensed under the terms of the royalty agreement were $15, $29 and
$35 for the years ended December 31, 1997, 1998 and 1999, respectively.
NOTE 10 -- PREFERRED STOCK:
Preferred stock consisted of the following at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
------ -------
<S> <C> <C>
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
STOCK:
Series B....................................... $1,436 $ 1,460
Series D....................................... 1,064 1,292
Series E....................................... - 17,104
Series F....................................... - 35,482
------ -------
Total mandatorily redeemable
convertible preferred stock......... $2,500 $55,338
====== =======
CONVERTIBLE PREFERRED STOCK AT PAR VALUE:
Series A....................................... $ - $ -
Series C....................................... - -
------ -------
$ - $ -
====== =======
</TABLE>
SERIES A CONVERTIBLE PREFERRED STOCK:
In February 1995, the Company issued 3,770 shares of Series A convertible
preferred stock to IIP for $150 per share. Series A convertible preferred stock
was convertible into common shares at a conversion rate of 500-to-1. As the
equivalent conversion price per common share was equal to or greater than the
estimated fair value of the Company's common shares at the time of issuance no
beneficial
F-19
<PAGE> 110
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
conversion charge was applicable to this issuance. Upon the issuance, 40% of the
Company's common stock was owned by Intelligent Investment Partners, Inc., a
holding company, which is wholly owned by SkyTel Communications, Inc., a
significant customer.
In February 1999, the Company redeemed all 3,770 shares of its Series A
convertible preferred stock and 1,885,000 shares of its common stock owned by
Intelligent Investment Partners, Inc. The redemption price of the Series A
preferred stock and the common stock of $8,000 is payable as follows: $3,000 in
cash upon closing of the transaction and $5,000 in a promissory note which
matures on February 12, 2004 (Note 6). In addition a warrant to purchase 500,000
shares of the Company's common stock at a price of $3.00 per share was issued to
Intelligent Investment Partners, Inc. This warrant expires February 11, 2004
(Note 11). This warrant has a fair value of $460 which has been applied to the
value of the common and preferred stock repurchased. The fair value of the
warrant was determined using the Black-Scholes pricing model utilizing a
volatility rate of 40% and a risk free rate of return of 5.0%. The redemption of
the preferred stock resulted in $4,230 recorded as treasury stock, a $3,665
charge to accumulated deficit that is included in "loss applicable to common
stock" and a $105 charge to additional paid-in capital. The additional paid-in
capital charge represents the net impact of eliminating the Company's basis in
the Series A convertible preferred stock of $565, and the recording of the $460
value of the common stock warrants issued. The aggregate redemption value of
$8,460 was allocated between the common and convertible preferred stock redeemed
based on the ratio of equivalent common shares of each instrument.
SERIES B MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
In August 1996, the Company issued 1,421 shares of Series B mandatorily
redeemable preferred stock to a private investor group for $879.66 per share.
Series B mandatorily redeemable convertible preferred stock is convertible into
common shares at a conversion rate of 500-to-1. As the equivalent conversion
price per common share was equal to or greater than the estimated fair value of
the Company's common shares at the time of issuance no beneficial conversion
charge was applicable to this issuance. In connection with the issuance of the
Series B mandatorily redeemable preferred stock, warrants were issued to the
investor group to purchase 153,000 shares of common stock for $1.76 per share
(Note 11). These warrants were not exercised and expired on August 31, 1997.
Also, in connection with the issuance of the Series B mandatorily
redeemable preferred stock, the investor group was granted options to purchase
an additional 284 shares of Series B mandatorily redeemable preferred stock at a
price of $879.66. These options were exercisable at the option of the holder at
any time prior to August 31, 1997. Further if the Company fulfilled certain
criteria as outlined in the stock agreement and, if the investor group did not
exercise its option, the Company had the option to issue and sell to the
investor group, and the investor group was required to buy, 284 shares of Series
B mandatorily redeemable
F-20
<PAGE> 111
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
preferred stock at a price of $879.66. The Company fulfilled the criteria as
outlined in the Series B agreement and, accordingly, the investor group
purchased 284 shares of Series B mandatorily redeemable preferred stock on
February 27, 1997.
The relative fair value of the warrants and options granted in conjunction
with the Series B preferred stock of $90 was recorded as a discount to the
Series B preferred stock value and is being amortized as preferred stock
dividends over the period until the earliest possible redemption date. The fair
value of the warrant was determined using the Black-Scholes pricing model
utilizing a volatility rate of 40% and a risk free rate of return of 6.7%.
SERIES C CONVERTIBLE PREFERRED STOCK:
From July 1997 through December 1997, the Company sold 476 and 388 shares
of Series C convertible preferred stock to private investors at prices of
$879.66 per share and $1,187.00 per share, respectively. During 1998, the
Company changed the number of authorized shares of its Series C convertible
preferred stock to 2,194 and sold an additional 1,330 shares of its Series C
convertible preferred stock to private investors for $1,187.00 per share. Series
C convertible preferred stock is convertible into common shares at a conversion
rate of 500-to-1. As the equivalent conversion price per common share was equal
to or greater than the estimated fair value of the Company's common shares at
the time of issuance no beneficial conversion charge was applicable to this
issuance. Related parties purchased 430 of the 1,330 shares issued in 1998. In
connection with these issuances, a warrant was issued for the purchase of 74,910
shares of common stock for $3.00 per share (Note 11). The fair value of the
warrants were determined using the Black-Scholes pricing model utilizing a
volatility rate of 40% and a risk free rate of return of 5.7%.
On December 22, 1999, the Company's certificate of incorporation was
amended to provide for the mandatory conversion of the Series C preferred stock
into common stock upon a qualified initial public offering. This amendment was
approved by the Board of Directors and the stockholders, including a majority of
the Series C stockholders.
SERIES D MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
In August 1998, the Company converted two outstanding notes payable into
Series D preferred stock and sold additional shares of Series D preferred stock
to a private investor group. The notes were issued to the private investor group
in June 1998. The carrying value of the notes of $407 was converted into Series
D preferred stock at $1,187.00 per share (Note 6). A total of 843 shares of
Series D preferred stock were sold at a price of $1,187.00 per share for total
consideration of $1,001 of cash and converted notes payable. Series D
mandatorily redeemable convertible preferred stock is convertible into common
shares at a conversion rate of 500-to-1. As the equivalent conversion price per
common share is equal to or greater than the estimated fair value of the
Company's common shares at the time of issuance no beneficial conversion charge
is applicable to the issuance.
F-21
<PAGE> 112
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SERIES E MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
In February 1999, the Company sold to a private investor group, 7,714.56
shares of Series E mandatorily redeemable convertible preferred stock at a price
of $1,555.50 per share for $12,000. Series E mandatorily redeemable convertible
preferred stock is convertible into common shares at a conversion rate of
500-to-1. As the equivalent conversion price per common share related to the
February 1999 issuance is equal to or greater than the estimated fair value of
the Company's common shares at the time of issuance no beneficial conversion
charge is applicable to the February issuance.
On November 23, 1999, the same private investor group, in accordance with
its contract with the Company, purchased an additional 1,928.64 shares of Series
E mandatorily redeemable convertible preferred stock at a price of $1,555.50 per
share for $3,000. A $3,000 deemed dividend has been recognized as a charge to
additional paid-in capital and an increase to net loss available to common
shareholders for the beneficial conversion feature, calculated as the difference
between the per share conversion price and the estimated fair value of the
common stock into which the preferred stock is convertible, measured at the
commitment date. This beneficial conversion feature is limited to the amount of
the proceeds received, or $3,000.
SERIES F MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
On December 22, 1999, the Company issued 8,248.33 shares of Series F
mandatorily redeemable convertible preferred stock at a price of $3,960.40 per
share to private investor groups. The proceeds include $24,850 of cash
investments, including $3,000 from a related party stockholder of the Company,
the conversion of a $5,000 outstanding note payable, the conversion of a $317
five-year convertible note payable and future television advertising rights. In
connection with this issuance the Company recorded a beneficial conversion
charge of $17,504, an extraordinary loss on the redemption of the two notes
payable of $3,434 and deferred advertising value of $4,261. These charges are
calculated as the difference between the per share value of the conversion
feature and the estimated fair value of the common stock at commitment date
multiplied by the applicable equivalent common shares.
CONVERSION FEATURES, RIGHTS AND PREFERENCES:
All preferred stock is convertible at any time into shares of common stock
at the option of the holder according to a 500-to-1 conversion rate. Each series
of preferred stock includes anitdilution and conversion price adjustment
provisions that may increase the conversion ratio for these shares in the event
of a sale by the Company of additional shares of common stock at a price below
the conversion price for such shares. Automatic conversion of all outstanding
preferred stock occurs upon the closing of an initial public offering or sale or
merger of the Company provided certain defined minimum proceeds and per share
requirements are met. The conversion of preferred stock into a total of
11,316,765
F-22
<PAGE> 113
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
shares of common stock is reflected in the unaudited pro forma consolidated
balance sheet at December 31, 1999.
Series C preferred stock is not entitled to any voting rights. Series B
preferred stock is entitled to vote on certain matters and Series D, E, and F
preferred stock are entitled to voting rights afforded to common stockholders in
proportion to the number of common shares into which their preferred shares are
convertible.
The Series B mandatorily redeemable preferred stock and Series C preferred
stock are entitled to receive dividends when and if declared by the board of
directors. The Series D, E, and F mandatorily redeemable preferred stock accrue
dividends cumulatively at a rate of 10% per share per annum. This cumulative
dividend is included in the charge to accumulated deficit and the increase in
carrying values of the preferred shares related to the 20% internal rate of
return guarantee. Such dividends may only be paid at the discretion of the board
of directors and are payable upon the conversion of the related shares into
common stock upon the closing of an initial public offering. All accumulated
dividends shall be forfeited in the event of a public offering where the value
of i3 is equal to or greater than $152,000.
In the event of an involuntary liquidation, the holders of the Series F
preferred shares are entitled to receive the stated value per share of the stock
together with any accrued and unpaid dividends before any payments to the other
stockholders of the Company. Subsequently, the Series B, Series D and Series E
preferred stockholders are entitled to receive, on a pro rata basis, prior and
in preference to Series C preferred stock, the stated value per share for each
outstanding share plus accrued but unpaid dividends. After the initial payment
to the holders of the Series F preferred shares and payment to the other
preferred stockholders of the Company in accordance with the Company's
certificate of incorporation, the holders of the Series F preferred shares are
entitled to receive an additional amount until they shall have received an
aggregate of two times the stated value per share of the stock.
Series B preferred stock is mandatorily redeemable based on certain
predefined events subsequent to December 31, 2003, but no later than June 30,
2004, at a price per share equal to $879.66 per share, without any dividends.
The Series D, E, and F preferred stock is mandatorily redeemable based on
certain predefined events subsequent to December 31, 2003, but no later than
June 30, 2004, at a price which equates to the investor receiving a 20% internal
rate of return on their initial investment of $1,187.00, $1,555.50 and $3,960.40
per share, respectively. This 20% internal rate of return is being recorded by a
charge to accumulated deficit and an increase to the carrying values of the
Series D, E, and F preferred shares. The state in which the Company is
incorporated does not preclude companies from accruing dividends when a
stockholders' deficit exists.
F-23
<PAGE> 114
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
The total preferred shares authorized was 10,000 at December 31, 1998 and
50,000 at December 31, 1999. The Company's preferred stock issued and
outstanding consisted of the following shares at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
----- -------------
<S> <C> <C>
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
STOCK:
Series B, $.01 par value
Shares issued and outstanding........... 1,705 1,705
Series D, $.01 par value
Shares issued and outstanding........... 843 843
Series E, $.01 par value
Shares issued and outstanding........... - 9,643.20
Series F, $.01 par value
Shares issued and outstanding........... - 8,248.33
CONVERTIBLE PREFERRED STOCK:
Series A, $.01 par value
Shares issued and outstanding........... 3,770 -
Series C, $.01 par value
Shares issued and outstanding........... 2,194 2,194
</TABLE>
NOTE 11 -- COMMON STOCK:
COMMON STOCK WARRANTS:
The Company had outstanding stock purchase warrants as follows. In this
table, "Debt financings" refers to warrants issued to noteholders, while
"Services related to 1998 capital raising" refers to warrants issued in
consideration for assistance provided to the Company in obtaining debt and
preferred stock financing.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
--------- -------------
<S> <C> <C>
Debt financings.......................... 547,484 645,984
Series B preferred stock................. 234,465 234,465
Series C preferred stock................. 74,910 74,910
Services related to 1998 capital
raising................................ 350,000 350,000
Series A preferred stock redemption...... - 500,000
Series F preferred stock................. - 123,725
--------- ---------
1,206,859 1,929,084
========= =========
Weighted Average exercise price per
share.................................. $3.10 $3.50
</TABLE>
In connection with the Company's 1996 debt financing (Note 6), a warrant
was issued for the purchase of 101,500 shares of common stock for $1.72 per
share. This warrant is exercisable at the option of the holder and expires on
December 31, 2003. The relative fair value of this warrant of $95 has been
F-24
<PAGE> 115
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
recorded as additional paid-in capital and as a discount to the debt. The fair
value of the warrant was determined using the Black-Scholes pricing model
utilizing a volatility rate of 40% and a risk free rate of return of 6.2%. The
gross proceeds of the debt financing were allocated between the debt and the
warrants based on the estimated fair values of both instruments.
In December 1997, a warrant was issued to the Series B preferred
stockholders, a related party, for the purchase of 234,465 shares of common
stock of the Company for $3.00 per share. This warrant was issued in
consideration for the Series B stockholder giving up its 12% cumulative
dividend. This cumulative dividend was to be paid as of the sale or initial
public offering of the Company. The elimination of the dividend was a condition
for the Company to receive the Series C convertible preferred stock financing.
The warrant is exercisable at the option of the holder and originally expired on
December 31, 1998. In April 1998 the expiration date of this warrant was
extended to December 31, 2001 in consideration for the continued financial
support of the Series B stockholder. The warrants' original fair value of $52
was charged as a preferred dividend immediately upon issuance in 1997 and the
fair value of the extension of the expiration date of $123 was immediately
charged as a preferred dividend in 1998.
In connection with the issuance of the Series C convertible preferred stock
in 1997 (Note 10), two warrants were issued for the purchase of an aggregate of
74,910 shares of common stock for $3.00 per share. The warrants are exercisable
at the option of the holder and had an original expiration date of December 31,
1998. In April 1998 the expiration dates of these warrants were extended to
December 31, 2001 in consideration for the continued financial support of the
holders. The difference between the remaining fair value of the warrants under
their original terms and the fair value under the extended terms of $39 was
immediately charged as a preferred dividend in 1998.
In December 1997, in connection with the issuance of a $200 promissory note
(Note 6), a warrant was issued to the private investor for the purchase of
100,000 shares of common stock of the Company for $3.00 per share. The warrant
is exercisable at the option of the holder and had an original expiration date
of December 31, 1998. The relative fair value of the warrant of $20 was
amortized to interest expense over the term of the note. In April 1998 the
expiration date for this warrant was extended to December 31, 2001 in
consideration for the continued financial support of the lender. The fair value
related to the extension of the expiration date of $52 was immediately charged
as interest expense in 1998.
In connection with the issuance of the Company's June 1998 notes to private
investors, two warrants were issued in August 1998 to purchase an aggregate of
195,984 shares of the Company's common stock at a price of $3.00 per share.
These notes to private investors were converted into Series D preferred stock in
August 1998. These warrants expire on July 31, 2003. The fair value of the
warrant of $83 was immediately recorded as interest expense in 1998.
In consideration for assistance provided in raising capital during 1998, a
warrant was issued in June 1998 to the holder of the Series B preferred stock, a
F-25
<PAGE> 116
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
related party, for the purchase of 350,000 shares of common stock for $3.50 per
share in June 1998. This warrant is exercisable at the option of the holder and
expires on December 31, 2001. As a result of the issuance, the fair value of the
warrant of $182 has been charged to general and administrative expense in 1998.
The charge was recorded to general and administrative expenses as the warrants
were issued in consideration for the general assistance provided to the Company
in obtaining debt and preferred stock financings and was not applicable to a
specific financing.
In December 1998 a warrant to purchase 150,000 shares of the Company's
common stock at a price of $3.50 per share was issued to a holder of the
Company's notes payable for financing provided to the Company (Note 6). This
warrant expires on December 31, 2001. As a result of this issuance, the Company
has recorded the fair value of the warrant of $75 as a charge to interest
expense in 1998.
In February 1999, the Company issued a warrant to Intelligent Investment
Partners, Inc., as part of the redemption price for its Series A preferred and
common stock (Note 10). This warrant allows Intelligent Investment Partners,
Inc. to purchase 500,000 shares of the Company's common stock at a price of
$3.00 per share, subject to adjustment. This warrant expires on February 11,
2004. The value of this warrant of $460 was included in the valuation of the
treasury stock and the loss on redemption of Series A preferred stock.
In September 1998 the Company authorized a Loan Incentive Warrant Plan that
provided for the issuance of warrants to purchase common stock of the Company to
the holders of notes payable. In March 1999, the Company issued warrants under
this plan to purchase 200,000 shares of the Company's common stock at a price of
$3.50 per share. The number of warrants was determined by a formula based on the
amount of the loan. This plan has now expired. These warrants were issued to
short-term notes payable holders and expire on December 31, 2001. The related
loans were repaid in February 1999. As a result of the issuance, the Company has
recorded the fair value of the warrants of $100 as a charge to interest expense.
In conjunction with the Series F mandatorily redeemable preferred stock
offering, the Company issued a warrant to purchase 123,725 shares of common
stock at an exercise price of $7.92 per share and incurred a liability of $1,633
to an investment banking firm pursuant to a binding agreement. This fee is in
consideration for acting as placement agent in connection with the Series F
mandatorily redeemable preferred stock offering. The warrant, which has an
exercise price of $7.92 per share and a five year life, has been valued at
$1,033 using a Black-Scholes pricing model. Assumptions utilized included a
volatility rate of 40% and a risk free rate of return of 5.8%. The value of the
payment and warrants has been accounted for as issuance costs against the gross
proceeds of the Series F offering.
On December 29, 1999, the Company entered into a two-year agreement with
NBC Interactive Media, Inc. This agreement provides the Company with the right
to
F-26
<PAGE> 117
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
distribute content from NBC Interactive Media, Inc. or its affiliates upon
execution of distribution agreements. The Company will issue warrants to NBC
Interactive Media, Inc. to purchase 20,000 common shares at an exercise price of
$10.00 per share for each content distribution agreement it or any of its
affiliates enters into with the Company, or 30,000 shares for the first
agreement reached prior to March 31, 2000. The aggregate number of shares of
common stock issuable under this contingent warrant agreement is 110,000 shares.
These warrants expire three years after their issuance. The accounting treatment
for those contingent warrants to be issued to NBC Interactive Media, Inc. is
prescribed by EITF 96-18, Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling Goods or
Services. Under EITF 96-18 the measurement date for determining the fair value
of these warrants would not occur until such time as a distribution agreement is
entered into between i3 Mobile and NBC Interactive Media, Inc. or its
affiliates. The fair value of the warrants will be determined through a
Black-Scholes pricing model utilizing the fair value of the Company's common
stock as of the measurement date. As no such agreements have been entered into
at December 31, 1999 these contingent warrants have no impact on the 1999
financial statements.
COMMON STOCK RESERVED:
The Company has reserved shares of common stock as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1999
---- ----
<S> <C> <C>
Conversion of preferred stock.......... 4,256,000 11,316,765
Stock options.......................... 387,205 914,000
Stock warrants......................... 1,206,859 1,929,084
--------- ----------
5,850,064 14,159,849
========= ==========
</TABLE>
On June 11, 1997, the Company effected a 500-to-1 common stock split. All
references to common stock amounts, shares and per share data included in the
financial statements have been adjusted to give retroactive effect to the stock
split.
NOTE 12 -- STOCK INCENTIVE PLAN:
The Company's 1995 Stock Incentive Plan provides for the issuance of up to
1,014,000 shares of common stock outstanding through the granting of stock
options to employees, officers, consultants and directors. The board of
directors has complete authority to determine awards and establish the exercise
price based on the Board's estimate of fair value provided that the exercise
price of the stock option was no less than the fair value of a share of common
stock on the date of grant, and the exercise price of a stock option granted to
an employee who owns more than 10% of the common stock will be no less than 110%
of the fair value of a share of common stock on the date of grant. Such option
grants prior to September 15, 1999 vest over a period of five years. As of
September 15, 1999, new options granted will vest over a period of four years.
F-27
<PAGE> 118
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
The following table describes the Company's stock option activity:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
WEIGHTED AVERAGE FAIR VALUE
NUMBER OF EXERCISE PRICE OF OPTIONS GRANTED
OPTIONS PER SHARE PER SHARE
--------- ---------------- ------------------
<S> <C> <C> <C>
Outstanding at January 1,
1997....................... 119,500 $0.30
Granted....................... 130,000 $1.76 $1.76
Canceled...................... (22,500) $1.08
-------
Outstanding at December 31,
1997....................... 227,000 $1.05
Granted....................... 162,600 $2.37 $2.37
Canceled...................... (4,450) $2.37
-------
Outstanding at December 31,
1998....................... 385,150 $1.59
Granted....................... 540,500 $2.74 $5.38
Canceled...................... (11,650) $2.37
-------
Outstanding at December 31,
1999....................... 914,000 $2.71
=======
</TABLE>
The following summarizes the outstanding and exercisable options under the
Plan as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
- -------------- ----------- ---------- -------- ----------- --------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.30 109,000 1.0 $0.30 87,200 $ .30
$1.76 - $2.37 415,500 3.1 $2.20 161,482 $2.10
$3.11 - $4.00 389,500 3.1 $3.94 96,025 $3.95
------- -------
914,000 344,707
======= =======
</TABLE>
For all options granted in 1997 and 1998, the exercise price equaled the
fair value of the common stock on the date of grant. In 1999, options granted
with an exercise price equal to fair value of the common stock had a
weighted-average exercise price of $2.42. Options granted with an exercise price
below gain value had a weighted average exercise price and weighted-average fair
value of $3.96 and $6.66 per share, respectively.
F-28
<PAGE> 119
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
If compensation expenses had been recognized based on the fair value of the
options at their grant date, in accordance with Statement of Financial
Accounting Standard No. 123 ("FAS 123"), pro forma results of operations would
be as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Loss applicable to common stock:
As reported............................ $(2,524) $(3,169) $(36,870)
Pro forma under FAS 123................ (2,566) (3,231) (37,062)
Basic and diluted net loss per share:
As reported............................ ($ 0.33) ($ 0.42) ($ 6.43)
Pro forma under FAS 123................ ($ 0.34) ($ 0.43) ($ 6.46)
</TABLE>
The estimated fair value at date of grant for options granted for the year
ended December 31, 1999 ranged from $2.37 to $7.00. The fair value of each
option is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ -----
<S> <C> <C> <C>
Risk free interest rate.................... 6.3% 5.4% 5.8%
Expected dividend yield.................... 0 0 0
Expected life of option (years)............ 5 5 4.33
Expected volatility........................ 0.0001% 0.0001% 28.83%
</TABLE>
As additional options are expected to be granted in future years and the
options vest over several years, the above pro forma results are not necessarily
indicative of future pro forma results.
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
plans. Deferred compensation of $764 was recorded for the year ended December
31, 1999. This represents compensation expense that will be recognized over the
remaining vesting period. Compensation expense of $253 was recorded for the year
ended December 31, 1999. No compensation expense has been recognized for
stock-based compensation plans for the years ended December 31, 1998 and 1997.
NOTE 13 - DEFERRED ADVERTISING:
As part of the Series F mandatorily redeemable convertible preferred stock
offering, the Company entered into an agreement with National Broadcasting
Company, Inc. "NBC". In the agreement NBC provides television advertising rights
to the Company in exchange for 631.25 shares of Series F mandatorily redeemable
preferred stock issued to NBC Interactive Media, Inc. in December
F-29
<PAGE> 120
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
1999. This advertising can be broadcast on NBC, NBC's owned and operated
television stations or CNBC. The term of the agreement is two years, effective
January 1, 2000. The Company has accounted for these services as deferred
advertising at the fair value of the Series F mandatorily redeemable preferred
shares exchanged for the advertising rights of $4,261. These advertising rights
will be amortized to expense as the advertising is used by the Company.
NOTE 14 - SUBSEQUENT EVENTS:
WARRANTS
On January 4, 2000 the Company amended its certificate of incorporation to
change its name from Intelligent Information Incorporated to i3 Mobile, Inc.
On January 25, 2000, the Company entered into a two-year agreement with
Sony Corporation of America, "Sony". This agreement provides the Company with
the right to distribute content from Sony or its affiliates upon execution of
distribution agreements. The Company will issue warrants to Sony to purchase
20,000 common shares at an exercise price of $10.00 per share for each content
distribution agreement Sony or any of its affiliates enters into with the
Company, or 30,000 shares for the first distribution agreement reached prior to
March 31, 2000. The aggregate number of shares of common stock issuable under
this contingent warrant agreement is 110,000 shares. These warrants expire three
years after their issuance.
The accounting treatment for these contingent warrants to be issued to Sony
is prescribed by EITF 96-18. Under EITF 96-18 the measurement date for
determining the fair value of these warrants would not occur until such time as
an agreement is entered into between i3 Mobile and Sony or its affiliates. The
fair value of the warrants will be determined through a Black-Scholes pricing
model utilizing the fair value of the Company's common stock as of the
measurement date.
OPTIONS
Subsequent to December 31, 1999 the Company has committed to issue 264,000
stock options to employees pursuant to employment agreements at an exercise
price of $7.92 per share. The granting of these options by the Board of
Directors will result in a material deferred compensation charge to be amortized
over the vesting period of the options.
On February 9, 2000, the Board of Directors adopted the 2000 Stock
Incentive Plan. This plan provides for the issuance of up to 1,250,000 shares of
common stock through the granting of stock options to employees, officers,
consultants and directors. The option exercise price will be determined by the
Board and may be equal to or greater than the fair market value of a share of
the Company's common stock on the date of grant. The plan limits the number of
options issued to any one employee in one fiscal year to 300,000. No options
have been issued to date under the 2000 Stock Incentive Plan.
F-30
<PAGE> 121
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE SALE OF COMMON
STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE
DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH
THE OFFER OR SOLICITATION IS UNLAWFUL.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 9
Forward Looking Statements............. 24
Use of Proceeds........................ 25
Dividend Policy........................ 25
Capitalization......................... 26
Dilution............................... 27
Selected Consolidated Financial Data... 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 29
Our Business........................... 40
Management............................. 65
Certain Relationships and Related
Transactions......................... 75
Principal Stockholders................. 78
Description Of Capital Stock........... 80
Shares Eligible for Future Sale........ 84
Underwriting........................... 86
Experts................................ 89
Legal Matters.......................... 89
Where You Can Find Additional
Information.......................... 89
Reports to Stockholders................ 89
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATIONS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[I3 MOBILE, INC. LOGO]
i3 MOBILE, INC.
4,400,000 SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
CHASE H&Q
CREDIT SUISSE FIRST BOSTON
PROSPECTUS
, 2000
<PAGE> 122
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by i3 Mobile in connection with this offering,
other than underwriting discounts and commissions, are as follows. All amounts
other than the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 21,374
NASD filing fee............................................. 7,000
Nasdaq National Market listing fee.......................... 1,000
Printing and engraving expenses............................. 500,000
Accounting fees and expenses................................ 750,000
Legal fees and expenses..................................... 750,000
Blue Sky fees and expenses.................................. 25,000
Transfer Agent and Registrar fees and expenses.............. 25,000
Miscellaneous expenses...................................... 100,626
----------
Total:................................................. $2,180,000
==========
</TABLE>
- -------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102 of the Delaware General Corporation Law, the
Restated Certificate of Incorporation of i3 Mobile (filed as Exhibit 3.1 to this
registration statement) eliminates its directors' personal liability to i3
Mobile or its stockholders for monetary damages for a breach of fiduciary duty
as a director of i3 Mobile, except:
- for any breach of the director's duty of loyalty to i3 Mobile or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for payment of dividends or stock purchases or redemptions by the
corporation in violation of Section 174 of the Delaware General
Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
As a result of this provision, i3 Mobile and its stockholders may be unable to
obtain monetary damages from a director for certain breaches of his or her
fiduciary duty to i3 Mobile. This provision does not, however, eliminate the
II-1
<PAGE> 123
directors' fiduciary responsibilities and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. The provision also does not affect a
director's responsibilities under any other laws, such as the federal securities
laws or state or federal environmental laws.
The Amended Bylaws of i3 Mobile (filed as Exhibit 3.2 to this registration
statement) provide that i3 Mobile must indemnify its directors and officers to
the fullest extent permitted by the Delaware General Corporation Law and that it
may indemnify its employees and agents in accordance with Delaware law as
determined by i3 Mobile's board of directors in its sole discretion. Under
Section 145 of the Delaware General Corporation Law, a Delaware corporation has
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that the person is or was a director, officer, employee or agent of the
corporation. The corporation may indemnify such a person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with the action,
suit or proceeding if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful, except that, in the
case of an action by or in the right of the corporation, judicial approval is
required for indemnification in respect of any claim, issue or matter as to
which the person was adjudged to be liable to the corporation. To the extent
that a present or former director or officer of a corporation is successful on
the merits or otherwise in the defense of any such action, suit or proceeding,
the corporation must indemnify him or her against the expenses (including
attorney's fees) he or she actually and reasonably incurred. Under Delaware law,
the expenses of an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by a
Delaware corporation in advance of the final disposition of the action, suit or
proceeding after delivery to the corporation of an undertaking by or on behalf
of the director or officer to repay such amounts if it is ultimately determined
that the director or officer is not entitled to be indemnified. Expenses
incurred by former directors and officers or other employees and agents may be
so paid on such terms and conditions, if any, as the corporation deems
appropriate.
The Underwriting Agreement (filed as Exhibit 1.1 to this registration
statement) provides for indemnification by the underwriters of i3 Mobile and its
officers and directors for certain liabilities arising under the Securities Act
of 1933, as amended, or otherwise.
The indemnification provision in i3 Mobile's Restated Certificate of
Incorporation, Amended Bylaws and the Underwriting Agreement may be sufficiently
broad to permit indemnification of i3 Mobile's directors and executive officers
for liabilities arising under the Securities Act of 1933, as amended.
i3 Mobile has obtained a Directors' and Officers' Liability and Private
Company Reimbursement Insurance Policy that insures its directors and officers
against the cost of defense, settlement or payment of a judgment under certain
circumstances.
II-2
<PAGE> 124
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following securities were issued by i3 Mobile within the past three
years and were not registered under the Securities Act of 1933, as amended (the
"Securities Act").
(a) Pursuant to a Stock Purchase Agreement dated August 30, 1996, i3 Mobile
issued 1,421 shares of Series B Convertible Preferred Stock and warrants to
purchase up to an additional 153,000 shares of common stock to Keystone Venture
IV, L.P. for $1.76 per common share or an aggregate purchase price of $1,250,000
in cash. These warrants were not exercised and expired. Subsequently, the
Company issued a warrant to purchase 234,465 shares of common stock to Keystone
Venture IV, L.P. in consideration for the elimination of the right to receive
dividends payable upon a sale or initial public offering of i3 Mobile. This
warrant was exercisable at any time until December 31, 1998 at an exercise price
of $3.00 per share. In April 1998, i3 Mobile extended the expiration date of
this warrant to December 31, 2001. Also, in connection with the issuance of the
Series B Convertible Preferred Stock, Keystone Venture IV, L.P. purchased an
additional 284 shares of Series B Convertible Preferred Stock for $1.76 per
common share or an aggregate purchase price of $250,000 in cash in February
1998. Each of these shares will be converted into 500 shares of our common stock
upon the completion of this offering.
(b) On December 30, 1996, i3 Mobile issued to Connecticut Development
Authority warrants to purchase 101,500 shares of common stock in connection with
a loan to us of $750,000. The warrants are exercisable at any time until
December 31, 2003 at an exercise price of $1.72 per share. The warrants were
exercised on December 22, 1999 by converting a portion of the outstanding loan
equal to the aggregate warrant exercise price.
(c) Between July 31, 1997 and October 16, 1998, the following investors
purchased an aggregate of 2,194 shares of Series C Convertible Preferred Stock
for an aggregate consideration of $2,458,000:
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER COMMON STOCK
NAME SHARES SHARE PRICE PER SHARE
- ---- ------ --------- ---------------
<S> <C> <C> <C>
William Lombardi.............................. 22 $ 879.66 $1.76
GII Family Partnership........................ 227 879.66 1.76
Glenville Capital Partnership L.P. ........... 227 879.66 1.76
Robert Flynn.................................. 125 1,187.00 2.37
George Denney................................. 168 1,187.00 2.37
Wayne & Jordan................................ 84 1,187.00 2.37
Peter Linder.................................. 42 1,187.00 2.37
Robert Muir, Jr. ............................. 126 1,187.00 2.37
Francis Unnold................................ 9 1,187.00 2.37
Henry Applebaum............................... 84 1,187.00 2.37
Alson II Partners............................. 210 1,187.00 2.37
Ruth McAdam................................... 21 1,187.00 2.37
Elizabeth Rogers.............................. 2 1,187.00 2.37
Marge Bonomo.................................. 9 1,187.00 2.37
</TABLE>
II-3
<PAGE> 125
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER COMMON STOCK
NAME SHARES SHARE PRICE PER SHARE
- ---- ------ --------- ---------------
<S> <C> <C> <C>
Charlene Rogers............................... 10 1,187.00 $2.37
Patrick McCarthy.............................. 21 1,187.00 2.37
Robert Collawn................................ 50 1,187.00 2.37
Keystone Venture IV L.P. ..................... 421 1,187.00 2.37
Dennis Roland................................. 21 1,187.00 2.37
Michael Pryslak............................... 21 1,187.00 2.37
Triple I, LLC................................. 294 1,187.00 2.37
</TABLE>
Each of these shares will be converted into 500 shares of our common stock
upon the completion of this offering. Additionally, i3 Mobile issued to each of
G-II Family Partnership and Glenville Capital Partners L.P. warrants to purchase
37,455 shares of our common stock at $3.00 per share in connection with the
Series C issuance. The warrants are exercisable at any time until December 31,
1998 at an exercise price of $3.00 per share. In April 1998, i3 Mobile extended
the expiration date of these warrants to December 31, 2001.
(d) On December 17, 1997, i3 Mobile issued to Glenville Capital Partners,
L.P. warrants to purchase 100,000 shares of common stock in consideration of
loans to us aggregating $200,000. The warrants are exercisable at any time until
December 31, 1998 at an exercise price of $3.00 per share. In April 1998, i3
Mobile extended the expiration date of these warrants to December 31, 2001.
(e) On June 23, 1998, i3 Mobile issued to Keystone Venture IV, L.P.
warrants to purchase 350,000 shares of common stock in consideration for
services rendered in connection with 1998 financings. The warrants are
exercisable at any time until December 31, 2001 at an exercise price of $3.50
per share.
(f) Pursuant to a Stock Purchase Agreement dated as of August 11, 1998, i3
Mobile issued an aggregate of 843 shares of Series D Convertible Preferred Stock
to Apex Investment Fund III, L.P. and Apex Strategic Partners, LLC for $2.37 per
common share or an aggregate purchase price of $1,001,000 in cash and converted
notes payable. Each of these shares will be converted into 500 shares of our
common stock upon the completion of this offering. As part of the issuance of
the notes payable, i3 Mobile issued warrants to purchase an aggregate of 195,984
shares of its common stock to Apex Investment Fund III, L.P. and Apex Strategic
Partners, LLC. The warrants are exercisable at any time until July 31, 2003 at
an exercise price of $3.00 per share.
(g) On December 1, 1998, i3 Mobile issued to Glenville Capital Partners,
L.P. a warrant to purchase 150,000 shares of common stock at an exercise price
of $3.50 per share related to previously issued notes payable. These warrants
are exercisable at any time until December 31, 2001.
(h) Pursuant to a Stock Purchase Agreement dated December 1, 1998, and
consummated on February 12, 1999, i3 Mobile redeemed 3,770 shares of Series A
Convertible Preferred Stock and 1,885,000 shares of common stock from
Intelligent Investment Partners, Inc. for an aggregate purchase price consisting
of $3,000,000 in cash, a $5,000,000 10% promissory note and a warrant to
purchase 500,000 shares of common stock. This warrant is exercisable at any time
until February 11, 2004 at an exercise price of $3.00 per share. This promissory
note
II-4
<PAGE> 126
was converted into Series F mandarorily redeemable preferred stock in December
1999.
(i) Pursuant to a Stock Purchase Agreement dated February 1, 1999, i3
Mobile sold a total of 9,643.2 shares of Series E Convertible Preferred Stock to
BG Media Investors L.P. for $3.11 per common share or an aggregate purchase
price of $15,000,000. 7,714.56 shares were purchased in February 1999 for
$12,000,000 and 1,928.64 shares were purchased in November 1999 for $3,000,000.
Each of these shares will be converted into 500 shares of our common stock upon
the completion of this offering.
(j) On March 8, 1999, i3 Mobile issued warrants, in accordance with its
Loan Incentive Warrant Plan, to purchase an aggregate of 200,000 shares of
common stock in consideration for certain loans made to i3 Mobile by the
following persons and entities:
<TABLE>
<CAPTION>
ISSUED TO: NO. OF SHARES
- ---------- -------------
<S> <C>
Glenville Capital Partners, L.P. ........................ 113,823
Apex Investment Fund III, L.P. .......................... 19,251
Apex Strategic Partners, LLC............................. 984
Certain directors, officers and employees................ 65,942
</TABLE>
All of the warrants listed above are exercisable at any time until December 31,
2001 at an exercise price of $3.50 per share.
(k) Pursuant to a Stock Purchase Agreement dated as of December 22, 1999,
i3 Mobile sold an aggregate of 8,248.33 shares of Series F Convertible Preferred
Stock for $7.92 per common share or an aggregate purchase price of $32,667,000
to the following strategic and financial investors:
<TABLE>
<CAPTION>
PURCHASE
NAME NO. OF SHARES PRICE
---- ------------- ----------
<S> <C> <C>
NBC Interactive Media, Inc. 1,262.50 $5,000,000
Sony Corporation of America 505.00 2,000,000
Sony Music Entertainment Inc. 757.50 3,000,000
GE Capital Equity Investments, Inc. 1,262.50 5,000,000
Bowman Capital Management Funds 1,262.50 5,000,000
MCI WorldCom, Inc. 1,262.50 5,000,000
Keystone Venture V, L.P. 757.50 3,000,000
Susquehanna Partners, GP 378.75 1,500,000
Clearnet Communications, Inc. 340.87 1,350,000
BT Investment Partners, Inc. 252.5 1,000,000
Connecticut Development Authority 206.21 817,000
</TABLE>
The aggregate consideration was paid in cash except for the value of future
television advertising rights from the National Broadcasting Company, Inc.,
$317,000 in conversion of a portion of an outstanding loan from Connecticut
Development Authority and $5,000,000 in conversion of a note payable from an
II-5
<PAGE> 127
affiliate of MCI WorldCom, Inc. Each of these shares will be converted into 500
shares of our common stock upon the completion of this offering.
(l) As of the date of this prospectus, i3 Mobile had granted options to
employees under the 1995 Stock Incentive Plan to purchase an aggregate of
914,000 shares of common stock at a weighted average exercise price of $2.71 per
share.
The sale and issuance of securities in the transactions described set forth
in paragraphs (a) to (k) above were exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act or Regulation D
promulgated thereunder as transactions by an issuer not involving a public
offering where the purchasers were sophisticated investors who represented their
intention to acquire securities for investment only and not with a view to
distribution and received or had access to adequate information about i3 Mobile.
Appropriate restrictive legends were affixed to the stock certificates issued in
these transactions, and the affixing of similar legends is required in
connection with any subsequent sales of any such securities.
The sale and issuance of the options described in paragraph (l) above were
exempt from registration under the Securities Act in reliance on Rule 701 as
transactions under a written compensatory benefit plan established by i3 Mobile
for the participation of its employees, directors, officers, consultants and
advisors.
No underwriters were employed in any of the above transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Underwriting Agreement.++
3.1 Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on February 16,
1999.+
3.2 Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of the State
of Delaware on December 22, 1999.*
3.3 Certificate of Designations, Powers, Preferences and Rights
of Series F Convertible Preferred Stock filed with the
Secretary of State of the State of Delaware on December 22,
1999.*
3.4 Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of the State
of Delaware on December 22, 1999.*
3.5 Amendment to Certificate of Designations, Powers,
Preferences and Rights of Series F Convertible Preferred
Stock filed with Secretary of State of Delaware on December
30, 1999.*
3.6 Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of the State
of Delaware on January 4, 2000.*
3.7 Amended and Restated Bylaws of i3 Mobile as amended as of
February 9, 2000.*
4.1 Form of Common Stock Certificate.++
</TABLE>
II-6
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4.2 Fourth Amended and Restated Stockholders Agreement dated
December 22, 1999.*
4.3 1995 Stock Incentive Plan, as amended, as of July 13, 1999.+
4.4 Third Amended and Restated Registration Rights Agreement
dated December 22, 1999.*
4.6 General Form of Warrant issued to other warrantholders.+
5.1 Opinion of Piper Marbury Rudnick & Wolfe LLP.++
10.1 Employment Agreement by and between i3 Mobile and Stephen G.
Maloney dated as of January 1, 1999 as amended September 9,
1999.+
10.2 Employment Agreement by and between i3 Mobile and Robert M.
Unnold dated January 1, 1999, as amended September 9, 1999.+
10.3 Employment and Royalty Agreement by and between i3 Mobile
and Jeffrey N. Klein dated October 27, 1998.+
10.4 Agreement of Lease by and between i3 Mobile and Seaboard
Property Management, Inc. dated April 27, 1995, as amended.+
10.4a Lease Modification Agreement between i3 Mobile and Seaboard
Property Management, Inc. dated February 1997.+
10.5 Ridgewood Square Office Park Commercial Lease by and between
i3 Mobile and Ridgewood Square Ltd. dated February 7, 1997.+
10.6 Agreement of Sublease by and between i3 Mobile and National
Westminster Bank, PLC, dated as of September 9, 1999.+
10.7 Lease Agreement by and between i3 Mobile and Double Creek
Capital Corporation dated November 30, 1999.+
10.8 Stock Purchase Agreement by and between i3 Mobile and
Michael J. Pryslak and Dennis M. Roland dated February 27,
1992, as amended as of September 30, 1994 and further
amended in November 1998.+
10.9 Master Service Agreement by and between i3 Mobile and AT&T
Wireless Services, Inc. dated November 3, 1998.**+
10.10 Preferred Content License Agreement by and between i3 Mobile
and AT&T Wireless Service Data, Inc. d/b/a AT&T Wireless
Services dated May 1, 1997, as amended May 1, 1998.+
10.11 Service Agreement by and between i3 Mobile and Bell Mobility
Cellular Inc. dated May 12, 1998.**+
10.12 Service Reseller Agreement by and between i3 Mobile and
Omnipoint Communications Services dated November 8, 1996, as
amended July 10, 1998.**+
10.12a Amendment to Service Reseller Agreement by and between i3
Mobile and Omnipoint Communications Services dated July 10,
1998.**+
10.13 Services Agreement by and between i3 Mobile and Southwestern
Bell Mobile Systems, Inc. and Southwestern Bell Wireless
Inc. dated June 9, 1998.**+
10.13a Amendment to Services Agreement by and between i3 Mobile and
Southwestern Bell Mobile Systems Inc. and Southwestern Bell
Wireless Inc. dated January 11, 1999.**+
10.14 Service Agreement by and between i3 Mobile and AirTouch
Cellular dated April 30, 1999.**+
10.15 Service Agreement by and between i3 Mobile and The Weather
Channel Enterprises, Inc. dated December 21, 1998.**+
</TABLE>
II-7
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.16 Letter Agreement by and between i3 Mobile and National
Broadcasting Company, Inc. dated December 24, 1999.+
10.17 Letter Agreement by and between i3 Mobile and NBC
Interactive Media, Inc. dated December 29, 1999.+
10.18 Letter Agreement by and between i3 Mobile and 1-800-flowers
dated May 6, 1997.** *
10.19 2000 Stock Incentive Plan.*
10.20 Employment Agreement by and between i3 Mobile and Michael P.
Neuscheler dated as of January 10, 2000.++
10.21 Letter Agreement by and between i3 Mobile and Sony
Corporation of America dated January 25, 2000.*
21.1 Subsidiaries of the Registrant.+
23.1 Consent of PricewaterhouseCoopers LLP.*
23.2 Consent of Counsel (included in Exhibit 5.1).++
24.1 Power of Attorney.+
27.1 Financial Data Schedule.*
</TABLE>
- -------------------------
* Filed herewith.
** Confidential treatment has been requested for certain portions of this
Exhibit pursuant to Rule 406 promulgated under the Securities Act.
Confidential portions of this Exhibit have been filed separately with the
Securities and Exchange Commission.
+ Filed previously.
++ To be filed by amendment.
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION
- -------- -----------
<C> <S>
I Report of PricewaterhouseCoopers LLP on financial statement
schedule
II Valuation and Qualifying Accounts
</TABLE>
II-8
<PAGE> 130
SCHEDULE I
REPORT OF PRICEWATERHOUSECOOPERS LLP ON FINANCIAL STATEMENT SCHEDULE
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
To the Board of Directors and Stockholders
of i3 Mobile, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 14, 2000 appearing on page F-2 in this Registration Statement on
Form S-1 of i3 Mobile, Inc. also included an audit of the Financial Statement
Schedule listed in Part II Item 16(b) of this Registration Statement on Form
S-1. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 14, 2000
II-9
<PAGE> 131
SCHEDULE II
I3 MOBILE, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<S> <C>
Allowance for doubtful accounts:
Balance, January 1, 1997.................................... $ 50,000
Provision................................................. 20,000
Recoveries................................................ -
Charge-offs............................................... 28,000
--------
Balance, December 31, 1997.................................. 42,000
Provision................................................. 65,000
Recoveries................................................ 3,000
Charge-offs............................................... -
--------
Balance, December 31, 1998.................................. 110,000
Provision................................................. 131,000
Recoveries................................................ -
Charge-offs............................................... (98,000)
--------
Balance, December 31, 1999.................................. $143,000
========
</TABLE>
II-10
<PAGE> 132
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as may be required by the underwriter
to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 14 of this
registration statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933, as amended, and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) For the purpose of determining any liability under the Securities
Act of 1933, as amended, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of
1933, as amended, shall be deemed to be part of this registration statement
as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-11
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Stamford,
State of Connecticut, on February 18, 2000.
i3 MOBILE, INC.
By: /s/ STEPHEN G. MALONEY
------------------------------------
Stephen G. Maloney
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STEPHEN G. MALONEY President and Chief Executive February 18, 2000
- ------------------------------------------ Officer and Director (Principal
Stephen G. Maloney Executive Officer)
/s/ MICHAEL P. NEUSCHELER Chief Financial Officer (Principal February 18, 2000
- ------------------------------------------ Financial and Accounting Officer)
Michael P. Neuscheler
* Chairman of the Board and Director February 18, 2000
- ------------------------------------------
Robert M. Unnold
* Director February 18, 2000
- ------------------------------------------
Kerry J. Dale
* Director February 18, 2000
- ------------------------------------------
James A. Johnson
* Director February 18, 2000
- ------------------------------------------
J. William Grimes
* Director February 18, 2000
- ------------------------------------------
Donald F. Christino
* Director February 18, 2000
- ------------------------------------------
W. Peter Daniels
*By: /s/ STEPHEN G. MALONEY February 18, 2000
- -----------------------------------------
Stephen G. Maloney
Attorney-In-Fact
</TABLE>
II-12
<PAGE> 134
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<C> <S> <C>
1.1 Underwriting Agreement++....................................
3.1 Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on February 16,
1999+.......................................................
3.2 Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of the State
of Delaware on December 22, 1999*...........................
3.3 Certificate of Designations, Powers, Preferences and Rights
of Series F Convertible Preferred Stock filed with the
Secretary of State of the State of Delaware on December 22,
1999*.......................................................
3.4 Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of the State
of Delaware on December 22, 1999*...........................
3.5 Amendment to Certificate of Designations, Powers,
Preferences and Rights of Series F Convertible Preferred
Stock filed with Secretary of State of the State of Delaware
on December 30, 1999.*......................................
3.6 Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of the State
of Delaware on January 4, 2000.*............................
3.7 Amended and Restated Bylaws of i3 Mobile as amended as of
February 9, 2000.*..........................................
4.1 Form of Common Stock Certificate++..........................
4.2 Fourth Amended and Restated Stockholders Agreement dated
December 22, 1999*..........................................
4.3 1995 Stock Incentive Plan, as amended, as of July 13,
1999+.......................................................
4.4 Third Amended and Restated Registration Rights Agreement
dated December 22, 1999*....................................
4.6 General Form of Warrant issued to other warrantholders+.....
5.1 Opinion of Piper Marbury Rudnick & Wolfe LLP++..............
10.1 Employment Agreement by and between i3 Mobile and Stephen G.
Maloney dated as of January 1, 1999 as amended September 9,
1999+.......................................................
10.2 Employment Agreement by and between i3 Mobile and Robert M.
Unnold dated January 1, 1999, as amended September 9,
1999+.......................................................
10.3 Employment and Royalty Agreement by and between i3 Mobile
and Jeffrey N. Klein dated October 27, 1998+................
10.4 Agreement of Lease by and between i3 Mobile and Seaboard
Property Management, Inc. dated April 27, 1995, as
amended+....................................................
10.4a Lease Modification Agreement between i3 Mobile and Seaboard
Property Management, Inc. dated February 1997+..............
</TABLE>
<PAGE> 135
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<C> <S> <C>
10.5 Ridgewood Square Office Park Commercial Lease by and between
i3 Mobile and Ridgewood Square Ltd. dated February 7,
1997+.......................................................
10.6 Agreement of Sublease by and between i3 Mobile and National
Westminster Bank, PLC, dated as of September 9, 1999+.......
10.7 Lease Agreement by and between i3 Mobile and Double Creek
Capital Corporation dated November 30, 1999+................
10.8 Stock Purchase Agreement by and between i3 Mobile and
Michael J. Pryslak and Dennis M. Roland dated February 27,
1992, as amended as of September 30, 1994 and further
amended in November 1998+...................................
10.9 Master Service Agreement by and between i3 Mobile and AT&T
Wireless Services, Inc. dated November 3, 1998**+...........
10.10 Preferred Content License Agreement by and between i3 Mobile
and AT&T Wireless Service Data, Inc. d/b/a AT&T Wireless
Services dated May 1, 1997, as amended May 1, 1998+.........
10.11 Service Agreement by and between i3 Mobile and Bell Mobility
Cellular Inc. dated May 12, 1998**+.........................
10.12 Service Reseller Agreement by and between i3 Mobile and
Omnipoint Communications Services dated November 8, 1996, as
amended July 10, 1998**+....................................
10.12a Amendment to Service Reseller Agreement by and between i3
Mobile and Omnipoint Communications Services dated July 10,
1998**+.....................................................
10.13 Services Agreement by and between i3 Mobile and Southwestern
Bell Mobile Systems, Inc. and Southwestern Bell Wireless
Inc. dated June 9, 1998**+..................................
10.13a Amendment to Services Agreement by and between i3 Mobile and
Southwestern Bell Mobile Systems Inc. and Southwestern Bell
Wireless Inc. dated January 11, 1999**+.....................
10.14 Service Agreement by and between i3 Mobile and AirTouch
Cellular dated April 30, 1999**+............................
10.15 Service Agreement by and between i3 Mobile and The Weather
Channel Enterprises, Inc. dated December 21, 1998**+........
10.16 Letter Agreement by and between i3 Mobile and National
Broadcasting Company, Inc. dated December 24, 1999.+........
10.17 Letter Agreement by and between i3 Mobile and NBC
Interactive Media, Inc. dated December 29, 1999.+...........
10.18 Marketing Agreement by and between i3 Mobile and
1-800-FLOWERS dated May 6, 1997.** *........................
10.19 2000 Stock Incentive Plan.*.................................
10.20 Employment Agreement by and between i3 Mobile and Michael P.
Neuscheter dated as of January 10, 2000.++..................
</TABLE>
<PAGE> 136
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<C> <S> <C>
10.21 Letter Agreement by and between i3 Mobile and Sony
Corporation of America dated January 25, 2000.*.............
21.1 Subsidiaries of the Registrant+.............................
23.1 Consent of PricewaterhouseCoopers LLP*......................
23.2 Consent of Counsel (included in Exhibit 5.1)++..............
24.1 Power of Attorney+..........................................
27.1 Financial Data Schedule*....................................
</TABLE>
- -------------
+ Previously filed.
** Confidential treatment has been requested for certain portions of this
Exhibit pursuant to Rule 406 promulgated under the Securities Act.
Confidential portions of this Exhibit have been filed separately with the
Securities and Exchange Commission.
* Filed herewith.
++ To be filed by amendment.
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
INTELLIGENT INFORMATION INCORPORATED
-----------------------------------------
PURSUANT TO SECTIONS 228 AND 242 OF THE
DELAWARE GENERAL CORPORATION LAW
-----------------------------------------
INTELLIGENT INFORMATION INCORPORATED (the "Corporation"), a corporation
organized and existing under and by virtue of the Delaware General Corporation
Law, hereby certifies:
1. The first sentence of Article "FOURTH" of the Restated Certificate of
Incorporation of the Corporation is hereby amended to increase the authorized
number of shares of Common Stock and Preferred Stock of the Corporation and, as
so amended, shall read in its entirety as follows:
"FOURTH. Number of Shares. The total number of shares of stock which
the Corporation shall have authority to issue is 50,000,000 shares
of Common Stock, par value $0.01 per share ("Common Stock"), and
50,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock")."
2. The foregoing amendment was duly adopted in accordance with Sections
228 and 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed on December 22, 1999.
INTELLIGENT INFORMATION
INCORPORATED
By: /s/ Stephen G. Maloney
----------------------------
Stephen G. Maloney
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND RIGHTS OF
SERIES F CONVERTIBLE PREFERRED STOCK
INTELLIGENT INFORMATION INCORPORATED
PURSUANT TO SECTION 151(g) OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Intelligent Information Incorporated, a Delaware corporation (the
"CORPORATION"), does hereby certify that, pursuant to the authority conferred
upon the Board of Directors by Article Fourth of its Restated Certificate of
Incorporation, as amended, which Restated Certificate of Incorporation, as
amended, authorizes 50,000 shares of Preferred Stock of the Corporation, par
value $0.01 per share, and pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware (the "DGCL"), as amended, the
Board of Directors of the Corporation, by unanimous consent in writing, has duly
adopted a resolution providing for the creation of a series of Preferred Stock,
par value $0.01 per share, designated as Series F Convertible Preferred Stock,
authorizing the issuance of 7,575 shares of Series F Convertible Preferred Stock
and setting forth the powers, designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation pursuant to the provisions of the DGCL and the
Corporation's Restated Certificate of Incorporation, the Corporation is
authorized to issue 7,575 shares of Series F Convertible Preferred Stock of the
Corporation, as a class of Preferred Stock of the Corporation to be designated
as "SERIES F CONVERTIBLE PREFERRED STOCK," par value $0.01 per share, which
shall have such powers, designations, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions, in addition to those set forth in the Restated Certificate of
Incorporation, as amended, as are set forth below:
1. Designation; Number of Shares. The designation of this Series of
Preferred Stock shall be "Series F Convertible Preferred Stock," par value $0.01
per share (the "SERIES F PREFERRED STOCK"). The maximum number of shares of
Series F Preferred Stock that may be issued shall be 7,575 shares. The Series F
Preferred Stock shall have an initial stated value of $3,960.40 per share (the
"SERIES F STATED VALUE"). In the event of any stock split, stock dividend,
combination or other recapitalization transaction by which the Corporation
increases or decreases its outstanding Series F Preferred Stock, the Series F
Stated Value per share of Series F Preferred Stock shall be adjusted to reflect
such recapitalization.
<PAGE> 2
2. Voting Rights.
(a) The holder of each share of Series F Preferred Stock shall
have the right to one vote for each share of Common Stock into which such Series
F Preferred Stock could then be converted, and with respect to such vote, such
holder shall have full voting rights and powers equal to the voting rights and
powers of the holders of Common Stock, and shall be entitled to notice of any
shareholders' meeting in accordance with the By-laws of the Corporation, and
shall be entitled to vote, together with the holders of Common Stock, with
respect to any question upon which holders of Common Stock have the right to
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights available on an as-converted basis (after aggregating all shares
into which shares of Series F Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
(b) The holders of Series F Preferred Stock shall also be
entitled to vote as a class upon the following matters, which matters shall
require the approval of the holders of a majority of the outstanding shares of
Series F Preferred Stock with respect to clauses (i), (iii), (iv) and (v) below
and all of the outstanding shares of Series F Preferred Stock with respect to
clauses (ii) and (vi) below:
(i) the merger, consolidation, division, mandatory share
exchange, recapitalization, liquidation or sale of all or substantially all of
the assets of the Corporation;
(ii) the amendment of the By-laws or the Restated Certificate
of Incorporation, as amended, of the Corporation in a way that adversely affects
the rights, preferences or privileges of the holders of the Series F Preferred
Stock or the rights and protections accorded to the directors of the
Corporation;
(iii) the payment or making of any dividends or distributions
on or redemptions of any equity securities, provided, however, the Corporation
may redeem equity securities from departed or terminated employees and in
accordance with the rights of any other holder of Preferred Stock of the
Corporation;
(iv) the incurrence of funded indebtedness, capitalized lease
obligations or guarantees of third party debt, in each case involving an amount
in excess of One Million Dollars ($1,000,000);
(v) the engagement in any transaction which involves dealings
between the Corporation and insiders and affiliates (including the authorization
or issuance of stock options); and
(vi) the issuance of an equity security senior to or pari
passu with respect to voting rights, dividends, conversion rights or liquidation
preference with the Series F Preferred Stock.
-2-
<PAGE> 3
3. Dividends.
(a) The holders of record of shares of the Series F Preferred
Stock shall be entitled to receive, when and if declared out of funds legally
available therefor, an annual, cumulative cash dividend (the "SERIES F PREFERRED
DIVIDEND"), from the date of the issuance of the Series F Preferred Stock at the
annual rate of 10% of the Series F Stated Value per share of Series F Preferred
Stock. The Series F Preferred Dividend shall accrue and accumulate (without
compounding) beginning on the date of issuance and shall cease to accrue on and
after the date of the earlier of (i) the conversion or redemption of such shares
or (ii) the Sale (as hereinafter defined) of the Corporation or a Public
Offering (as hereinafter defined). If a Sale or Public Offering occurs in either
case where the value of the Corporation is equal to or greater than Two Hundred
Fifty Million Dollars ($250,000,000), all accrued and unpaid Series F Preferred
Dividends shall be forfeited by the holders of the Series F Preferred Stock.
(b) Except as set forth in Section 3(a) above, unless earlier
paid, any and all Series F Preferred Dividends that have accrued shall be
payable in full at the beginning of the Put Option Period (as hereinafter
defined) or upon an earlier Sale or Public Offering in either case where the
value of the Corporation is less than Two Hundred Fifty Million Dollars
($250,000,000).
(c) If dividends are declared and paid on the Corporation's
Common Stock, then the Series F Preferred Stock shall receive dividends pari
passu with the holders of the Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock on the number of shares of Common Stock into which
the Series F Preferred Stock would be converted on the day such Common Stock
dividends are declared, but in no event in an amount less than the dividends
declared and paid on the Corporation's Common Stock.
(d) A "SALE" shall mean (i) the merger, consolidation, division,
mandatory share exchange, sale of stock or other transaction resulting in the
stockholders of the Corporation prior to the transaction or series of
transactions owning less than 50% of the voting stock of the Corporation after
the transaction or series of transactions or (ii) a sale of all or substantially
all of the assets of the Corporation. A "PUBLIC OFFERING" shall mean an
underwritten public offering pursuant to an effective Registration Statement
under the Securities Act of 1933, as amended, covering the offer and sale by the
Corporation of its Common Stock (by such a registration statement or statements
being declared effective by the Securities and Exchange Commission and such
Securities being registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") (regardless of whether the Corporation is
subject to the filing requirements of Section 15(d) of the Exchange Act).
-3-
<PAGE> 4
4. Conversion Rights of Series F Preferred Stock.
(a) Optional Conversion.
(i) A holder of record of any share or shares of Series F
Preferred Stock shall have the right, at any time, at such holder's option, to
convert, without the payment of any additional consideration, each share of
Series F Preferred Stock held by such holder into that number of fully paid and
non-assessable shares of Common Stock as is determined by multiplying 1 by the
Series F Conversion Factor (as defined below)
(ii) Upon the optional conversion of any shares of Series F
Preferred Stock, such shares of Series F Preferred Stock shall resume the status
of authorized and unissued shares of the Preferred Stock, par value $0.01 per
share, of the Corporation, without designation as to series until such shares
are once more designated as part of a particular series by the Board of
Directors.
(iii) If a holder of shares of Series F Preferred Stock
desires to exercise the optional conversion right pursuant to this subsection
4(a), such holder shall give written notice to the Corporation of such holder's
election to convert a stated number of shares of Series F Preferred Stock into
shares of Common Stock, at the conversion rate then in effect, which shall be
accompanied by the certificate or certificates representing such shares of
Series F Preferred Stock that shall be converted into Common Stock. The notice
shall also contain a statement of the name or names in which the certificate or
certificates for Common Stock shall be issued. If such certificate or
certificates are to be issued to any person or persons other than the registered
holder or holders of such certificate or certificates, or if such certificate or
certificates are registered in the name or names of any person or persons other
than the person or persons signing the notice, the signatures on the notice must
be guaranteed by a participant in the Security Transfer Agents Medallion Program
or the New York Stock Exchange Medallion Signature Guarantee Program. Promptly
after receiving the aforesaid notice and certificate or certificates
representing the Series F Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver to such holder of Series F Preferred Stock,
or to such holder's nominee or nominees, a certificate or certificates for the
number of shares of Common Stock issuable upon conversion of such Series F
Preferred Stock, and the certificates representing shares of Series F Preferred
Stock surrendered for conversion shall be canceled by the Corporation. If the
number of shares represented by the certificate or certificates surrendered for
conversion shall exceed the number of shares to be converted, the Corporation
shall issue and deliver to the person entitled thereto a certificate
representing the balance of any unconverted shares.
(b) Mandatory Conversion.
(i) Immediately prior to the first closing of a Qualified
Public Offering (as hereinafter defined) of the Common Stock of the Corporation,
each share of Series F Preferred Stock held by such holder shall immediately be
converted into that number of fully paid and non-assessable shares of Common
Stock as is determined by multiplying 1 by the Series F Conversion Factor (as
defined below).
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<PAGE> 5
(ii) A "QUALIFIED PUBLIC OFFERING" is hereby defined as a
Public Offering in which the pre-money valuation of the Corporation is no less
than Two Hundred Twenty-Five Million Dollars ($225,000,000) and the aggregate
proceeds (net of any underwriter's discount) to the Corporation exceed
Twenty-Five Million Dollars ($25,000,000).
(iii) The Corporation shall give each holder notice of the
occurrence of a Qualified Public Offering within a reasonable time of the
initial filing of a registration statement. At any time at or after the closing
of the Qualified Public Offering, the Corporation shall deliver to each holder
of Series F Preferred Stock such number of shares of Common Stock into which
such holder's shares are then convertible upon surrender by such holder of
certificates representing the shares of Series F Preferred Stock held by such
holder or presentation of an affidavit of loss certificate together with an
indemnity reasonably satisfactory to the Corporation.
(c) Conversion Factor. The initial conversion factor for the
Series F Preferred Stock shall be 500, subject to adjustment in accordance with
the provisions of this Section 4(c). The conversion factor in effect from time
to time, as adjusted to this Section 4(c), is referred to herein as the "SERIES
F CONVERSION FACTOR".
(i) Each adjustment to the Series F Conversion Factor
shall be calculated to the nearest four decimal places.
(ii) In the event that: (A) the Corporation shall, at any
time, pay a dividend in, or make a distribution on its Common Stock or any other
equity securities in, shares of Common Stock; (B) the Corporation shall, at any
time, by subdivision of its shares of outstanding Common Stock, by
reclassification, stock split or otherwise, subdivide its outstanding shares of
Common Stock into a greater number of shares; (C) the Corporation shall, at any
time, combine its outstanding shares of Common Stock into a lesser number of
shares, by reclassification, reverse stock split or otherwise (for purposes of
this Section 4(c)(ii), the events described in (A), (B) and (C) above shall be
referred to as "Capital Transactions"), then the Series F Conversion Factor then
in effect shall be adjusted to a number determined by multiplying the Series F
Conversion Factor in effect immediately prior to such Capital Transaction by the
following fraction:
X
-
Y
wherein:
X = the number of shares of Common Stock outstanding
immediately after such Capital Transaction; and
Y = the number of shares of Common Stock outstanding
immediately prior to such Capital Transaction.
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<PAGE> 6
(iii) The "SERIES F CONVERSION PRICE" shall be defined as the
fraction obtained by dividing the initial Series F Stated Value per share by the
Series F Conversion Factor in effect at the time such calculation is made. The
Series F Conversion Price shall initially be equal to $7.92 and shall be subject
to adjustment from time to time as hereinafter provided in subsection (iv)
below. Upon each adjustment of the Series F Conversion Price, the Series F
Conversion Factor shall be recalculated so that it is equal to the quotient
obtained by dividing the Series F Stated Value per share by the Series F
Conversion Price that is a result of the calculation set forth in subsection
(iv) below.
(iv) If the Corporation shall after the date hereof issue or sell
any Common Stock (other than Common Stock into which the Series B Preferred
Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock or the Series F Preferred Stock is convertible or Common Stock
issuable upon exercise of warrants outstanding on the date hereof or options to
purchase up to 2,264,000 shares of Common Stock granted or to be granted to
employees or consultants of the Corporation pursuant to any stock option plan
adopted by the Corporation and its stockholders), without consideration or for a
consideration per share (1) less than the Series F Conversion Price in effect
immediately prior to the issuance of such Common Stock or (2), in the case of
options granted after the date hereof, less than 75% of the Series F Conversion
Price in effect immediately prior to the issuance of such options, the Series F
Conversion Price in effect immediately prior to such issuance shall forthwith
(except as provided below in Section 4(c)(v)) be reduced to the price at which
such Common Stock was issued or sold by the Corporation.
The provisions of this Section 4(c)(iv) shall not apply under any
of the circumstances for which an adjustment is provided in Section 4(c)(ii)
above.
(v) For the purposes of any adjustment of the Series F Conversion
Price pursuant to this Section 4, the following provisions shall be applicable:
(A) In the case of the issuance of Common Stock for cash,
the consideration received therefor shall be deemed to be the amount of cash
paid therefor without deduction of any discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash received therefor shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors of the Corporation without
deduction for any discounts, commissions or other expenses allowed, paid or
incurred by the Corporation for any underwriting or otherwise in connection with
the issuance and sale thereof.
(C) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, the issuance of any securities by their
terms convertible into or exchangeable for Common Stock or the granting of any
options to purchase or rights to subscribe for such convertible or exchangeable
securities:
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<PAGE> 7
(w) The aggregate number of shares of Common Stock
initially deliverable upon exercise of such options or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were granted or issued, as the case may be, and for a consideration equal
to the consideration, if any (determined in the same manner provided in
subdivisions (A) and (B) above of this Section 4(c)(v) with respect to cash
consideration and consideration other than cash), received by the Corporation
upon the grant or issuance of such options or rights plus the minimum purchase
price provided in such options or rights for the Common Stock covered thereby;
(x) The aggregate number of shares of Common Stock
initially deliverable upon conversion of or in exchange for any such convertible
or exchangeable securities or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options were granted, and for a
consideration equal to the consideration received by the Corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each cash to be determined in the same manner as provided
in subdivision (w) above);
(y) On any change in the number of shares of Common
Stock deliverable upon exercise of such options or rights or conversion of or
exchange for such convertible or exchangeable securities, other than a change
resulting from anti-dilution provisions thereof not more favorable to the holder
thereof than those contained herein, the Series F Conversion Price shall
forthwith be readjusted to such Series F Conversion Price as would have been
obtained had the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities not covered prior to
such change been made upon the basis of such changed terms;
(z) On the expiration of such options or rights,
the termination of such right to convert or exchange or the expiration of the
options or rights related to such convertible or exchangeable securities, the
Series F Conversion Price shall forthwith be readjusted to such Series F
Conversion Price as would have been obtained had the readjustment been made upon
the issuance of such options, rights, securities or options or rights related to
such securities for only the number of shares of Common Stock actually issued
upon the exercise of such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(d) Notice of Change in Series F Conversion Factor. Whenever the
Series F Conversion Factor is adjusted as provided in Section 4(c), the
Corporation shall forthwith compute the adjusted Series F Conversion Factor in
accordance with this Section 4 and prepare a certificate signed by the President
and Chief Executive Officer and the Secretary, the Treasurer, any Assistant
Secretary or any Assistant Treasurer of the Corporation setting forth the
adjusted Series F Conversion Factor, the method of calculation thereof in
reasonable detail and the facts
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<PAGE> 8
requiring such adjustment and upon which such adjustment is based and shall mail
a notice stating that the Series F Conversion Factor has been adjusted, the
facts requiring such adjustment and upon which such adjustment is based and
setting forth the adjusted Series F Conversion Factor, to the holders of record
of the outstanding shares of the Series F Preferred Stock at or prior to the
time the Corporation mails an interim statement, if any, to its stockholders
covering the fiscal quarter during which the facts requiring such adjustment
occurred, but in any event within forty-five (45) days of the end of such fiscal
quarter.
(e) No Fractional Shares. Notwithstanding anything herein to the
contrary, no fractional shares of Common Stock shall be issued to any holder of
Series F Preferred Stock on conversion of such holder's Series F Preferred
Stock. With respect to any fraction of a share of Common Stock called for upon
any conversion after completion of the calculation of the aggregate number of
shares of Common Stock to be issued to such holder, the Corporation shall pay to
such holder an amount in cash equal to any fractional share to which such holder
would be entitled, multiplied by the current market value of a share, as
determined by the Board of Directors of the Corporation.
(f) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued Common
Stock, solely for issuance upon conversion of shares of Series F Preferred Stock
as herein provided, such number of shares of Common Stock as shall be issuable
from time to time upon the conversion of all of the shares of Series F Preferred
Stock at the time issued and outstanding.
5. Redemption at the Option of Holder. Each holder of Series F
Preferred Stock shall have the right at any time after such holder's receipt of
the Corporation's audited financial statements for the year ending December 31,
2003, but in no event later than June 30, 2004 (such date constituting the
beginning of the Put Option Period) to require such holder's shares of Series F
Preferred Stock to be redeemed by the Corporation, in whole or in part, in
accordance with the terms and subject to the conditions of that certain Put
Option Agreement dated December 22, 1999 between the Company and the holders of
the Series F Preferred Stock and the other parties thereto.
6. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up
(either voluntary or involuntary) of the Corporation (a "LIQUIDATION"), the
holders of the Series F Preferred Stock shall be entitled to receive, before any
distribution or payments are made upon any Common Stock or any other security
subordinate to the Series F Preferred Stock, after payment by the Corporation of
all sums due all creditors and before any distribution or payments are made upon
any of the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock to be paid out of the assets of
the Corporation available for distributions to its stockholders, an amount equal
to the Series F Stated Value per share for each outstanding share of Series F
Preferred Stock plus accrued and unpaid dividends (the "SERIES F SENIOR
PREFERENTIAL AMOUNT"). After the payment of the Series F Senior Preferential
Amount and the amounts payable to the holders of the Series B Preferred Stock,
the Series C Preferred Stock, the Series D Preferred Stock and the Series E
Preferred Stock in accordance with the
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<PAGE> 9
applicable provisions of the Restated Certificate of Incorporation of the
Corporation, as amended, the holders of the Series F Preferred Stock shall be
entitled to receive an additional amount until the holders of the Series F
Preferred Stock shall have received an aggregate Liquidation preference
(including the Series F Senior Preferential Amount) of two (2) times the Series
F Stated Value, and the Common Stock of the Corporation shall thereafter share
ratably in all remaining assets of the Corporation. If, upon Liquidation, the
assets available for distribution to the holders of Series F Preferred Stock
shall be insufficient to pay such holders their liquidation preference in full,
then such holders shall share ratably in the distribution of such assets in
proportion to the respective sums which would otherwise be payable upon such
distribution if all sums so payable to the holders of Series F Preferred Stock
were paid in full.
(b) A recapitalization, merger or consolidation involving the
Corporation, or a sale, lease or transfer of all or substantially all of the
assets of the Corporation shall, at the option of the holders of a majority of
the Series F Preferred Stock, be deemed a Liquidation.
7. Notices. Any notice required herein to be given to a holder of
the Series F Preferred Stock shall be deemed to be given if deposited in the
United States mail, first class postage prepaid, and addressed to the holder of
record at such holder's address appearing on the books of the Corporation.
8. Replacement. Upon receipt of evidence of the ownership and the
loss, theft, destruction or mutilation of any certificate evidencing one or more
shares of Series F Preferred Stock, and an agreement of the holder to indemnify
reasonably satisfactory to the Corporation, the Corporation will (at its
expense) execute and deliver in replacement of such certificate a new
certificate representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate.
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<PAGE> 10
IN WITNESS WHEREOF, Intelligent Information Incorporated has caused this
Certificate to be signed by its President and Chief Executive Officer on the
22nd day of December, 1999.
INTELLIGENT INFORMATION INCORPORATED
By: /s/ Stephen G. Maloney
--------------------------------
Stephen G. Maloney
President and Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
INTELLIGENT INFORMATION INCORPORATED
---------------------------------------
PURSUANT TO SECTIONS 228 AND 242 OF THE
DELAWARE GENERAL CORPORATION LAW
---------------------------------------
INTELLIGENT INFORMATION INCORPORATED (the "Corporation"), a corporation
organized and existing under and by virtue of the Delaware General Corporation
Law, hereby certifies:
1. The first sentence of Section 4(c) of Part II.A. of Article
"FOURTH" of the Restated Certificate of Incorporation is hereby amended to
correct the initial conversion factor of the Series B Preferred Stock of the
Corporation and, as so amended, shall read in its entirety as follows:
"The initial conversion factor shall be 500, subject to
adjustment in accordance with the provisions of this Section
4(c)."
2. Section 4(c)(iv) of Part II.A. of Article "FOURTH" of the
Restated Certificate of Incorporation is hereby amended to add reference to the
Series F Preferred Stock with respect to certain anti-dilution protections and,
as so amended, shall read in its entirety as follows:
"If the Corporation shall after the date hereof issue or sell
any Common Stock (other than Common Stock into which the Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock is convertible,
or options to purchase shares of Common Stock granted or to be granted
pursuant to any stock option plan adopted by the Corporation and its
stockholders, or Common Stock issuable upon exercise of warrants
delivered in connection with the purchase of Series C Preferred Stock)
without consideration or for a consideration per share less than the
Series B Conversion Price in effect immediately prior to the issuance
of such Common Stock, the Series B Conversion Price in effect
immediately prior to such issuance shall forthwith (except as provided
below in Section 3(d)(v)) be reduced to that price that is equal to
the fraction obtained by dividing:"
Subparagraphs A and B and the remainder of such Section shall
remain in full force and effect.
<PAGE> 2
3. The first sentence of Section 6 of Part II.A. of Article "FOURTH"
of the Restated Certificate of Incorporation is hereby amended to clarify the
relative liquidation rights of the several series of Preferred Stock and, as so
amended, shall read in its entirety as follows:
"(a) In the event of any liquidation, dissolution or winding up
(either voluntary or involuntary) of the Corporation (a "Liquidation"),
the holders of the Series B Preferred Stock shall be entitled to
receive, before any distributions or payments are made upon any Common
Stock or any other security subordinate to the Series B Preferred Stock,
after payment by the Corporation of all sums due all creditors, after
payment by the Corporation of the Series F Stated Value to the holders
of the Series F Preferred Stock and pari passu with the holders of the
Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock and proportionate to their relative ownership interests
in the Corporation, to be paid out of the assets of the Corporation
available for distributions to its stockholders, the Series B Stated
Value per share for each outstanding share of Series B Preferred Stock."
4. Section 2 of Part II.B. of Article "FOURTH" of the Restated
Certificate of Incorporation is hereby amended to add reference to the Series F
Preferred Stock with respect to certain dividend rights and, as so amended,
shall read in its entirety as follows:
"The holders of the outstanding shares of Series C Preferred
Stock shall be entitled to receive, and shall be paid whenever funds
are legally available therefor, dividends in an amount at least equal
to the amount of any dividends declared or to be paid with respect to
that number of shares of Common Stock into which the shares of Series
C Preferred Stock are convertible on the date of such dividend and
which shall be paid prior and in preference to any such dividend as
may be declared from time to time with respect to the Common Stock and
pari passu with the holders of the Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock. No dividends may be paid
with respect to the Common Stock of the Corporation until all
dividends declared or accrued on all outstanding shares of the Series
C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock
and Series F Preferred Stock have been set apart and paid."
5. Section 3 of Part II.B. of Artcile "FOURTH" of the Restated
Certificate of Incorporation is hereby amended to harmonize the conversion
rights of the holders of the Series C Preferred Stock with the holders of all
other series of Preferred Stock and, as so amended, shall read in its entirety
as follows:
"3. Conversion Rights of Series C Preferred Stock.
(a) Optional Conversion.
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<PAGE> 3
(i) A holder of record of any share or
shares of Series C Preferred Stock shall have the right, at any time,
at such holder's option, to convert, without the payment of any
additional consideration, each share of Series C Preferred Stock held
by such holder into that number of fully paid and non-assessable
shares of Common Stock as is determined by multiplying 1 by the Series
C Conversion Factor (as defined below)
(ii) Upon the optional conversion of any
shares of Series C Preferred Stock, such shares of Series C Preferred
Stock shall resume the status of authorized and unissued shares of the
Preferred Stock, par value $0.01 per share, of the Corporation,
without designation as to series until such shares are once more
designated as part of a particular series by the Board of Directors.
(iii) If a holder of shares of Series C
Preferred Stock desires to exercise the optional conversion right
pursuant to this subsection 3(a), such holder shall give written
notice to the Corporation of such holder's election to convert a
stated number of shares of Series C Preferred Stock into shares of
Common Stock, at the conversion rate then in effect, which shall be
accompanied by the certificate or certificates representing such
shares of Series C Preferred Stock that shall be converted into Common
Stock. The notice shall also contain a statement of the name or names
in which the certificate or certificates for Common Stock shall be
issued. If such certificate or certificates are to be issued to any
person or persons other than the registered holder or holders of such
certificate or certificates, or if such certificate or certificates
are registered in the name or names of any person or persons other
than the person or persons signing the notice, the signatures on the
notice must be guaranteed by a participant in the Security Transfer
Agents Medallion Program or the New York Stock Exchange Medallion
Signature Guarantee Program. Promptly after receiving the aforesaid
notice and certificate or certificates representing the Series C
Preferred Stock surrendered for conversion, the Corporation shall
issue and deliver to such holder of Series C Preferred Stock, or to
such holder's nominee or nominees, a certificate or certificates for
the number of shares of Common Stock issuable upon conversion of such
Series C Preferred Stock, and the certificates representing shares of
Series C Preferred Stock surrendered for conversion shall be canceled
by the Corporation. If the number of shares represented by the
certificate or certificates surrendered for conversion shall exceed
the number of shares to be converted, the Corporation shall issue and
deliver to the person entitled thereto a certificate representing the
balance of any unconverted shares.
(b) Mandatory Conversion.
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<PAGE> 4
(i) Immediately prior to the first
closing of a Qualified Public Offering (as hereinafter defined) of the
Common Stock of the Corporation, each share of Series C Preferred
Stock held by such holder shall immediately be converted into that
number of fully paid and non-assessable shares of Common Stock as is
determined by multiplying 1 by the Series C Conversion Factor (as
defined below).
(ii) A "Qualified Public Offering" is
hereby defined as a Public Offering in which the pre-money valuation
of the Corporation is no less than One Hundred Twenty-Nine Million
Dollars ($129,000,000) and the aggregate proceeds (net of any
underwriter's discount) to the Corporation exceed Twenty Million
Dollars ($20,000,000).
(iii) The Corporation shall give each holder
notice of the occurrence of a Qualified Public Offering within a
reasonable time of the initial filing of a registration statement. At
any time at or after the closing of the Qualified Public Offering, the
Corporation shall deliver to each holder of Series C Preferred Stock
such number of shares of Common Stock into which such holder's shares
are then convertible upon surrender by such holder of certificates
representing the shares of Series C Preferred Stock held by such
holder or presentation of an affidavit of loss certificate together
with an indemnity satisfactory to the Corporation.
(c) Series C Conversion Factor. The initial
conversion factor for the Series C Preferred Stock shall be 500,
subject to adjustment in accordance with the provisions of this
Section 3(c). The conversion factor in effect from time to time, as
adjusted to this Section 3(c), is referred to herein as the " Series C
Conversion Factor".
(i) Each adjustment to the Series C
Conversion Factor shall be calculated to the nearest four decimal
places.
(ii) In the event that: (A) the
Corporation shall, at any time, pay a dividend in, or make a
distribution on its Common Stock or any other equity securities in,
shares of Common Stock; (B) the Corporation shall, at any time, by
subdivision of its shares of outstanding Common Stock, by
reclassification, stock split or otherwise, subdivide its outstanding
shares of Common Stock into a greater number of shares; (C) the
Corporation shall, at any time, combine its outstanding shares of
Common Stock into a lesser number of shares, by reclassification,
reverse stock split or otherwise (for purposes of this Section
3(c)(ii), the event described in (A), (B) and (C) above shall be
referred to as "Capital Transactions"), then the Series C Conversion
Factor then in effect shall be adjusted to a number determined by
multiplying the Series C Conversion
- 4 -
<PAGE> 5
Factor in effect immediately prior to such Capital Transaction by the
following fraction:
X
-
Y
wherein:
X = the number of shares of Common Stock outstanding immediately after
such Capital Transaction; and
Y = the number of shares of Common Stock outstanding immediately prior
to such Capital Transaction.
(iii) The "Series C Conversion Price"
shall be defined as the fraction obtained by dividing the purchase
price paid to the Corporation per share (the "Series C Stated Value")
by the Series C Conversion Factor in effect at the time such
calculation is made. The Series C Conversion Price shall be subject to
adjustment from time to time as hereinafter provided in subsection
(iv) below. Upon each adjustment of the Series C Conversion Price, the
Series C Conversion Factor shall be recalculated so that it is equal
to the fraction obtained by dividing the Series C Stated Value per
share by the Series C Conversion Price that is a result of the
calculation set forth in subsection (iv) below.
(iv) If the Corporation shall after the
date hereof issue or sell any Common Stock (other than Common Stock
into which the Series B Preferred Stock, the Series C Preferred Stock,
the Series D Preferred Stock, the Series E Preferred Stock or the
Series F Preferred Stock is convertible or Common Stock issuable upon
exercise of warrants outstanding on the date hereof or options granted
or to be granted to employees or consultants of the Corporation
pursuant to any stock option plan adopted by the Corporation and its
stockholders), without consideration or for a consideration per share
less than the Series C Conversion Price in effect immediately prior to
the issuance of such Common Stock, the Series C Conversion Price in
effect immediately prior to such issuance shall forthwith (except as
provided below in Section 3(c)(v)) be reduced to that price that is
equal to the fraction obtained by dividing:
(A) an amount equal to (x) the
total number of shares of Common Stock outstanding immediately prior
to such issuance or sale multiplied by the Series C Conversion Price
in effect
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<PAGE> 6
immediately prior to such issuance or sale, plus (y) the
consideration, if any, received or deemed to be received, by the
Corporation upon such issuance or sale, by
(B) the total number of shares of
Common Stock outstanding immediately after such issuance or sale.
The provisions of this Section 3(c)(iv) shall not apply under any of
the circumstances for which an adjustment is provided in Section
3(c)(ii) above.
(v) For the purposes of any adjustment
of the Series C Conversion Price pursuant to this Section 3, the
following provisions shall be applicable:
(A) In the case of the issuance
of Common Stock for cash, the consideration received therefor shall be
deemed to be the amount of cash paid therefor without deduction of any
discounts, commissions or other expenses allowed, paid or incurred by
the Corporation for any underwriting or otherwise in connection with
the issuance and sale thereof.
(B) In the case of the issuance
of Common Stock for a consideration in whole or in part other than
cash, the consideration other than cash received therefor shall be
deemed to be the fair value thereof as determined by the Board of
Directors of the Corporation without deduction for any discounts,
commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with the
issuance and sale thereof.
(C) In the case of the issuance
of options to purchase or rights to subscribe for Common Stock, the
issuance of any securities by their terms convertible into or
exchangeable for Common Stock or the granting of any options to
purchase or rights to subscribe for such convertible or exchangeable
securities:
(w) The aggregate number
of shares of Common Stock initially deliverable upon exercise of such
options or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were granted or
issued, as the case may be, and for a consideration equal to the
consideration, if any (determined in the same manner provided in
subdivisions (A) and (B) above of this Section 3(c)(v) with respect to
cash consideration and consideration other than cash), received by the
Corporation upon the grant
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<PAGE> 7
or issuance of such options or rights plus the minimum purchase price
provided in such options or rights for the Common Stock covered
thereby;
(x) The aggregate number
of shares of Common Stock initially deliverable upon conversion of or
in exchange for any such convertible or exchangeable securities or
upon the exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent conversion
or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options were granted, and for a
consideration equal to the consideration received by the Corporation
for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends),
plus the additional consideration, if any, to be received by the
Corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
cash to be determined in the same manner as provided in subdivision
(w) above);
(y) On any change in the
number of shares of Common Stock deliverable upon exercise of such
options or rights or conversion of or exchange for such convertible or
exchangeable securities, other than a change resulting from
anti-dilution provisions thereof not more favorable to the holder
thereof than those contained herein, the Series C Conversion Price
shall forthwith be readjusted to such Series C Conversion Price as
would have been obtained had the adjustment made upon the issuance of
such options, rights, securities or options or rights related to such
securities not covered prior to such change been made upon the basis
of such changed terms; and
(z) On the expiration of
such options or rights, the termination of such right to convert or
exchange or the expiration of the options or rights related to such
convertible or exchangeable securities, the Series C Conversion Price
shall forthwith be readjusted to such Series C Conversion Price as
would have been obtained had the readjustment been made upon the
issuance of such options, rights, securities or options or rights
related to such securities for only the number of shares of Common
Stock actually issued upon the exercise of such options or rights,
upon the conversion or exchange of such securities or upon the
exercise of the options or rights related to such securities.
(d) Notice of Change in Series C Conversion Factor.
Whenever the Series C Conversion Factor is adjusted as provided in
Section 3(c), the Corporation shall forthwith compute the adjusted
Series C Conversion Factor in accordance with this Section 3 and
prepare a
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<PAGE> 8
certificate signed by the President or Chief Executive Officer and the
Secretary, the Treasurer, any Assistant Secretary or Assistant
Treasurer of the Corporation setting forth the adjusted Series C
Conversion Factor, the method of calculation thereof in reasonable
detail and the facts requiring such adjustment and upon which such
adjustment is based, which certificate shall be conclusive, final and
binding evidence of the correctness of the adjustment, and shall mail
a notice stating that the Series C Conversion Factor has been
adjusted, the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Series C Conversion
Factor, to the holders of record of the outstanding shares of the
Series C Preferred Stock at or prior to the time the Corporation mails
an interim statement, if any, to its stockholders covering the fiscal
quarter period during which the facts requiring such adjustment
occurred, but in any event within forty-five (45) days of the end of
such fiscal quarter period.
(e) No Fractional Shares. Notwithstanding
anything herein to the contrary, no fractional shares of Common Stock
shall be issued to any holder of Series C Preferred Stock on
conversion of such holder's Series C Preferred Stock. With respect to
any fraction of a share of Common Stock called for upon any conversion
after completion of the calculation of the aggregate number of shares
of Common Stock to be issued to such holder, the Corporation shall pay
to such holder an amount in cash equal to any fractional share to
which such holder would be entitled, multiplied by the current market
value of a share, as determined by the Board of Directors of the
Corporation.
(f) Reservation of Common Stock. The Corporation
shall at all times reserve and keep available out of its authorized
but unissued Common Stock, solely for issuance upon conversion of
shares of Series C Preferred Stock as herein provided, such number of
shares of Common Stock as shall be issuable from time to time upon the
conversion of all of the shares of Series C Preferred Stock at the
time issued and outstanding."
6. The first sentence of Section 4 of Part II.B. of the Restated
Certificate of Incorporation is hereby amended to clarify the relative
liquidation rights of the several series of Preferred Stock and, as so amended,
shall read in its entirety as follows:
"In the event of any liquidation, dissolution or winding up
(either voluntary or involuntary) of the Corporation (a
"Liquidation"), the holders of the Series C Preferred Stock shall be
entitled to receive, before any distribution or payments are made upon
any Common Stock or any other security subordinate to the Series C
Preferred Stock, after payment by the
- 8 -
<PAGE> 9
Corporation of all sums due all creditors, after payment by the
Corporation of the Series F Stated Value to the holders of the Series
F Preferred Stock and pari passu with the holders of the Series B
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
and proportionate to their relative ownership interests in the
Corporation, to be paid out of the assets of the Corporation available
for distribution to its stockholders, an amount equal to the Series C
Stated Value for each outstanding share of Series C Preferred Stock"
7. Section 6 of Part II.B. of Article "FOURTH" of the Restated
Certificate of Incorporation is hereby amended to add reference to the Series F
Preferred Stock with respect to pre-emptive purchase rights and, as so amended,
shall read in its entirety as follows:
"In the event of any offering of shares of Common Stock or
other securities of the Corporation convertible into or exercisable
for Common Stock other than pursuant to an underwritten public
offering (excluding (i) issuances of shares of Common Stock pursuant
to conversion of the shares of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or
Series F Preferred Stock, (ii) shares issuable pursuant to warrants
outstanding on the date hereof or options granted under the
Corporation's 1995 Incentive Stock Plan or (iii) other securities
outstanding as of the date hereof), the Corporation shall send written
notice thereof to the holders of Series C Preferred Stock not less
than forty-five (45) days prior to such public or private offering,
which notice shall set forth all material terms of the proposed
transaction, including, without limitation, the manner of sale and the
per share sale price or the amount and type of other consideration to
be received by the Corporation. In the event that the Corporation
offers shares or other securities where the value of such shares or
other securities is based upon a valuation of the Corporation that is
equal to or greater than $47.5 million, then each of the holders of
Series F Preferred Stock, as a group, and Series E Preferred Stock
shall have the first right, by sending irrevocable written notice
thereof to the Corporation within twenty (20) days after receipt of
the Corporation's notice, to purchase up to Ten Million Dollars
($10,000,000) of such shares or other securities being offered by the
Corporation at the same price offered to the public or in the private
offering (or, if the sale is not for cash, at the fair market value of
the property or other consideration received by the Corporation (as
determined by an independent third party appraiser selected by a
majority vote of the shares held by the holders of the Series B
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock
and Series F Preferred Stock)), of which up to Two Million Dollars
($2,000,000) may be allocated and transferred, in the sole discretion
of the holders of Series E Preferred Stock, to Banque
- 9 -
<PAGE> 10
Paribas or its affiliates, and the holders of Series C Preferred Stock
shall have the right, by sending irrevocable written notice thereof to
the Company within thirty (30) days after receipt of the Company's
notice, to purchase their pro rata portion of the remaining shares or
other securities, if any, in the offering on the same basis as the
holders of Series F Preferred Stock, as a group, and Series E
Preferred Stock. In the event that the Corporation offers shares or
other securities where the value of such shares or other securities is
based upon a valuation of the Corporation that is less than $47.5
million, then the holders of Series C Preferred Stock shall have the
right, by sending irrevocable written notice thereof to the
Corporation within twenty (20) days after receipt of the Corporation's
notice, to purchase at the same price sold to the public or in the
private offering (or, if the sale is not for cash, at the fair market
value of the property or other consideration received by the
Corporation (as determined by an independent third party appraiser
selected by a majority vote of the shares held by the holders of the
Series B Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock)), such number of shares of Common
Stock or other securities as is necessary to maintain such holder's
respective percentage ownership of Common Stock on a fully diluted
basis, as it existed immediately prior to such offering. A closing for
the purchase of Common Stock or other securities pursuant to this
Section 6 shall occur on the later of (i) the date on which such
public or private offering occurs and (ii) such later date as may be
agreed to by the holders of Series C Preferred Stock who have
exercised their rights hereunder and the Corporation, at a time and
place specified by such holders in a notice provided to the
Corporation at least ten (10) days prior to such closing. In
connection with such closing, the Corporation and such holders shall
provide such customary closing certificates and opinions as such
holders or the Corporation, as appropriate, shall reasonably request."
8. Section 3(c) of Part II.C. of Article "FOURTH" of the Restated
Certificate of Incorporation is hereby amended to add reference to the Series F
Preferred Stock with respect to certain dividend rights and, as so amended,
shall read in its entirety as follows:
"If dividends are declared and paid on the Corporation's
Common Stock, then the Series D Preferred Stock shall receive
dividends pari passu with the holders of the Series C Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock on the number of
shares of Common Stock into which the Series D Preferred Stock would
be converted on the day such Common Stock dividends are declared."
9. Section 4(c)(iv) of Part II.C. of Article "FOURTH" of the
Restated Certificate of Incorporation is hereby amended to add reference to the
Series F Preferred Stock with respect to certain anti-dilution protections and,
as so amended, shall read in its entirety as follows:
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<PAGE> 11
"If the Corporation shall after the date hereof issue or sell
any Common Stock (other than Common Stock into which the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock, the Series E Preferred Stock or the Series F Preferred Stock is
convertible or Common Stock issuable upon exercise of warrants
outstanding on the date hereof or options granted or to be granted to
employees or consultants of the Corporation pursuant to any stock
option plan adopted by the Corporation and its stockholders), without
consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such
Common Stock, the Conversion Price in effect immediately prior to such
issuance shall forthwith (except as provided below in Section 4(c)(v))
be reduced to that price that is equal to the fraction of obtained by
dividing:"
Subparagraphs A and B and the remainder of such Section shall remain in
full force and effect.
10. The first sentence of Section 6 of Part II.C. of Article "FOURTH"
of the Restated Certificate of Incorporation is hereby amended to clarify the
relative liquidation rights of the several series of Preferred Stock and, as so
amended, shall read in its entirety as follows:
"(a) In the event of any liquidation, dissolution or winding
up (either voluntary or involuntary) of the Corporation (a
"Liquidation"), the holders of the Series D Preferred Stock shall be
entitled to receive, before any distribution or payments are made upon
any Common Stock or any other security subordinate to the Series D
Preferred Stock, after payment by the Corporation of all sums due all
creditors, after payment by the Corporation of the Series F Stated
Value to the holders of the Series F Preferred Stock and pari passu
with the holders of the Series B Preferred Stock, the Series C
Preferred Stock and the Series E Preferred Stock and proportionate to
their relative ownership interests in the Corporation, to be paid out
of the assets of the Corporation available for distributions to its
stockholders, at the stockholders option, the Series D Stated Value
per share for each outstanding share of Series D Preferred Stock
together with any accrued but unpaid Series D Preferred Dividends or,
at the Series D Preferred stockholders' option, the consideration such
holders would receive if their Series D Preferred Stock were converted
into Common Stock, provided such consideration is paid pari passu with
other holders of Common Stock. If upon Liquidation, the assets
available for distribution to the holders of Series D Preferred Stock
shall be insufficient to pay such holders their liquidation preference
in full, then such holders shall share ratably in the distribution of
such assets in proportion to the respective sums which would otherwise
be payable upon such distribution if all sums so payable to the
holders of Series D Preferred Stock were paid in full."
- 11 -
<PAGE> 12
11. Section 3(c) of Part II.D. of Article "FOURTH" of the Restated
Certificate of Incorporation is hereby amended to add reference to the Series F
Preferred Stock with respect to certain dividend rights and, as so amended,
shall read in its entirety as follows:
"If dividends are declared and paid on the Corporation's
Common Stock, then the Series E Preferred Stock shall receive
dividends pari passu with the holders of the Series C Preferred Stock,
Series D Preferred Stock and Series F Preferred Stock on the number of
shares of Common Stock into which the Series E Preferred Stock would
be converted on the day such Common Stock dividends are declared."
12. Section 4(c)(iv) of Part II.D. of Article "FOURTH" of the
Restated Certificate of Incorporation is hereby amended to add reference to the
Series F Preferred Stock with respect to certain anti-dilution protections and,
as so amended, shall read in its entirety as follows:
"If the Corporation shall after the date hereof issue or sell
any Common Stock (other than Common Stock into which the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock, the Series E Preferred Stock or the Series F Preferred Stock is
convertible or Common Stock issuable upon exercise of warrants
outstanding on the date hereof or options granted or to be granted to
employees or consultants of the Corporation pursuant to any stock
option plan adopted by the Corporation and its stockholders), without
consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such
Common Stock, the Conversion Price in effect immediately prior to such
issuance shall forthwith (except as provided below in Section 4(c)(v))
be reduced to that price that is equal to the fraction of obtained by
dividing:"
Subparagraphs A and B and the remainder of such Section shall remain in
full force and effect.
13. The first sentence of Section 6 of Part II.D. of Article "FOURTH"
of the Restated Certificate of Incorporation is hereby amended to clarify the
relative liquidation rights of the several series of Preferred Stock and, as so
amended, shall read in its entirety as follows:
"(a)In the event of any liquidation, dissolution or winding up
(either voluntary or involuntary) of the Corporation (a
"Liquidation"), the holders of the Series E Preferred Stock shall be
entitled to receive, before any distribution or payments are made upon
any Common Stock or any other security subordinate to the Series E
Preferred Stock, after payment by the Corporation of all sums due all
creditors, after payment by the Corporation of the Series F Stated
value to the holders of the Series F
- 12 -
<PAGE> 13
Preferred Stock and pari passu with the holders of the Series B
Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock and proportionate to their relative ownership
interests in the Corporation, to be paid out of the assets of the
Corporation available for distributions to its stockholders, an amount
equal to the Series E Stated Value per share for each outstanding
share of Series E Preferred Stock plus accrued and unpaid dividends.
If, upon Liquidation, the assets available for distribution to the
holders of Series E Preferred Stock shall be insufficient to pay such
holders their liquidation preference in full, then such holders shall
share ratably in the distribution of such assets in proportion to the
respective sums which would otherwise be payable upon such
distribution if all sums so payable to the holders of Series E
Preferred Stock were paid in full."
14. The foregoing amendments were duly adopted in accordance with
Sections 228 and 242 of the Delaware General Corporation Law.
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<PAGE> 14
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed on December 22, 1999.
INTELLIGENT INFORMATION
INCORPORATED
By: /s/ Stephen G. Maloney
---------------------------------------
Stephen G. Maloney
President and Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.5
AMENDMENT TO
CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND
RIGHTS OF SERIES F CONVERTIBLE PREFERRED STOCK
OF
INTELLIGENT INFORMATION INCORPORATED
---------------------------------------
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
---------------------------------------
INTELLIGENT INFORMATION INCORPORATED (the "CORPORATION"), a
corporation organized and existing under and by virtue of the Delaware General
Corporation Law, hereby certifies as follows:
1. The first two paragraphs and Section 1 of the
Certificate of Designations, Powers, Preferences and Rights of Series F
Convertible Preferred Stock of the Company (the "SERIES F CERTIFICATE"), are
hereby amended in their entirety to increase the number of shares of Series F
Convertible Preferred Stock from 7,575 shares to 8,248.33 shares, and now read,
in their entirety, as follows:
"Intelligent Information Incorporated, a Delaware
corporation (the "CORPORATION"), does hereby certify that, pursuant
to the authority conferred upon the Board of Directors by Article
Fourth of its Restated Certificate of Incorporation, as amended,
which Restated Certificate of Incorporation, as amended, authorizes
50,000 shares of Preferred Stock of the Corporation, par value $0.01
per share, and pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware (the "DGCL"), as
amended, the Board of Directors of the Corporation, by unanimous
consent in writing, has duly adopted a resolution providing for the
creation of a series of Preferred Stock, par value $0.01 per share,
designated as Series F Convertible Preferred Stock, authorizing the
issuance of 8,248.33 shares of Series F Convertible Preferred Stock
and setting forth the powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, which
resolution is as follows:
RESOLVED, that pursuant to the authority vested in the
Board of Directors of the Corporation pursuant to the provisions of
the DGCL and the Corporation's Restated Certificate of
Incorporation, the Corporation is authorized to issue 8,248.33
shares of Series F Convertible Preferred Stock of the Corporation,
as a class of Preferred Stock of the Corporation to be designated as
- 1 -
<PAGE> 2
"SERIES F CONVERTIBLE PREFERRED STOCK," par value $0.01 per share,
which shall have such powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, in addition to those
set forth in the Restated Certificate of Incorporation, as amended,
as are set forth below:
1. Designation; Number of Shares. The
designation of this Series of Preferred Stock shall be "Series F
Convertible Preferred Stock," par value $0.01 per share (the "SERIES
F PREFERRED STOCK"). The maximum number of shares of Series F
Preferred Stock that may be issued shall be 8,248.33 shares. The
Series F Preferred Stock shall have an initial stated value of
$3,960.40 per share (the "SERIES F STATED VALUE"). In the event of
any stock split, stock dividend, combination or other
recapitalization transaction by which the Corporation increases or
decreases its outstanding Series F Preferred Stock, the Series F
Stated Value per share of Series F Preferred Stock shall be adjusted
to reflect such recapitalization."
2. Section 4 of the Series F Certificate,
entitled "Conversion Rights of Series F Preferred Stock," is hereby amended to
replace certain uses of the words "Common Stock" with the words "capital stock"
in the first paragraph of subsection 4(c)(iv), and such subsection now reads, in
its entirety, as follows:
"(iv) If the Corporation shall after the date hereof
issue or sell any capital stock (other than Common Stock into which
the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock, the Series E Preferred Stock or the Series
F Preferred Stock is convertible or Common Stock issuable upon
exercise of warrants outstanding on the date hereof or options to
purchase up to 2,264,000 shares of Common Stock granted or to be
granted to employees or consultants of the Corporation pursuant to
any stock option plan adopted by the Corporation and its
stockholders), without consideration or for a consideration per
share (1) less than the Series F Conversion Price in effect
immediately prior to the issuance of such capital stock or (2), in
the case of options granted after the date hereof, less than 75% of
the Series F Conversion Price in effect immediately prior to the
issuance of such options, the Series F Conversion Price in effect
immediately prior to such issuance shall forthwith (except as
provided below in Section 4(c)(v)) be reduced to the price at which
such capital stock was issued or sold by the Corporation."
3. The foregoing amendments were approved by the Board of
Directors pursuant to Section 151 of the Delaware General Corporation Law.
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<PAGE> 3
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed this 22nd day of December, 1999.
INTELLIGENT INFORMATION INCORPORATED
By: /s/ Stephen G. Maloney
------------------------------
Stephen G. Maloney,
President and Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
INTELLIGENT INFORMATION INCORPORATED
---------------------------------------
PURSUANT TO SECTIONS 228 AND 242 OF THE
DELAWARE GENERAL CORPORATION LAW
---------------------------------------
INTELLIGENT INFORMATION INCORPORATED (the "Corporation"), a
corporation organized and existing under and by virtue of the Delaware General
Corporation Law, hereby certifies:
1. Paragraph "FIRST" of the Restated Certificate of
Incorporation of the Corporation is hereby amended in its entirety to read as
follows:
"FIRST. NAME. The name of the corporation is i3 MOBILE, INC."
2. The foregoing amendment was duly adopted and written
consent has been given in accordance with Sections 228 and 242 of the Delaware
General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed as of this 4th day of January, 2000.
INTELLIGENT INFORMATION INCORPORATED
By: /s/ Stephen G. Maloney
------------------------------
Stephen G. Maloney
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 3.7
AMENDED AND RESTATED BYLAWS OF
i3 MOBILE, INC.
ARTICLE I.
OFFICES
Section 1. Registered Office. The registered office of the above-named
corporation shall be located at 1013 Centre Road, Wilmington, Delaware 19805.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine in the business of the corporation may
require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. All meetings of the stockholders for any
purpose shall be held at such time and place, either within or without the State
of Delaware, as shall be designated from time to time by the board of directors
and stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing
with the year 1998, shall be held on the first Tuesday in July if not a legal
holiday, and, if a legal holiday, then on the next business day following, at
11:00 A.M., or at such other date and time as shall be designated from time to
time by the board of directors. For the purposes of these bylaws a "business
day" shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in The City of New York, New York are authorized or
obligated by law or executive order to be closed. At the annual meeting, holders
of the corporation's voting stock, shall elect, by a plurality vote, a board of
directors and transact such other business as may properly be brought before the
meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting, stating the place, date and time of the meeting, shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 4. List of Stockholders. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days
<PAGE> 2
prior to the meeting either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 5. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chief executive officer and
shall be called by the chief executive officer or the secretary at the request
in writing of a majority of the board of directors or at the request in writing
of stockholders owning ten percent (10%) in amount of the entire capital stock
of the corporation issued and outstanding and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.
Section 6. Notice of Special Meetings. Written notice of a special
meeting, stating the place, date and time of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
Section 7. Limit on Business at Special Meetings. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
Section 8. Quorums. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of stockholders for the
transaction of business, except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting of the time and place of such adjourned meeting, until a quorum
shall be present by proxy or represented by proxy. At any adjourned meeting at
which a quorum shall be present or represented by proxy, any business may be
transacted which might have been transacted at the meeting as originally called.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. Voting at Meetings. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock having voting power, present
in person or represented by proxy, shall decide any question brought before such
meeting, unless the question is one upon which by express statutory provision or
provision of the certificate of incorporation a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
Section 10. Voting Power. Unless otherwise provided in the certificate
of incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but
- 2 -
<PAGE> 3
no proxy shall be voted on after three (3) years from its date, unless the proxy
provides for a longer period.
Section 11. Written Consent Without Meeting. Unless otherwise provided
in the certificate of incorporation, any action required to be taken at any
annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III.
DIRECTORS
Section 1. General Powers. The business of the corporation shall be
managed by, or under the direction of, its board of directors which may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by statute, the certificate of incorporation or these bylaws directed or
required to be exercised or done by the stockholders.
Section 2. Election and Tenure. The number of directors which shall
constitute the whole board shall be a maximum of eight (8). Each director shall
hold office until his successor or successors are elected and shall qualify or
until his earlier resignation or removal. Directors need not be stockholders.
Section 3. Place of Meetings. The board of directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 4. Annual Meetings. The first meeting of each newly elected
board of directors shall be held immediately after the annual meeting and no
notice of such meeting shall be necessary to the newly elected directors in
order to legally constitute the meeting, provided a quorum shall be present.
Section 5. Regular Meetings. Regular meetings of the board of directors
shall be held at least bi-monthly at such time and at such place as shall from
time to time be determined by the board.
Section 6. Special Meetings. Special meetings of the board of directors
may be called by the chief executive officer on two (2) days' notice to each
director, either personally, by mail, by telegram, by telex or by facsimile
transmission; special meetings shall be called by the chief executive officer in
like manner and on like notice upon the written request of a majority of the
directors then in office on one occasion each month. Any notice may be given by
the secretary
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<PAGE> 4
and need not state the purpose or purposes of the meeting unless otherwise
required by these bylaws.
Section 7. [INTENTIONALLY OMITTED]
Section 8. Quorum and Adjournments. At all meetings of the board, a
majority of the directors shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time without notice other than announcement at the meeting until a quorum shall
be present.
Section 9. Action by Consent. Any action required or permitted to be
taken at any meeting of the board of directors or of any committee thereof may
be taken without a meeting if all members of the board of directors or
committee, as the case may be, consent thereto in writing and the writing is
filed with the minutes of the proceedings of the board or committee.
Section 10. Meetings by Telephone or Similar Communications Equipment.
Members of the board of directors or any committee designated by the board of
directors may participate in a meeting of the board of directors or any
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
Section 11. Compensation. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the board of directors shall have
the authority to fix the compensation of directors. The directors and the
Observers shall be paid their reasonable out-of-pocket expenses, if any,
incurred in attending any meeting of the board of directors. Directors may also
be paid a fixed sum for attendance at each meeting of the board of directors or
a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 12. Removal of Directors. Unless otherwise restricted by
statute, the certificate of incorporation or any agreement among the
shareholders, any director or the entire board of directors may be removed, with
or without cause, by the holders of a majority of shares entitled to vote at an
election of directors.
Section 13. Resignation of Directors. Any director may resign at any
time by giving written notice to the board of directors, the chief executive
officer or the secretary of the corporation. Unless otherwise specified in such
notice, a resignation shall take effect upon the delivery thereof to the board
of directors or the designated officer. It shall not be necessary for a
resignation to be accepted before it becomes effective.
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ARTICLE IV.
COMMITTEES
Section 1. Designation. The board of directors may, by resolution
passed by a majority of the whole board, designate one (1) or more committees,
each committee to consist of one (1) or more of the directors of the
corporation. The board may designate one (1) or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Section 2. Powers. Any such committee, to the extent provided in the
resolution of the board of directors, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the Delaware General Corporation
Law, fix any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution
or amending these bylaws; and, unless the resolution or the certificate of
incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors.
Section 3. Minutes and Reports. Each committee shall keep regular
minutes of its meetings and report the same to the board of directors when
required.
ARTICLE V.
NOTICES
Section 1. Form and Delivery. Whenever, under the provisions of
statutes, the certificate of incorporation or these bylaws, notice is required
to be given to any director or stockholder, it shall not be construed to mean
personal notice but such notice may be given in writing, by mail, addressed to
such director or stockholder at his address as it appears on the records of the
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<PAGE> 6
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram, telex or facsimile
transmission at such director's address as it appears in the corporation's
records.
Section 2. Waiver. Whenever any notice is required to be given under
the provisions of statutes, the certificate of incorporation or these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent to receipt of the notice.
Section 3. Attendance at Meetings as Waiver of Notice. Any stockholder
who attends a meeting of stockholders in person or is represented at that
meeting by proxy without protesting, at the commencement of the meeting, the
lack of notice to him or any director who attends a meeting of the board of
directors without protesting, at the commencement of the meeting, the lack of
notice to him shall, in each case, be conclusively deemed to have waived notice
of that meeting.
ARTICLE VI.
OFFICERS
Section 1. Designation. The officers of the corporation shall be chosen
by the board of directors and shall be a chairman of the board, a president, a
chief executive officer, a treasurer and a secretary. The board of directors may
also choose one or more vice presidents and one or more assistant treasurers and
assistant secretaries. Any number of offices may be held by the same person,
unless the certificate of incorporation or these bylaws otherwise provide.
Section 2. Election. The board of directors at its annual meeting shall
choose a chairman of the board, a president, a chief executive officer, a
treasurer and a secretary and may choose such other officers as it deems
appropriate.
Section 3. Powers and Other Duties. The officers shall exercise such
powers and perform such duties as shall be determined from time to time by the
board of directors.
Section 4. Salaries. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. Term of and Removal from Office. The officers of the
corporation shall hold office until their successors are chosen and qualified.
Any officer elected or appointed by the board of directors may be removed at any
time by the affirmative vote of a majority of the board of directory Any vacancy
occurring in any office of the corporation shall be filled by the board of
directors.
Section 6. The Chairman of the Board. The chairman of the board of the
corporation shall preside at all meetings of the stockholders and the board of
directors and shall have such
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<PAGE> 7
powers and perform such duties as may from time to time be assigned by the board
of directors, including, without limitation, assisting the corporation with
acquisitions.
Section 7. The Chief Executive Officer. The chief executive officer of
the corporation shall have the overall responsibility for, supervision of and
control over the day-to-day management of the business and operations of the
corporation, subject to the general policy directions of the board of directors,
and shall have such other powers and perform such other duties as may from time
to time be assigned to him by the board of directors.
The chief executive officer shall, under the seal of the corporation,
execute bonds, mortgages and other contracts requiring a seal except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
Section 8. The President. The president shall perform such duties and
have such powers as the board of directors may from time to time prescribe.
Section 9. The Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. The treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings or when the board of directors so requires, an account of
all the treasurer's transactions and of the financial condition of the
corporation.
If required by the board of directors, the treasurer shall give the
corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of the treasurer's office and for the
restoration to the corporation, in case of the treasurer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under the treasurer's
control belonging to the corporation.
Section 10. Vice Presidents. The vice presidents, if any, shall perform
such duties and have such powers as the board of directors may from time to time
prescribe.
Section 11. The Secretary. The secretary shall attend all meetings of
the board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the board of directors and of the stockholders in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
board of directors and shall perform such other duties as may be prescribed by
the board of directors or the president, under whose supervision he shall be.
The secretary shall have custody of the
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<PAGE> 8
corporate seal of the corporation and the secretary or an assistant secretary
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the secretary's signature or by the signature
of such assistant secretary. The board of directors may give general authority
to any other officer to affix the seal of the corporation and to attest the
affixing by the secretary's signature.
Section 12. The Assistant Treasurers and Secretaries. The assistant
treasurer and assistant secretary (or, if there is more than one, the assistant
treasurers and assistant Secretaries in the order designated by the board of
directors or, if there be no such designation, then in the order of their
election) shall, in the absence of the treasurer or secretary, or in the event
of the treasurer's or secretary's inability or refusal to act, perform the
duties and exercise the powers of the treasurer or secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
ARTICLE VII.
CERTIFICATES FOR SHARES
Section 1. Form and Signatures. The shares of the corporation shall be
represented by a certificate or shall be uncertificated. Certificates shall be
signed by, or in the name of the corporation by, the chief executive officer or
president and the treasurer or secretary or an assistant treasurer or assistant
secretary of the corporation.
Upon the face or back of each stock certificate issued to represent any
partly paid shares, or upon the books and records of the corporation in the case
of uncertificated partly paid shares, shall be set forth the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
If the corporation shall be authorized to issue more than one (1) class
of stock or more than one (1) series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise provided in Section 202 of the Delaware General Corporation Law, in
lieu of the foregoing requirements, there may be set forth on the face or faces
of the certificate which the corporation shall issue to represent such class or
series of stock a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware
General Corporation Law or a statement that the corporation will furnish without
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<PAGE> 9
charge to each stockholder who so requests the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
Section 2. Signature on Certificates. Any or all of the signatures on a
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The board of directors may direct a new
certificate or certificates or uncertificated shares to be issued in place of
any certificate or certificates therefore issued by the corporation alleged to
have been lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates or uncertificated shares, the board of directors may
require the owner or his legal representative to give the corporation a bond in
such sum as it may direct as indemnity against the corporation with respect to
the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfers of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instruments from the
registered owner of uncertificated shares, such uncertificated shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the corporation.
Section 5. Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, to express consent to corporate action in writing
without a meeting, to receive payment of any dividend or other distribution or
allotment of any rights, to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of such meeting
nor more than sixty (60) days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
Section 6. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by statute.
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ARTICLE VIII.
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding capital stock of
the corporation, subject to the provisions of the statutes or the certificate of
incorporation, may be declared by the board of directors at any regular or
special meeting of directors and dividends may be paid in cash, property or in
shares of the capital stock.
Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, for equalizing dividends,
for repairing or maintaining any property of the corporation or for such other
purpose as the directors shall think conducive to the interest of the
corporation and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 3. Annual Statement. The board of directors shall present at
each annual meeting or special meeting of the stockholders, when called for by
vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 4. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
Section 6. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed, affixed, reproduced or otherwise.
Section 7. Indemnification. The corporation shall indemnify its
officers and directors to the fullest extent permitted by the General
Corporation Law of the State of Delaware. The Corporation may indemnify
employees and agents of the corporation in accordance with Delaware law as the
board of directors shall determine in its sole discretion.
ARTICLE IX.
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws may be
adopted by the stockholders or by the board of directors, when such power is
conferred upon the board of directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors if notice of
such alteration, amendment, repeal or adoption of new bylaws is contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws is
conferred upon the
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board of directors by the certificate of incorporation, it shall not divest or
limit the power of the stockholders to adopt, amend or repeal bylaws.
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<PAGE> 1
EXHIBIT 4.2
FOURTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
THIS FOURTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (the
"Agreement") is made and entered into as of the 22nd day of December, 1999, by
and among INTELLIGENT INFORMATION INCORPORATED, a Delaware corporation (the
"COMPANY"), the Purchasers listed on Exhibit A to this Agreement (each, a
"SERIES F PURCHASER" and collectively, the "SERIES F PURCHASERS"), BG MEDIA
INVESTORS L.P., a Delaware limited partnership ("BG MEDIA"), APEX INVESTMENT
FUND III, L.P., a Delaware limited partnership, and APEX STRATEGIC PARTNERS,
LLC, a Delaware limited liability company ("APEX"), KEYSTONE VENTURE IV, L.P., a
Pennsylvania limited partnership ("KEYSTONE"), and ROBERT M. UNNOLD, STEPHEN G.
MALONEY, DONALD F. CHRISTINO and W. PETER DANIELS (the "FOUNDERS" and
collectively with the Series F Purchasers, BG Media, Apex and Keystone, the
"STOCKHOLDERS").
W I T N E S S E T H:
The Stockholders own substantially all of the issued and outstanding
shares of the Common Stock, par value $.01 per share (the "COMMON STOCK"), all
of the issued and outstanding shares of the Series B Preferred Stock, par value
$.01 per share (the "SERIES B PREFERRED STOCK"), 421 shares of the Series C
Preferred Stock par value $.01 per share (the "KEYSTONE SERIES C PREFERRED
STOCK"), all of the issued and outstanding shares of the Series D Preferred
Stock, par value $.01 per share (the "SERIES D PREFERRED STOCK") all of the
issued and outstanding shares of the Series E Preferred Stock, par value $.01
per share (the "SERIES E PREFERRED STOCK"), and all of the issued and
outstanding shares of the Series F Preferred Stock, par value $.01 per share
(the "SERIES F PREFERRED STOCK") of the Company, in the amounts set forth on
Exhibit A annexed hereto (such shares together with all shares of Common Stock
issued upon conversion of the Series B Preferred Stock, the Keystone Series C
Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and
the Series F Preferred Stock being hereinafter referred to as the "SHARES").
The Stockholders and the Company consider it to be in their individual
and mutual best interests to set forth certain agreements with respect to (i)
board representation, (ii) certain corporate actions, (iii) restrictions on the
transfer of the Shares, and (iv) certain other matters as hereinafter set forth.
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
specifically agreed to and acknowledged, the parties hereby agree as follows:
1. Board of Directors and Related Matters.
<PAGE> 2
1.01 Series F Purchasers' Board Designee. For so long as the Series F
Purchasers own at least fifty percent (50%) of the aggregate number of shares of
Series F Preferred Stock, the Series F Purchasers, as a group, shall be entitled
to designate one person for election to the Company's Board of Directors (the
"BOARD"). Any person designated by the Series F Purchasers for election to the
Board pursuant to this Section 1.01 shall be referred to herein as the "SERIES F
PURCHASERS' DESIGNEE."
1.02 BG Media's Board Designee. For so long as BG Media owns at least
fifty percent (50%) of the aggregate number of shares of Series E Preferred
Stock, BG Media shall be entitled to designate one person for election to the
Board. Any person designated by BG Media for election to the Board pursuant to
this Section 1.02 shall be referred to herein as the "BG MEDIA DESIGNEE."
1.03 Keystone's Board Designee. For so long as Keystone owns at least
fifty percent (50%) of the aggregate number of shares of Series B Preferred
Stock outstanding on the date hereof, Keystone shall be entitled to designate
one person for election to the Board (the "KEYSTONE DESIGNEE").
1.04 Apex's Board Designee; Company Board Designee.
(a) For so long as Apex owns at least fifty percent (50%) of
the aggregate number of shares of Series D Preferred Stock outstanding on the
date hereof, Apex shall be entitled to designate one person for election to the
Board (the "APEX DESIGNEE");
(b) For so long as Apex owns at least fifty percent (50%) of
the aggregate number of shares of Series D Preferred Stock outstanding on the
date hereof, the President and Chief Executive Officer of the Company shall
designate and elect a director, who was not designated pursuant to Sections
1.01, 1.02, 1.03, 1.04(a) and 1.05 hereof, and who has relevant experience in
the Company's business and is acceptable to the President and Chief Executive
Officer of the Company, the Series F Purchasers, BG Media, Apex and Keystone
(the "COMPANY'S DESIGNEE"). Such designee shall be chosen and appointed on or
before June 30, 2000.
1.05 Founders' Board Designees. Each Founder shall be entitled to serve
as a member of the Board for so long as such Founder owns at least 10% of the
outstanding voting stock of the Company; provided, however, that in the event
any Founder owns less than 10% of the outstanding voting stock of the Company,
but the Founders collectively own the amount of outstanding voting stock of the
Company set forth below, the Founders shall be entitled to designate the number
of members of the Board as follows:
<TABLE>
<CAPTION>
Aggregate Number of
Ownership Founders'
Percentage Designees
---------- ---------
<S> <C>
40% 4
30% 3
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
20% 2
10% 1
</TABLE>
Any person elected to the Board pursuant to this Section 1.05 shall be referred
to herein as a "FOUNDER DESIGNEE."
1.06 Size of the Board. Except in accordance with Section 2 hereof, the
number of members of the Board shall be set as follows:
(a) For so long as Apex, BG Media or the Series F Purchasers
own at least fifty percent (50%) of the aggregate number of shares of Series D
Preferred Stock, Series E Preferred Stock or Series F Preferred Stock,
respectively, outstanding on the date hereof, the Board shall not, without the
affirmative consent of Apex, BG Media or the Series F Purchasers, as the case
may be, consist of more than eight (8) members.
(b) Subject to Section 1.06(a), to the extent that the size of
the Board must be increased or decreased in order to accommodate the Series F
Purchasers' Designee, the BG Media Designee, the Keystone Designee, the Apex
Designee, the Company's Designee and the Founder Designees to which the Series F
Purchasers, BG Media, Keystone, Apex, the Company and the Founders,
respectively, are entitled pursuant to Sections 1.01, 1.02, 1.03, 1.04 and 1.05
hereof, the Board shall take all necessary action to increase or decrease its
size accordingly, without requiring further action on the part of the
Stockholders, and with ownership of the Common Stock, as reflected in the
Company's stock transfer ledger, being conclusive evidence of the number of
designees to which the Series F Purchasers, BG Media, Keystone, Apex, the
Company and the Founders are respectively entitled.
1.07 Election of Designees. The Company will at all times use its best
efforts to cause the Series F Purchasers' Designee, the BG Media Designee, the
Keystone Designee, the Apex Designee, the Company Designee and the Founder
Designees to be elected to the Board and will refrain from taking any action
that would diminish the prospects of the Series F Purchasers' Designee, the BG
Media Designee, the Keystone Designee, the Apex Designee, the Company Designee
and the Founder Designees being elected to the Board pursuant to Sections 1.01,
1.02, 1.03, 1.04 and 1.05 hereof. Each Stockholder agrees, for so long as this
Agreement remains in effect, to vote or cause to be voted, if applicable, all of
the shares of Common Stock, Series B Preferred Stock, Keystone Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock now owned or hereafter acquired by such Stockholder, or over
which such Stockholder has voting control, and to otherwise use its best
efforts, (a) to elect to the Board, at any time that directors are elected to
the Board, the Series F Purchasers' Designee, the BG Media Designee, the
Keystone Designee, the Apex Designee, the Company Designee and the Founder
Designees and (b) other than in accordance with Section 2 hereof, not to
increase or decrease or permit the Company to increase or decrease the number of
members of the Board except as is necessary to accommodate the Series F
Purchasers' Designee, the BG Media Designee, the Keystone Designee, the Apex
Designee, the Company Designee and the Founder Designees to which the Series F
Purchasers, BG Media, Keystone, Apex, the Company and the Founders,
respectively, are entitled pursuant to Sections 1.01, 1.02, 1.03, 1.04 and 1.05
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<PAGE> 4
hereof. Upon any change in ownership of shares of the Company's stock, the
Company and each Stockholder will use their respective best efforts to ensure
compliance with the provisions of this Section 1.
1.08 Observer Rights. For so long as NBC Interactive Media, Inc. owns
at least fifty percent (50%) of the number of shares of Series F Preferred Stock
purchased by it hereunder, it shall have the right to designate one (1) person
to be an observer at each Board of Directors meeting. For so long as Sony
Corporation of America and Sony Music, a Group of Sony Music Entertainment Inc.
(collectively, "Sony") own at least fifty percent (50%) of the number of shares
of Series F Preferred Stock purchased by Sony hereunder, Sony shall also have
the right to designate one (1) person to be an observer at each Board of
Directors meeting. Each observer and GE Capital Equity Investments, Inc. shall
be entitled to receive all documents provided to the directors of the Company,
subject to any restrictions under applicable law.
2. Restrictions on Certain Corporate Actions.
Except with the affirmative vote of a majority of the Board (which
majority must include the affirmative vote of the Series F Purchasers' Designee,
the BG Media Designee and either the Keystone Designee or the Apex Designee (or
such other existing director designated by BG Media if either Keystone or Apex
is no longer represented on the Board (the "BG MEDIA REPLACEMENT DESIGNEE")) on
the actions specified in clauses (l) through (p) below), the Board will not:
(a) Amend the Certificate of Incorporation or By-laws of the
Company;
(b) Issue any additional shares of capital stock or securities
convertible into shares of capital stock, or options, warrants or other
commitments for the issuance of shares of capital stock or such securities
(other than pursuant to the Company's 1995 Stock Incentive Plan, as in effect on
the date hereof);
(c) Retire, redeem or otherwise repurchase, directly or
indirectly, any share of the capital stock or other equity securities of the
Company;
(d) Enter into any agreement, commitment or plan of merger,
reorganization or consolidation which would result in the issuance of any shares
of the capital stock of the Company or which would result in a disposition of
any shares of the capital stock of the Company held or owned by any Stockholder;
(e) Create, incur, or assume or suffer to exist, or guarantee,
endorse or otherwise become directly or contingently liable for, any
indebtedness or other obligation in excess of $75,000 with respect to any single
obligation or permit the aggregate amount of such indebtedness or obligation
outstanding at any given time to exceed $250,000;
(f) Sell, assign, lease or otherwise dispose of any of the
Company's material assets;
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<PAGE> 5
(g) Declare or pay any dividends, in cash or property;
(h) Increase or enter into any agreement or arrangement to
increase the aggregate annual base compensation of any officer, director or
employee of the Company to any amount greater than $150,000;
(i) Commence, or cause to be commenced, any bankruptcy,
reorganization, debt arrangement or proceeding under any bankruptcy or
insolvency law, or any disposition or liquidation proceeding;
(j) File a registration statement, under the Securities Act of
1933, as amended, with respect to any securities of the Company, except pursuant
to the Third Amended and Restated Registration Rights Agreement of even date
herewith by and among the parties hereto;
(k) Enter into or materially amend any contract, agreement or
other arrangement with any officer, employee, director or holder of at least 5%
of the Company's outstanding voting stock;
(l) Commence any business not directly related to the present
(or presently proposed) business of the Company;
(m) Increase or decrease the size of the Board except as is
necessary to elect the Series F Purchasers' Designee, the BG Media Designee, the
Keystone Designee, the Apex Designee, the Company Designee and the Founder
Designees to which the Series F Purchasers, BG Media, Keystone, Apex and the
Founders, respectively, are entitled pursuant to Sections 1.01, 1.02, 1.03, 1.04
and 1.05 hereof, subject to Section 1.06(a) hereof;
(n) Approve the Company's annual budgets, business plan and
marketing plans;
(o) Approve compensation matters related to the Company's
Chairman of the Board and President and Chief Executive Officer; or
(p) Approve any other matter not in the ordinary course of
business.
3. Restrictions on Transfer of Shares.
3.01 Transfer of Stockholder Shares. Except as hereinafter provided, no
Stockholder shall sell, assign, transfer, give, pledge, encumber or otherwise
dispose of all or any part of such Stockholder's Shares to any person, trust,
association, partnership, firm, corporation or other legal entity (a
"Transfer"), except as expressly permitted pursuant to this Agreement and except
for any pledge, lien, security interest, control arrangement or other
encumbrance granted to, or arising by operation of law in favor of, any lender
(or other financing entity) or securities broker/dealer (or similar entity) to
or in respect of any Stockholder, or any transfers in connection with such
party's exercise of its rights therewith.
- 5 -
<PAGE> 6
3.02 Permitted Transferees. A Stockholder may Transfer all or any part
of his or its Shares in accordance with the redemption right contained in the
Restated Certificate of Incorporation, as amended, and the Certificate of
Designations of the Series F Preferred Stock or to a Permitted Transferee (as
hereinafter defined) without first complying with Section 4 or Section 5,
provided that prior to effecting such Transfer, the Permitted Transferee shall
execute a counterpart of this Agreement in accordance with Section 9 hereof,
thereby evidencing that the Shares to be held by such Permitted Transferee shall
remain subject to this Agreement and that such Permitted Transferee has become a
Stockholder for purposes of, and is bound as such by the terms of, this
Agreement. For purposes of this Agreement, the term "PERMITTED TRANSFEREE" of a
Stockholder shall mean (i) if such Stockholder is a corporation, any Affiliate
(as defined below) of such corporation, (ii) if such Stockholder is a limited
partnership, any current or former general or limited partner of such limited
partnership, (iii) if such Stockholder is a limited liability company, any
current or former member of such Stockholder, (iv) if such Stockholder is an
individual, such Stockholder's spouse or lineal descendants, or any trust or
other entity created and existing solely for the benefit, directly or
indirectly, of any such person or persons, or, upon the death of any such
Stockholder, such Stockholders' estate, administrator or executor, provided that
under the terms of such Stockholder's will or under the applicable laws of
intestate succession, such Stockholder's Shares are to be transferred solely to
a Permitted Transferee or Permitted Transferees in accordance with the
requirements of this Section 3.02, and (v) with regard to any of the foregoing,
the Company, if the Transfer is made pursuant to any redemption right contained
in the Restated Certificate of Incorporation, as amended, and the Certificate of
Designations of the Series F Preferred Stock. For purposes of this Agreement, an
"Affiliate" of an entity shall mean a person or entity that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the entity. Notwithstanding the foregoing, a
Stockholder may, in one or a series of transactions, Transfer up to an aggregate
of 2.5% of the total number of Shares outstanding, without being subject to, or
complying with, the provisions of Sections 4 and 5, provided, however, that each
of Robert M. Unnold and Stephen G. Maloney shall not, so long as they are
employed by the Company in a management position, be permitted to Transfer more
than 20% of his individual holdings during the five (5) year period after the
date hereof except in the case of the sale by the Company of all or
substantially all of its business or assets, the sale of all or substantially
all of the capital stock by the Company's shareholders as a whole and
Board-approved changes to the Company's stock option plans or for estate
planning purposes.
4. Stockholder's First Offer Rights.
4.01 Except as permitted by Section 3.02 hereof, no Stockholder shall
Transfer all or any portion of the Shares owned by such Stockholder without, at
least forty-five (45) days prior to any such proposed Transfer, giving
concurrent written notice to the Company and the other Stockholders of (i) the
number and class of Shares he or it proposes to Transfer, (ii) the total number
of shares of such class then owned by the selling Stockholder, (iii) the name
and address of the proposed transferee and (iv) the terms of the proposed
Transfer (the "TRANSFER NOTICE"). The date on which the Company receives a
Transfer Notice is referred to as the "NOTICE DATE". The Stockholders agree
that, in the event they propose to sell any Shares for consideration other than
cash, the selling Stockholder shall, at his or its cost, obtain an appraisal of
the proposed
- 6 -
<PAGE> 7
consideration for the purpose of valuing such offer in connection with the First
Offer Rights hereunder.
4.02 The Transfer Notice shall constitute an offer to sell such portion
of the Shares to all remaining Stockholders at a price per share and on the same
terms as set forth in the Transfer Notice. Under such circumstances, each
remaining Stockholder shall have the option to purchase all or any portion of
his or its pro rata share (in relation to all of the other Stockholders and
assuming the conversion of all outstanding securities convertible into shares of
Common Stock) of the Shares proposed to be Transferred. A Stockholder who elects
to exercise such option must do so in writing, to the Stockholder proposing the
Transfer, within twenty (20) days of the Notice Date. Any stock with respect to
which the option is not exercised shall be subject to an option to purchase in
favor of the other remaining Stockholders, at the same price per share and on
the same terms, on a pro rata basis. Any remaining Stockholders electing to
exercise such option shall notify the Stockholder proposing the Transfer in
writing within ten (10) days after the expiration of the twenty (20)-day period
set forth above.
4.03 If the option under this Section 4 to purchase the Shares that are
proposed to be Transferred is not exercised in its entirety by one or more of
the remaining Stockholders within thirty (30) days of the Notice Date, then such
Stockholder shall, subject to Section 5 of this Agreement, be free to dispose of
all, but not less than all, of the Shares proposed to be Transferred; provided,
however, (i) that such Transfer shall be made in strict accordance with the
terms of the proposed Transfer described in the Transfer Notice, (ii) the
proposed transferee executes a counterpart of this Agreement in accordance with
Section 9 hereof, thereby evidencing that the Shares to be held by the proposed
transferee remain subject to this Agreement and that the proposed transferee has
become a Stockholder, for purposes of, and is bound as such by the terms of,
this Agreement and (iii) that such Transfer is consummated within ninety (90)
days after the Notice Date. After the expiration of such ninety (90)-day period,
all Shares then owned by the Stockholder that proposed the Transfer shall again
be subject to the provisions of this Agreement as though the offer pursuant to
this Section 4 had not previously been made. The certificates representing any
Shares registered in the name of such transferee shall bear the legend provided
for in Section 10 hereof.
4.04 If the offer of the selling Stockholder pursuant to this Section 4
is accepted, the closing of the purchase of the offered Shares shall be held at
the principal executive office of the Company within forty (40) days after the
Notice Date, on the date and at the hour set forth in a written notice given by
the Company to the selling Stockholder and the remaining Stockholders. The
purchasing party shall deliver to the selling Stockholder at the closing the
full purchase price payable for the Shares by means of any official bank check
or certified check, and the selling Stockholder shall deliver to the purchasing
party share certificates representing the Shares being purchased by the
purchasing party, duly endorsed in blank for transfer or with other documents as
may be necessary or appropriate, in the reasonable opinion of counsel for the
purchasing party, to effectuate the Transfer to the purchasing party.
- 7 -
<PAGE> 8
5. Tag-Along Rights.
5.01 In the event that any Stockholder other than any Series F
Purchaser (a "SELLING STOCKHOLDER") proposes to Transfer Shares which either
alone or together with all other Shares Transferred by such Stockholder
represent in excess of 7.5% of the total Shares owned by such Selling
Stockholder, and if the remaining Stockholders have not exercised their rights
under Section 4.02 hereof, then at least fifteen (15) days prior to any such
Transfer, the Selling Stockholder shall give concurrent written notice (the
"TAG-ALONG TRANSFER NOTICE") to the Company and the remaining Stockholders of
(i) the number and class of Shares proposed to be transferred, (ii) the total
number of Shares then owned by the Selling Stockholder, (iii) the name and
address of the proposed transferee and (iv) the terms of the proposed Transfer.
The Tag-Along Transfer Notice shall be signed both by the Selling Stockholder
and by the proposed transferee and must constitute a binding commitment of both
such parties for the transfer of such Shares, subject only to the Tag-Along
Right (as hereinafter defined). The date on which the Company receives a
Tag-Along Transfer Notice is referred to as the "TAG-ALONG NOTICE DATE." Total
Shares outstanding shall include all Shares on a converted or exercised basis.
5.02 The Tag-Along Transfer Notice shall constitute an offer by the
proposed transferee to purchase a portion of the Shares proposed to be so
Transferred from each remaining Stockholder. Under such circumstances, each
remaining Stockholder may elect to sell to the proposed transferee, at a per
share price and on the same terms as were offered to the Selling Stockholder as
set forth in the Tag-Along Transfer Notice, a percentage of the Shares proposed
to be so Transferred, such percentage equal to the percentage which the Shares
owned by such remaining stockholder represent of the total Shares outstanding,
in each case assuming the conversion of any securities convertible into shares
of Common Stock (the "Tag-Along Right"). A Stockholder who elects to exercise
his or its Tag-Along Right must do so in writing, to the Selling Stockholder,
within five (5) days of the Tag-Along Notice Date. The consummation of the
purchase of the Selling Stockholder's Shares and any remaining Stockholders'
Shares being sold pursuant to the Tag-Along Right, if any, shall be made
contemporaneously by the proposed transferee.
6. Pre-emptive Purchase Rights.
In the event of any offering of shares of Common Stock or other
security of the Company convertible into or exercisable for the Common Stock
other than pursuant to an underwritten public offering (excluding (i) issuances
of shares of Common Stock pursuant to conversion of the shares of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock or Series F Preferred Stock, (ii) shares issuable pursuant to
warrants outstanding on the date hereof or options to purchase up to 2,264,000
shares of Common Stock granted or to be granted under the Company's 1995
Incentive Stock Plan or any successor plan or (iii) other securities outstanding
as of the date hereof), the Company shall send written notice thereof to each
Stockholder not less than forty-five (45) days prior to such public or private
offering, which notice shall set forth all material terms of the proposed
transaction, including, without limitation, the manner of sale and the per share
sale price or the amount and type of other consideration to be received by the
Company. In the event that the Company offers shares
- 8 -
<PAGE> 9
or other securities where the value of such shares or other securities is based
upon a valuation of the Company that is equal to or greater than $47.5 million,
then each of the Series F Purchasers, as a group, and BG Media shall have the
first right, by sending irrevocable written notice thereof to the Company within
twenty (20) days after receipt of the Company's notice, to purchase up to Ten
Million Dollars ($10,000,000) of such shares or other securities being offered
by the Company at the same price offered to the public or in the private
offering (or, if the sale is not for cash, at the fair market value of the
property or other consideration received by the Company (as determined by an
independent third party appraiser selected by a majority vote of the shares held
by the Series F Purchasers, BG Media, Keystone and Apex)), of which up to Two
Million Dollars ($2,000,000) of the shares or other securities purchased by BG
Media may be allocated and transferred, in BG Media's sole discretion, to Banque
Paribas or its affiliates, and the other Stockholders shall have the right, by
sending irrevocable written notice thereof to the Company within thirty (30)
days after receipt of the Company's notice, to purchase their pro rata portion
of the remaining shares or other securities, if any, in the offering on the same
basis as the Series F Purchasers, as a group, and BG Media. In the event that
the Company offers shares or other securities where the value of such shares or
other securities is based upon a valuation of the Company that is less than
$47.5 million, then each Stockholder shall have the right, by sending
irrevocable written notice thereof to the Company within twenty (20) days after
receipt of the Company's notice, to purchase at the same price sold to the
public or in the private offering (or, if the sale is not for cash, at the fair
market value of the property or other consideration received by the Company (as
determined by an independent third party appraiser selected by a majority vote
of the shares held by the Series F Purchasers, BG Media, Keystone and Apex)),
such number of shares of Common Stock or other securities as is necessary to
maintain its or his respective percentage ownership of Shares as it existed
immediately prior to such offering. A closing for the purchase of Common Stock
or other securities pursuant to this Section 6 shall occur on the later of (i)
the date on which such public or private offering occurs and (ii) such later
date as may be agreed to by the Stockholders who have exercised their rights
hereunder and the Company, at a time and place specified by such Stockholders in
a notice provided to the Company at least ten (10) days prior to such closing.
In connection with such closing, the Company and such Stockholders shall provide
such customary closing certificates and opinions as such Stockholders or the
Company, as appropriate, shall reasonably request.
7. Anti-Dilution Protections.
In the event that the relative ownership percentages of Shares, as
among the Stockholders, should be altered, as a result of a stock split, stock
dividend or combination of Shares or any reclassification, reorganization,
redesignation, merger, consolidation, recapitalization, split-up, spin-off,
distribution to stockholders, combination of Shares or otherwise (other than
pursuant to a transaction to which Section 6 would apply or as a result of any
Transfer of Shares by any Stockholder), the number of Shares held by the
Stockholders shall be appropriately and proportionately adjusted to maintain,
after giving effect to such action, among the Stockholders, the same relative
ownership percentages of Shares as existed immediately prior to such action.
8. Enforceability.
- 9 -
<PAGE> 10
8.01 Specific Performance. The parties hereto recognize and hereby
acknowledge that it is impossible to measure in money the damages which would
result to a party hereto by reason of a failure of any of the parties hereto to
perform any of the obligations imposed upon it or him under this Agreement.
Therefore, if any party hereto should institute an action or proceeding to
enforce the provisions hereof, any person, including the Company, against whom
such action or proceeding is thereby brought hereby waives the claim or defense
that such party has an adequate remedy at law, and such person shall not urge in
any action or proceeding the claim or defense that such a remedy at law exists.
8.02 Separate Agreement. The parties hereto recognize, acknowledge and
agree that this Agreement constitutes a separate agreement independently
supported by good and adequate consideration, the receipt and sufficiency of
which are hereby acknowledged, and that this Agreement shall be interpreted,
construed and enforced separate and apart from any other agreements between or
among the parties hereto. The parties hereto further agree that no claim or
cause of action of any party hereto against any other party hereto arising under
any other agreement between or among the parties hereto or out of any set of
facts shall constitute a defense to the enforcement of this Agreement.
9. Additional Parties Hereto.
9.01 Permitted Transferees. Any Permitted Transferee of a Stockholder
who hereafter becomes a holder of Shares shall and must become a party hereto by
signing a counterpart signature page. Any such party executing this Agreement
shall thereafter be a party to this Agreement as fully and to the same extent as
if he or it had been an original signatory party hereof and shall be deemed to
be a "Stockholder" for the purposes hereof.
9.02 Other Transferees. Unless this provision is expressly waived in
writing by all Stockholders, any person who hereafter acquires shares from the
Stockholders in excess of 2.5% of the total Shares outstanding shall and must
become a party hereto by executing a counterpart signature page. Any such party
executing this Agreement shall thereafter be a party to this agreement as fully
and to the same effect as if he or it had been an original signatory party
hereof and shall be deemed to be a Stockholder for the purposes hereof.
10. Legends on Stock Certificates.
10.01 In addition to compliance with the terms of this Agreement, no
Transfer of Shares may be made except in compliance with applicable federal and
state securities laws. Accordingly, each certificate representing Shares now or
hereafter held by or issued to any Stockholder shall have placed thereon a
legend in substantially the following form:
"THE SECURITIES ACT OF 1933 AND STATE SECURITIES LAWS
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any applicable state securities laws and cannot be sold or
transferred
- 10 -
<PAGE> 11
unless (i) a Registration Statement under the Securities Act
of 1933, as amended, and any applicable state securities laws
is then in effect with respect to the securities represented
hereby; or (ii) a written opinion from legal counsel
reasonably acceptable to the issuer is obtained to the effect
that an exemption from registration under the Securities Act
of 1933, as amended, and any applicable state securities laws
is available with respect to the proposed sale or transfer and
that no such registration is required; or (iii) a no action
letter or its then equivalent with respect to such sale or
transfer has been issued by the Staff of the Securities and
Exchange Commission and any applicable state securities
governmental body."
10.02 In addition to the foregoing, each certificate representing
shares of stock of the Company subject to this Agreement shall bear in
conspicuous type the following legend:
"The shares of stock represented by this certificate (and all
transfers thereof) are subject to the terms of a Fourth
Amended and Restated Stockholders Agreement, dated as of
December 22, 1999 (and all amendments thereto), by and among
certain stockholders of the Company and the Company, a copy of
which is on file at the main office of the Company. Any sale,
assignment, transfer, gift, pledge, encumbrance or other
disposition of the shares evidenced by this certificate not in
conformity with said Agreement shall be invalid."
11. Termination. Unless earlier terminated by agreement of the parties hereto,
including all of the Stockholders and their Permitted Transferees who may
hereafter become party hereto, this Agreement shall terminate upon the earlier
to occur of (a) the twentieth (20th) anniversary of the date hereof and (b) such
time as the Company shall have successfully completed an underwritten public
offering of its Common Stock.
12. Notices. All communications in connection with this Agreement shall be in
writing and shall be deemed properly given if hand delivered or sent by
telecopier (provided that such communication is confirmed by same-day deposit in
the United States mail) or overnight courier with adequate evidence of delivery
or sent by registered or certified mail, return receipt requested, and, if to a
Stockholder, addressed to such Stockholder's address as shown on the signature
page or other such address or persons as such Stockholder may designate from
time to time, and if to the Company, at its offices at:
Intelligent Information Incorporated
181 Harbor Drive
Third Floor
Stamford, CT 06902
Attention: Stephen G. Maloney
- 11 -
<PAGE> 12
President and Chief Executive Officer
with a copy to:
Piper Marbury Rudnick & Wolfe LLP
1251 Avenue of the Americas
New York, NY 10020
Attention: Michael Hirschberg, Esq.
or such other addresses or persons as the recipient shall have designated to the
sender by a written notice given in accordance with this Section. Any notice
called for hereunder shall be deemed given when received.
13. Entire Agreement. This Agreement, that certain Stock Purchase Agreement of
even date herewith between the Series F Purchasers and the Company (the "SERIES
F PURCHASE AGREEMENT"), that certain Stock Purchase Agreement dated as of
February 1, 1999 between BG Media and the Company (the "BG MEDIA PURCHASE
AGREEMENT"), that certain Third Amended and Restated Registration Rights
Agreement of even date herewith, those certain Put Option Agreements of even
date herewith, dated as of February 12, 1999 and as of August 11, 1998 by and
among the parties thereto, that certain Preferred Stock Purchase Agreement dated
August 30, 1996 between Keystone and the Company and that certain Series D
Preferred Stock Purchase Agreement dated as of August 11, 1998 between Apex and
the Company constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof and are the final, complete and
exclusive expression of the terms and conditions thereof; provided, however,
that to the extent that any provisions in the foregoing agreements are contrary
to the provisions of the Related Agreements dated as of the date hereof, the
provisions of the Related Agreements dated as of the date hereof shall control.
All prior agreements, representations, negotiations and understandings of the
parties hereto, oral or written, express or implied, are hereby superseded and
merged herein.
14. Modification. No addition to or modification of any provision contained in
this Agreement shall be effective unless fully set forth in writing signed by
the parties hereto.
15. Governing Law. This Agreement shall be governed and construed under the laws
of the State of New York (without giving effect to principles of conflicts of
law).
16. Successors and Assigns. The rights and obligations set forth in this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective legal representatives, permitted transferees, successors
and assigns.
17. Captions. The captions of the several sections and paragraphs of this
Agreement are included for reference only and shall not limit or otherwise
affect the meaning thereof.
18. Amendments. Neither this Agreement nor any term or provision hereof may be
amended, waived, discharged or terminated except in writing signed by all
parties to this Agreement.
- 12 -
<PAGE> 13
19. Arbitration. Any dispute arising in connection with this Agreement shall be
submitted to binding arbitration in accordance with Section 9.10 of that certain
Stock Purchase Agreement of even date herewith between the Company and the
Series F Purchasers.
20. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute but one and the same instrument.
- 13 -
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Shareholders
Agreement as of the date and year first above written.
INTELLIGENT INFORMATION INCORPORATED
By: /s/ Stephen G. Maloney
-------------------------------------
Stephen G. Maloney
President and Chief Executive Officer
BG MEDIA INVESTORS L.P.
399 Park Avenue
19th Floor
New York, NY 10022
By: BG Media Investors LLC,
its General Partner
By: /s/ J. William Grimes
-------------------------------------
J. William Grimes
Member
KEYSTONE VENTURE IV, L.P.
1601 Market Street
Philadelphia, PA 19103
By: Keystone Venture IV
Management Company L.P.,
its General Partner
By: Keystone MCGP, Inc.,
its General Partner
By: /s/ Kerry J. Dale
-------------------------------------
Kerry J. Dale
Vice President
- 14 -
<PAGE> 15
APEX INVESTMENT FUND III, L.P.
233 South Wacker Drive
Suite 9600
Chicago, IL 60606
By: Apex Management III, LLC
By: Stellar Investment Co.
By: /s/ James A. Johnson
-------------------------------------
James A. Johnson
President
APEX STRATEGIC PARTNERS
233 South Wacker Drive
Suite 9600
Chicago, IL 60606
By: Apex Management III, LLC
By: Stellar Investment Co.
By: /s/ James A. Johnson
-------------------------------------
James A. Johnson
President
/s/ Robert M. Unnold
-----------------------------------------
ROBERT M. UNNOLD
52 Lanark Road
Stamford, CT 06902
/s/ Stephen G. Maloney
-----------------------------------------
STEPHEN G. MALONEY
1766 Shippan Avenue
Stamford, CT 06902
/s/ Donald F. Christino
-----------------------------------------
DONALD F. CHRISTINO
57 Mitchell Street
Stamford, CT 06902
/s/ W. Peter Daniels
-----------------------------------------
W. PETER DANIELS
21 Susan Place
Katonah, NY 10536
- 15 -
<PAGE> 16
INTELLIGENT INVESTMENT PARTNERS, INC.
By: /s/ [illegible]
------------------------------------
Name:
Title:
Address:
City, State:
Phone:
Fax:
- 16 -
<PAGE> 17
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Brian Graff
-------------------------------------
Brian Graff
Vice President
120 Long Ridge Road
Stamford, CT 06927
Phone: 203-357-3982
Fax: 203-961-2088
- 17 -
<PAGE> 18
NBC INTERACTIVE MEDIA, INC.
By: /s/ Margaret T. Murphy
-------------------------------------
Margaret T. Murphy
Vice President
30 Rockefeller Plaza
New York, NY 10020
Phone: 212-664-6163
- 18 -
<PAGE> 19
SPINNAKER CROSSOVER INSTITUTIONAL FUND,
L.P.
By: /s/ Eric Moore
-------------------------------------
Title: Controller
Address: 1875 S. Grant St. Ste. 600
San Mateo, CA 94402City, State, Zip:
Phone: (650) 287-2200
Fax: (650) 522-8497
SPINNAKER CROSSOVER FUND, L.P.
By: /s/ Eric Moore
-------------------------------------
Title: Controller
Address: 1875 S. Grant St. Ste. 600
San Mateo, CA 94402City, State, Zip:
Phone: (650) 287-2200
Fax: (650) 522-8497
SPINNAKER CLIPPER FUND, L.P.
By: /s/ Eric Moore
-------------------------------------
Title: Controller
Address: 1875 S. Grant St. Ste. 600
San Mateo, CA 94402City, State, Zip:
Phone: (650) 287-2200
Fax: (650) 522-8497
- 19 -
<PAGE> 20
KEYSTONE VENTURE V, L.P.
By: Keystone V Partners, L.P.,
Its General Partner
By: Keystone Management Co., Inc.,
the General Partner of Keystone
V Partners, L.P.
By: /s/ Kerry J. Dale
-------------------------------------
Kerry J. Dale, Managing Director
- 20 -
<PAGE> 21
SONY CORPORATION OF AMERICA
By: /s/ Marinus N. Henny
-------------------------------------
Name: Marinus N. Henny
Title: CFO
SONY MUSIC, A GROUP OF SONY MUSIC
ENTERTAINMENT, INC.
By: /s/ Ron Wilcox
-------------------------------------
Name: Ron Wilcox
Title: Senior Vice President
Business Affairs and Administration
- 21 -
<PAGE> 22
SUSQUEHANNA PARTNERS, GP
By: /s/ Joel Greenberg
-------------------------------------
Joel Greenberg
Managing Director
401 City Line Ave., Suite 220
Bala Cynwyd, PA 19004-1122
Phone: 610-617-2614
Fax: 610-617-2908
with copies to:
Michael J. Howe
Associate Director
Susquehanna Financial Group
401 City Line Ave., Suite 220
Bala Cynwyd, PA 19004-1122
Phone: 610-617-2702
Fax: 610-617-2707
and
Michael L. Spolan, Esq.
General Counsel and Secretary
Susquehanna Financial Group
425 California Street, Suite 1100
San Francisco, CA 94104
Phone: 415-403-6500
Fax: 415-403-6525
- 22 -
<PAGE> 23
CLEARNET COMMUNICATIONS, INC.
By: /s/ John H. Phillips
-------------------------------------
John H. Phillips
Executive Vice President, Carrier
Relations & General Counsel
200 Consilium, Suite 1600
Scarborough, Ont. M1H 3J3
Phone: 416-279-3009
Fax: 416-279-2995
- 23 -
<PAGE> 24
BT INVESTMENT PARTNERS, INC.
By: /s/ Kristine Cicardo
-------------------------------------
Kristine Cicardo
Vice President
130 Liberty Street
New York, NY 10006
Phone: 212-250-2500
Fax: 212-669-1530
- 24 -
<PAGE> 25
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Donald G. Reed
--------------------
Donald G. Reed
Senior Vice President and Managing
Director
999 West Street
Rocky Hill, CT 06067
Phone: 860-258-7812
Fax: 860-257-7582
- 25 -
<PAGE> 26
EXHIBIT A
<TABLE>
<S> <C>
Common Stock
------------
Robert M. Unnold 2,145,000 Shares
Stephen G. Maloney 1,471,666 Shares
Donald F. Christino 1,065,000 Shares
W. Peter Daniels 220,000 Shares
Keystone Venture IV, L.P. 62,858 Shares
Series B Preferred Stock
------------------------
Keystone Venture IV, L.P. 1,705 Shares
Series C Preferred Stock
------------------------
Keystone Venture IV, L.P. 421 Shares
Series D Preferred Stock
------------------------
Apex Investment Fund III, L.P. 802 Shares
Apex Strategic Partners, LLC 41 Shares
Series E Preferred Stock
------------------------
BG Media Investors L.P. 9,643.2 Shares
</TABLE>
- 26 -
<PAGE> 27
<TABLE>
<S> <C>
Series F Preferred Stock
Intelligent Investment Partners, Inc. 1,262.50 Shares
GE Capital Equity Investments, Inc. 1,262.50 Shares
NBC Interactive Media, Inc. 1,262.50 Shares
Spinnaker Crossover Institutional Fund, L.P. 1,229.50 Shares
Spinnaker Crossover Fund, L.P. 17 Shares
Spinnaker Clipper Fund, L.P. 16 Shares
Keystone Venture V, L.P. 757.50 Shares
SONY Corporation of America 757.50 Shares
SONY Music, A Group of
SONY Music Entertainment, Inc. 505 Shares
Susquehanna Partners, GP 378.75 Shares
Clearnet Communications, Inc. 340.87 Shares
BT Investment Partners, Inc. 252.50 Shares
Connecticut Development Authority 206.21 Shares
</TABLE>
- 27 -
<PAGE> 1
EXHIBIT 4.4
INTELLIGENT INFORMATION INCORPORATED
THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT dated
as of this 22nd day of December, 1999 (this "Agreement"), among INTELLIGENT
INFORMATION INCORPORATED, a Delaware corporation (the "Company"), the Purchasers
listed on Schedule A to this Agreement (each, a "SERIES F PURCHASER" and
collectively, the "SERIES F PURCHASERS"), BG MEDIA INVESTORS, L.P., a Delaware
limited partnership ("BG MEDIA"), APEX INVESTMENT FUND III L.P., a Delaware
limited partnership, and APEX STRATEGIC PARTNERS, LLC, a Delaware limited
liability company (together, "APEX"), KEYSTONE VENTURE IV, L.P., a Pennsylvania
limited partnership ("KEYSTONE"), ROBERT M. UNNOLD, STEPHEN G. MALONEY, DONALD
F. CHRISTINO and W. PETER DANIELS (collectively, the "HOLDERS").
PRELIMINARY STATEMENT
The Series F Purchasers have agreed to purchase the Series F
Preferred Stock described below on the condition, among others, that the Company
grant the registration rights set forth in this Agreement.
The Holders (other than the Series F Purchasers) are parties
to the Second Amended and Restated Registration Rights Agreement dated as of
February 12, 1999 by and among the Company and the parties thereto ("PRIOR
AGREEMENT") providing for certain registration rights. The parties hereto wish
to amend and restate the Prior Agreement.
To induce the Series F Purchasers to purchase the Series F
Preferred Stock and in consideration of the mutual representations and
agreements set forth in this Agreement, the Company and the Holders agree as
follows.
AGREEMENT
SECTION 1. DEFINITIONS.
1.1 As used in this Agreement, the following terms shall have
the following meanings:
"Affiliate" means any entity controlling, controlled by or
under common control with a designated Person. For the purposes of this
definition, control" shall have the meaning specified as of the date of this
Agreement for that word in Rule 405 promulgated by the Commission under the
Securities Act.
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"Board" means the Board of Directors of the Company.
"Commission" means the Securities and Exchange Commission, and
any successor thereto.
"Common Stock" means the Company's Common Stock, $.01 par
value per share.
"Conversion Stock" means shares of Common Stock issued upon
conversion of the Preferred Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Founder" means any of Robert M. Unnold, Stephen G. Maloney,
Donald F. Christino and W. Peter Daniels.
"Holders" means (a) holders as of the date of this Agreement
of Outstanding Registrable Securities, each of whom is a party to this
Agreement, and (b) any subsequent legal or beneficial owner of Outstanding
Registrable Securities who has become a party to this Agreement in accordance
with Section 12 of this Agreement.
"Initiating Holder" means (a) any Investor, provided such
Investor holds at least 50% of the Outstanding Registrable Securities initially
purchased by such Investor and provided that the exercise of any rights by such
Investor are exercised by the Holders of more than 50% of the Outstanding
Registrable Securities then owned by such Investor, (b) any Holders who, in the
aggregate, own not less than thirty percent (30%) of the Company's outstanding
Common Stock or (c) any Holders who, in the aggregate, own Preferred Stock
convertible into not less than thirty percent (30%) of the Company's Common
Stock.
"Investor" means any of the Series F Purchasers as a group, BG
Media, Apex and Keystone and their permitted transferees and assigns.
"Outstanding Registrable Securities" means (a) any shares of
Preferred Stock then outstanding; and (b) any shares of Common Stock then
outstanding which were issued upon conversion of Preferred Stock; and (c) any
shares of Common Stock then outstanding which were issued as, or were issued
directly or indirectly upon the conversion of other Securities issued as, a
dividend or other distribution with respect to, or in replacement of, Preferred
Stock or other Registrable Common Stock; and (d) any shares of Common Stock
outstanding as of the date of this Agreement in the name of a Founder and which
are then outstanding in the name of a Founder or a permitted assignee of a
Founder (provided such assignee has become party to this Agreement in accordance
with Section 12 below).
"Person" means an individual, partnership, corporation,
business trust, limited liability company, joint stock company, trust,
unincorporated association, joint venture, or other entity of whatever nature.
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"Preferred Stock" means Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock.
"Registrable Common Stock" means (a) any shares of Common
Stock then outstanding which were issued upon conversion of Preferred Stock; and
(b) any shares of Common Stock then issuable upon conversion of then-outstanding
Preferred Stock; and (c) any shares of Common Stock then outstanding which were
issued as, or were issued directly or indirectly upon the conversion of other
Securities issued as, a dividend or other distribution with respect to, or in
replacement of, Preferred Stock or other Registrable Common Stock; and (d) any
shares of Common Stock then outstanding which are issued in the name of a
Founder or a permitted assignee of a Founder (provided such assignee has become
party to this Agreement in accordance with Section 12 below); and (e) any shares
of Common Stock then issuable directly or indirectly upon the conversion or
exercise of other Securities issued as a dividend or other distribution with
respect to, or in replacement of, Preferred Stock or other Registrable Common
Stock; provided, however, that outstanding shares of Common Stock shall no
longer be Registrable Common Stock when they shall have been (y) effectively
registered under the Securities Act and sold by the holder thereof in accordance
with such registration, or (z) sold to the public pursuant to Rule 144.
"Rule 144" means Rule 144 promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any
successor Rule thereto.
"Securities" means any debt or equity securities of the
Company, whether now or hereafter authorized, and any instrument convertible
into, or exercisable or exchangeable for, Securities or a Security.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Preferred Stock" means (a) the outstanding shares of
the Company's Series B Preferred Stock, $.01 par value; (b) any shares of Series
B Preferred Stock issued in payment of a dividend upon any share of Series B
Preferred Stock and (c) any other Securities issued as a dividend or other
distribution with respect to, or in replacement of, any Series B Preferred Stock
except shares of Registrable Common Stock.
"Series C Preferred Stock" means (a) the outstanding shares of
the Company's Series C Preferred Stock, $.01 par value; (b) any shares of Series
C Preferred Stock issued in payment of a dividend upon any share of Series C
Preferred Stock and (c) any other Securities issued as a dividend or other
distribution with respect to, or in replacement of, any Series C Preferred Stock
except shares of Registrable Common Stock.
"Series D Preferred Stock" means (a) the outstanding shares of
the Company's Series D Preferred Stock, $.01 par value; (b) any shares of Series
D Preferred Stock issued in payment of a dividend upon any share of Series D
Preferred Stock and (c) any other Securities
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issued as a dividend or other distribution with respect to, or in replacement
of, any Series D Preferred Stock except shares of Registrable Common Stock.
"Series E Preferred Stock" means (a) the outstanding shares of
the Company's Series E Preferred Stock, $.01 par value; (b) any shares of Series
E Preferred Stock issued in payment of a dividend upon any share of Series E
Preferred Stock and (c) any other Securities issued as a dividend or other
distribution with respect to, or in replacement of, any Series E Preferred Stock
except shares of Registrable Common Stock.
"Series F Preferred Stock" means (a) the outstanding shares of
the Company's Series F Preferred Stock, $.01 par value; (b) any shares of Series
F Preferred Stock issued in payment of a dividend upon any share of Series F
Preferred Stock and (c) any other Securities issued as a dividend or other
distribution with respect to, or in replacement of, any Series F Preferred Stock
except shares of Registrable Common Stock.
"Short Form" means Form S-2 or Form S-3 under the Securities
Act, and any other form promulgated after the date of this Agreement applicable
in circumstances substantially comparable to either of those forms, regardless
of its designation.
1.2 For purposes of references in this Agreement to Securities
"equivalent to" an amount of Registrable Common Stock issued and issuable, (a) a
Holder of Preferred Stock will be deemed to be the Holder of Registrable Common
Stock issuable upon conversion of such Preferred Stock but not then issued
(disregarding any legal restriction then applicable to the conversion of such
Preferred Stock), and (b) the Registrable Common Stock issuable but not then
issued with respect to outstanding Preferred Stock will be included in the total
number of Registrable Common Stock.
SECTION 2. REGISTRATIONS ON LONG FORMS.
2.1 By a written notice to the Company at any time after six
(6) months following the effective date of the first registration statement
filed by the Company covering a public offering of its Securities, any
Initiating Holder may from time to time request that the Company register any
Registrable Common Stock specified in the notice, under the Securities Act and
under other relevant securities laws, for disposition in accordance with methods
stated in the notice.
2.2 When it receives a registration notice under Section 2.1,
the Company shall promptly deliver a copy of the registration notice to each
Holder who is not a party to the registration notice, each of whom may then
specify, by prompt notice to the Company, a number of shares of Registrable
Common Stock held by or issuable to it which it wishes to include in any
registration pursuant to the registration notice under Section 2.1.
2.3 When it receives a registration notice under Section 2.1,
the Company shall use its best efforts (a) to file a registration statement
under the Securities Act as soon as practicable, and in any event within sixty
(60) days of the receipt of such request, and (b) to
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effect the registration under the Securities Act of Registrable Common Stock
held by Holders specified in the registration notice under Section 2.1 and
subsequent notices under Section 2.2 that are received within twenty (20) days
after the mailing of the notices under Section 2.2, all to the extent requisite
to permit disposition by such Initiating Holder and each Holder requesting
Registrable Common Stock to be included in such registration in accordance with
the intended methods of disposition described in the registration notice.
SECTION 3. REGISTRATIONS ON SHORT FORMS.
3.1 If at any time the Company is a registrant entitled to use
a Short Form to register the resale of Registrable Common Stock by a Holder, any
Initiating Holder may, by a written notice to the Company, request that the
Company register such Holder's Registrable Common Stock specified in the notice
on a Short Form.
3.2 When it receives a registration notice under Section 3.1,
the Company shall promptly deliver a copy of the registration notice to each
Holder who is not a party to the registration notice, each of whom may then
specify, by prompt notice to the Company, a number of shares of Registrable
Common Stock held or issuable to it which it wishes to include in any
registration pursuant to the registration notice under Section 3.1.
3.3 When it receives a notice under Section 3.1, the Company
shall use its best efforts to effect the expeditious registration under the
Securities Act, on the Short Form specified in the notice, of Registrable Common
Stock specified in the notice.
SECTION 4. INCIDENTAL REGISTRATION. The Company shall give at
least sixty (60) days' advance written notice to each Holder of the Company's
intention to register any of its Securities under the Securities Act. Each
Holder may then specify, by notice given to the Company within ten (10) business
days after the Company's notice, a number of shares of Registrable Common Stock
held by it which it wishes to include in the Company's proposed registration.
Subject to the market cutback limitations of Section 9, the Company will use its
best efforts to effect the registration under the Securities Act of Registrable
Common Stock specified by Holders under this Section 4.
SECTION 5. LIMITATIONS ON REGISTRATION RIGHTS. Notwithstanding
any contrary provision of this Agreement:
(a) the Company shall not be required to effect more than six
(6) registrations pursuant to Section 2, two (2) for the Series F
Purchasers as a group and one (1) for each of (i) the Founders as a
group, (ii) BG Media and its permitted transferees and assignees as a
group, (iii) Keystone and its permitted transferees and assignees as a
group and (iv) Apex and its permitted transferees and assignees as a
group, provided, however, that such party demanding the registration
qualifies as an Initiating Holder at the time of such demand (provided,
however, that a demand for registration shall not count as a
registration permitted pursuant to Section 2 under this clause (a) if
either (y) the registration statement filed with respect to such
registration is not declared effective by
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<PAGE> 6
the Commission, or (z) the Holders requesting registration of
Registrable Common Stock under Sections 2.1 and 2.2 do not register and
sell at least 90% of the Registrable Common Stock they have requested
be registered in such registration for reasons other than their
voluntary decision not to do so); and
(b) the Company shall not be required to effect any
registration pursuant to Section 2 if the Company shall furnish to the
Investors a certificate signed by the President and Chief Executive
Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such registration statement to be
filed and that it is essential to defer the filing of such registration
statement, then the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request
from the Investors and provided further that the Company may not
utilize this right more than once; and
(c) Section 4 shall not apply to a registration effected
solely to implement an employee benefit plan or to any other form or
type of registration which does not permit inclusion of Registrable
Common Stock pursuant to Commission rule or practice.
SECTION 6. REGISTRATION PROCEDURES.
6.1 Whenever the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of any Registrable
Common Stock under the Securities Act, the Company will, as expeditiously as
possible:
(a) in the case of a registration required under Section 2,
engage the underwriters designated in accordance with Section 13 below;
(b) before filing each registration statement or prospectus or
amendment or supplement thereto with the Commission, furnish counsel
for the sellers with copies of all such documents proposed to be filed,
and obtain the approval of such counsel with respect to all disclosures
contained therein relating to sellers;
(c) prepare and file with the Commission a registration
statement with respect to such Registrable Common Stock and use its
best efforts to cause such registration statement to become and remain
effective for the period provided in Section 6.2;
(d) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary 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 Registrable
Common Stock covered by such registration statement in accordance with
the intended methods of disposition set forth in such registration
statement;
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(e) prepare and promptly file with the Commission, and notify
each seller of such Registrable Common Stock immediately after the
filing of, such amendment or supplement to such registration statement
or prospectus as may be necessary to correct any statements or
omissions if, during such periods as a prospectus relating to such
Securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or
any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, and notify each
seller immediately after its discovery of such event;
(f) furnish to the underwriters and each seller of such
Registrable Common Stock such numbers of copies of such registration
statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), copies of all SEC comment letters and the Company's
responses thereto and such other documents as such underwriters or
seller may reasonably request in order to facilitate the disposition of
the Registrable Common Stock subject to such registration statement in
accordance with such registration statement;
(g) use its best efforts to register or qualify any
Registrable Common Stock covered by such registration statement under
the securities or blue sky laws of such jurisdictions within the United
States of America as the seller or the underwriters reasonably request,
and to take any other acts which a seller or the underwriters may
reasonably request under such securities or blue sky laws to enable the
consummation of the disposition in such jurisdictions of such
Registrable Common Stock (provided, however, that the Company may not
be required under this Agreement (i) to qualify generally to do
business as a foreign corporation in any jurisdiction in which it would
not otherwise be required to qualify, or (ii) to subject itself to
taxation in any such jurisdiction, or (iii) to consent to general
service of process in any such jurisdiction);
(h) provide a transfer agent and registrar for all Registrable
Common Stock sold under the registration and a CUSIP number for all
such Registrable Common Stock, in each case, not later than the
effective date of the registration statement;
(i) use its best efforts to cause all Registrable Common Stock
sold under the registration to be listed on each securities exchange or
to be qualified and eligible for trading on the automated quotation
system, if any, on which similar Securities issued by the Company are
then listed or traded;
(j) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the underwriters may deem necessary or desirable to expedite
or facilitate the disposition of such Registrable Common Stock
(including, without limitation, effecting a stock split or a
combination of shares);
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(k) make available for inspection by the sellers of
Registrable Common Stock, 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 accountants to supply all information
reasonably requested by any such seller or underwriter in connection
with such registration statement, all subject to such limitations as
the Company reasonably deems appropriate in order to protect the
Company's confidential or proprietary information;
(1) use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to
this Section 6.1(l), on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a
registration pursuant to this Section 6.1(l) if such securities are
being sold through underwriters, or, if such securities are not being
sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities; and
(m) cause its employees and personnel to use their best
efforts to support the marketing of the Registrable Common Stock
(including, without limitation, the participation in "road shows," at
the request of the underwriters or the holders of a majority of the
Registrable Common Stock to be included in such registration) to the
extent possible taking into account the Company's business needs and
the requirements of the marketing process.
6.2 Notwithstanding any contrary provision of this Section 6,
the Company shall not be required to use its best efforts to maintain the
effectiveness of any registration statement for a period in excess of 180 days
or until the sellers have sold or otherwise disposed of their Registrable Common
Stock registered under such registration statement, whichever is earlier.
6.3 It shall be a condition precedent to the inclusion of the
Registrable Common Stock of any Holder in a registration effected pursuant to
this Agreement that such Holder shall (a) furnish to the Company such
information regarding such Holder, the Registrable Common Stock of such Holder
to be registered and the intended method of disposition of such Registrable
Common Stock, and (b) execute such indemnities, underwriting agreements, lockups
(as required by Section 10) and other documents, as the Company or the managing
underwriter shall reasonably request in order to satisfy the requirements
applicable to such registration.
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SECTION 7. EXPENSES. The Company shall pay all expenses
incurred in effecting all registrations of Registrable Common Stock provided for
in Sections 2, 3 and 4 of this Agreement, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of counsel for the
sellers selected by the Holders, underwriting expenses (other than discounts and
commissions), and expenses of any 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 6.1(g) of this Agreement, and in the case
of a registration pursuant to Section 2, reasonable fees and disbursements of a
single counsel for the sellers selected by the Holders.
SECTION 8. INDEMNIFICATION.
8.1 In the event of any registration of any of its Registrable
Common Stock under the Securities Act pursuant to this Agreement, the Company
agrees, to the extent permitted by law, to indemnify and hold harmless each
seller of Registrable Common Stock, and each officer, director, employee,
partner, member, agent and Affiliate of such seller, against any losses, claims,
damages, expenses or liabilities, joint or several, arising out of or based
upon:
(a) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement
under which such Securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or
any summary prospectus contained therein, or any Securities being
registered, or any amendment or supplement thereto, or
(b) any alleged omission to state in any such document a
material fact required to be stated therein or necessary to make the
statements therein not misleading or
(c) any alleged violation by the Company of the Securities
Act, the Exchange Act or the securities or blue sky laws of any
jurisdiction within the United States of America in which the
Registrable Common Stock is sold;
except insofar as any such loss, claim, damage or liability is (i) caused by or
contained in any information furnished in writing to the Company by such seller
expressly for use in connection with such registration, or (ii) caused by such
seller's failure to deliver a copy of the registration statement or prospectus
or any amendment or supplement thereto as required by the Securities Act or the
rules or regulations thereunder, or (iii) caused by the use of a prospectus or
preliminary prospectus or any amendment or supplement thereto after receipt of
notice from the Company that it should no longer be used.
In connection with an underwritten offering, the Company will indemnify such
underwriters, their officers and directors and each Person who controls (within
the meaning of the Securities Act) such underwriters to the same extent as
provided above with respect to the sellers of Registrable Common Stock. The
Company shall reimburse each Person indemnified pursuant to this Section 8.1 in
connection with investigating or defending any loss, claim, damage, liability or
action indemnified against. The reimbursements required by this Section 8.1
shall be made by
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periodic payments during the course of the investigation or defense, as and when
bills are received or expenses incurred. The indemnities provided pursuant to
this Section 8.1 shall remain in force and effect regardless of any
investigation made by or on behalf of the indemnified party and shall survive
transfer of Registrable Common Stock by a seller.
8.2 In the event of any registration of any Registrable Common
Stock under the Securities Act pursuant to this Agreement, each Holder agrees to
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any registration statement or
prospectus in connection with the registration or any amendment or supplement
thereto.
8.3 To the extent permitted by law, and subject to the
limitation set forth in the last sentence of this Section 8.3, each Holder which
is a seller of Registrable Common Stock in a registration pursuant to this
Agreement agrees severally and not jointly to indemnify and hold harmless the
Company, its directors and officers, each other seller of Securities in such
registration, each Affiliate of each such other seller, and each Affiliate of
the Company, against:
(a) any losses, claims, damages or liabilities, joint or
several, arising out of or based upon:
(i) any alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement
under which such Securities were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained therein, or any summary prospectus contained
therein, or any Securities being registered, or any amendment
or supplement thereto, or
(ii) any alleged omission to state in any such document a material
fact required to be stated therein or necessary to make the
statements therein not misleading,
but only insofar as any such loss, claim, damage or liability is caused
by or contained in any information furnished in writing to the Company
by the indemnifying seller expressly for use in connection with such
registration, and excluding any such loss, claim, damage or liability
which is caused by or contained in such statements, or caused by such
omissions, based upon the authority of an expert as defined in the
Securities Act (but only if the indemnifying seller had no grounds to
believe, and did not believe, that the statements made on the authority
of an expert were untrue or that there was an omission to state a
material fact); and
(b) any losses, claims, damages or liabilities, joint or
several, arising out of or based upon any failure by such seller to
deliver a copy of the registration statement or prospectus or any
amendment or supplement thereto as required by the Securities Act or
the rules or regulations thereunder.
In connection with an underwritten offering, each seller will indemnify such
underwriters, their officers and directors and each Person who controls (within
the meaning of the Securities Act)
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such underwriters to the same extent as provided above with respect to the
Company and other sellers. Each seller shall reimburse each Person indemnified
pursuant to this Section 8.3 in connection with investigating or defending any
loss, claim, damage, liability or action indemnified against. The reimbursements
required by this Section 8.3 shall be made by periodic payments during the
course of the investigation or defense, as and when bills are received or
expenses incurred. The indemnities provided pursuant to this Section 8.3 shall
remain in force and effect regardless of any investigation made by or on behalf
of the indemnified party and shall survive transfer of Registrable Common Stock
by an indemnifying seller, and transfer of other Securities by any other
indemnified seller. Notwithstanding any contrary provision of this Agreement,
however, the liability under this Section 8 of each Holder which is a seller of
Registrable Common Stock shall be limited in the aggregate, with respect to the
claims of all indemnified Persons taken as a whole, not to exceed the amount of
net proceeds to the indemnifying seller from the sale of the Registrable Common
Stock sold by the indemnifying seller.
8.4 Indemnification similar to that specified in Sections 8.1
and 8.3 (with such modifications as shall be appropriate) shall be given by the
Company and each Holder of any Registrable Common Stock covered by any
registration or other qualification of Securities under any federal or state
securities law or regulation other than the Securities Act with respect to any
such registration or other qualification effected pursuant to this Agreement.
8.5 In the event the Company or any Holder receives a
complaint, claim or other notice of any loss, claim or damage, liability or
action, giving rise to claim for indemnification under this Section 8, the
Person claiming indemnification shall promptly notify the Person against whom
indemnification is sought of such complaint, notice, claim or action, and such
indemnifying Person shall have the right to investigate and defend any such
loss, claim, damage, liability or action. The Person claiming indemnification
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall not be at the expense of the Person against whom indemnification is sought
(unless the Person claiming indemnification reasonably believes that the ability
of the counsel defending such action to defend such Person's interests therein
is affected adversely and materially by a conflict of interest) and the
indemnifying Person shall not be obligated to indemnify any Person for any
settlement of any claim or action effected without the indemnifying Person's
consent, which consent will not be unreasonably withheld.
SECTION 9. MARKETING RESTRICTIONS.
9.1 If:
(a) a registration is to be made pursuant to a registration
notice under Section 2, and
(b) the offering proposed to be made by the Initiating Holder
for whom such registration is to be made is to be an underwritten
public offering and
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(c) in the opinion of the managing underwriters of such public
offering, the total amount of Securities to be included in such
offering would exceed the maximum number of shares of Common Stock
which can be marketed without otherwise materially and adversely
affecting such offering,
then the rights of the Holders to participate in such offering shall be in the
following order of priority:
First: the Initiating Holder and the Investors shall be
entitled to participate in such offering pro rata among themselves in
accordance with the number of shares of Registrable Common Stock which
each such Holder shall have requested to be registered; and then
Second: if such maximum number of shares of Common Stock
exceeds the aggregate number of shares of Registrable Common Stock that
all such Initiating Holder and Investors shall have requested be
registered, all Holders of other Securities having the right to include
such Securities in such registration shall be entitled to participate
pro rata in accordance with the number of shares proposed to be
registered by them or otherwise allocated as they may agree.
9.2 If:
(a) a registration is to be made pursuant to a registration
notice under Section 3 or a Holder requests registration under Section
4 of this Agreement, and
(b) the offering proposed to be made is to be an underwritten
public offering, and
(c) in the opinion of the managing underwriters of such public
offering, the total amount of Securities to be included in such
offering would exceed the maximum number of shares of Common Stock
which can be marketed without otherwise materially and adversely
affecting such offering,
then the rights of the Holders, of the holders of other Securities having the
right to include Common Stock in such registration and of the Company to
participate in such offering shall be in the following order of priority:
First: the Company shall be entitled to include such shares of
Common Stock as it wishes to include in the offering; provided that the
Company shall not be entitled to include Securities in an offering
effected pursuant to Section 3 hereof unless and until all Registrable
Common Stock that the Holders desire to include in such offering has
been so included pursuant to this Agreement; and then
Second: the Holders shall be entitled to participate in such
offering pro rata among themselves in accordance with the number of
shares of Registrable Common Stock which each such Holder shall have
requested to be registered; and then
- 12 -
<PAGE> 13
Third: if such maximum number of shares of Common Stock
exceeds the aggregate number of shares of Registrable Common Stock that
all such Holders shall have requested be registered, all holders of
other Securities having the right to include such Securities in such
registration shall be entitled to participate pro rata in accordance
with the number of shares proposed to be registered by them or
otherwise allocated as they may agree.
9.3 In connection with any offering involving an underwriting
of Registrable Common Stock pursuant to Section 4 of this Agreement, the Company
shall not be required to include any of the Registrable Common Stock of a Holder
in such offering unless such Holder agrees to the terms of the underwriting
agreed to between the Company and the underwriter or underwriters selected by
the Company.
SECTION 10. LOCKUP AGREEMENT. Each Holder agrees that, in
connection with the Company's initial public offering and one other underwritten
offering of the Company's Securities that is consummated within twelve (12)
months of the consummation of the Company's initial public offering, upon the
reasonable request of the Company or the request of the underwriters managing
such underwritten offering of the Company's Securities, he or it will not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Securities of the Company (other than the Securities included in
the registration, other than Securities of the Company acquired by any Holder in
the open market after the consummation of the Company's initial public offering
and other than Securities sold by any Holder in a private sale so long as the
purchaser of such Securities agrees to be bound by the provisions of this
Section 10) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed (i) 180
days with respect to the Company's initial public offering and (ii) 90 days with
respect to the other underwritten offering) from the effective date of such
registration as the Company or the underwriters may reasonably specify, provided
that all executive officers and directors of the Company and all Holders of more
than 2% of the Securities of the Company and all holders of registration rights
enter into agreements identical in terms to that of the Holders and provided
that all Holders are treated alike with respect to any release of the lockup
contemplated under this Section 10.
SECTION 11. COMPLIANCE WITH RULE 144. With a view to making
available to the Holders of Registrable Common Stock the benefits of Rule 144
promulgated under the Securities Act and any other rule or regulation of the SEC
that may at any time permit such a Holder to sell Securities of the Company to
the public without registration or pursuant to a registration on a Short Form,
the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general
public so long as the Company remains subject to the periodic reporting
requirements under Section 13 or 15(d) of the Exchange Act;
- 13 -
<PAGE> 14
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the Exchange Act, as is necessary
to enable the Holders to utilize a Short Form for the sale of their
Registrable Common Stock, such action to be taken as soon as
practicable after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its
securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(d) furnish to any such Holder, so long as such Holder owns
any Registrable Common Stock, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after ninety (90) days after
the effective date of the first registration statement filed by the
Company), the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to a
Short Form (at any time after it so qualifies), (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other information
as may be reasonably requested in availing any such Holder of any rule
or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
SECTION 12. ASSIGNABILITY OF REGISTRATION RIGHTS. The rights
set forth in this Agreement shall accrue to each subsequent Holder of
Registrable Common Stock who shall have executed a written consent agreeing to
be bound by the terms and conditions of this Agreement as a party to this
Agreement.
SECTION 13. DESIGNATION OF UNDERWRITER. In the case of any
registration effected pursuant to Section 2 or 3, the managing underwriters, if
any, and any other investment banking advisers to the Company shall be selected
by the Company and shall be reasonably acceptable to the Initiating Holder.
SECTION 14. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS.
From and after the date of this Agreement, the Company shall not, without the
prior written consent of the Holders of at least a majority of the Outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any Securities of the Company which would allow such holder or
prospective holder (a) to include such Securities in any registration filed
under Sections 2, 3 and 4 hereof, unless, under the terms of such agreement,
such holder or prospective holder may include such Securities in any such
registration only to the extent that the inclusion of his Securities will not
reduce the amount of the Registrable Common Stock of such Holders which is
included or (b) to make a demand registration which could result in such
registration statement being declared effective prior to the earlier of either
of the dates set forth in Section 2.1 hereof or within one hundred twenty (120)
days of the effective date of any registration effected pursuant to Section 3 or
4 hereof.
- 14 -
<PAGE> 15
SECTION 15. MISCELLANEOUS.
15.1 Amendment. This Agreement may be amended to add Holders
to this Agreement, to grant rights to Holders under this Agreement or consent to
rights of other holders of Securities of the Company, superior to, on parity
with, or junior to the rights of the Holders of Outstanding Registrable
Securities, or to effect any other amendment to or waiver under this Agreement,
by a written agreement signed by all the parties hereto.
15.2 Severability. In the event that any court or any
governmental authority or agency declares all or any part of any Section of this
Agreement to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any other Section of this Agreement, and in the event that
only a portion of any Section is so declared to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate the balance of such
Section.
15.3 Successors and Assigns. All representations, warranties,
covenants and agreements of the parties contained in this Agreement or made in
writing in connection herewith, shall, except as otherwise provided herein, be
binding upon and inure to the benefit of their respective successors and
assigns. In addition, and whether or not any express assignment has been made,
the provisions of this Agreement which are for the benefit of the Holders or
other Holders of Securities are also for the benefit of, and enforceable by, any
subsequent Holders of Securities, except any subsequent Holder who acquires any
such security after such Security has been sold to the public pursuant to an
effective registration statement under the Securities Act or in a sale under
Rule 144.
15.4 Notices. All communications in connection with this
Agreement shall be in writing and shall be deemed properly given if hand
delivered or sent by telecopier (provided that such communication is confirmed
by same-day deposit in the United States mail) or overnight courier with
adequate evidence of delivery or sent by registered or certified mail, return
receipt requested, and, if to a Holder, addressed to such Holder's address as
shown on the signature page or other such address or persons as such Holder may
designate from time to time, and if to the Company, at its offices at:
Intelligent Information Incorporated
181 Harbor Drive
Third Floor
Stamford, CT 06902
Attention: Stephen G. Maloney
President and Chief Executive Officer
- 15 -
<PAGE> 16
with a copy to:
Piper Marbury Rudnick & Wolfe LLP
1251 Avenue of the Americas
New York, NY 10020
Attention: Michael Hirschberg, Esq.
or such other addresses or Persons as the recipient shall have designated to the
sender by a written notice given in accordance with this Section. Any notice
called for hereunder shall be deemed given when received.
15.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (without giving
effect to principles of conflicts of law).
15.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same Agreement. A written consent executed
pursuant to Section 12 of this Agreement shall be deemed to be part of, and
constitute a counterpart of, this Agreement.
15.7 Headings. The headings used herein are solely for the
convenience of the parties and shall not control or affect the meaning or
construction of any provisions hereof.
15.8 Entire Agreement. This Agreement and the other documents
and agreements executed by the parties hereto on this date or referred to herein
together constitute the entire agreement and understanding of the parties hereto
in respect of the subject matter referred to herein and therein, and there are
no restrictions, promises, representations, warranties, covenants, or
undertakings with respect to the subject matter hereof, other than those
expressly set forth or referred to herein or therein. This Agreement supersedes
all prior agreements and understandings between the parties hereto with respect
to the subject matter hereof, including without limitation the Prior Agreement.
15.9 Arbitration. Any dispute arising in connection with this
Agreement shall be submitted to binding arbitration in accordance with Section
9.10 of that certain Stock Purchase Agreement of even date herewith by and
between the Company and the Series F Purchasers.
15.10 Construction and Representation. The parties understand
and acknowledge that they have each been represented by (or have had the
opportunity to be represented by) counsel in connection with the preparation,
execution and delivery of this Agreement. This Agreement shall not be construed
against any party for having drafted it.
- 16 -
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Third Amended
and Restated Registration Rights Agreement to be executed on the day first above
written.
INTELLIGENT INFORMATION INCORPORATED
By : /s/ Stephen G. Maloney
____________________________________
Stephen G. Maloney
President and Chief Executive Officer
BG MEDIA INVESTORS L.P.
By: BG Media Investors LLC,
its General Partner
By: /s/ J. William Grimes
_______________________________________
J. William Grimes
Member
APEX INVESTMENT FUND III, L.P.
By: APEX MANAGEMENT III, LLC,
its General Partner
By: STELLAR INVESTMENT CO., Member
By: /s/ James A. Johnson
___________________________________
James A. Johnson
President
APEX STRATEGIC PARTNERS, LLC
By: APEX MANAGEMENT III, LLC, Member
By: STELLAR INVESTMENT CO., Member
By: /s/ James A. Johnson
__________________________________
James A. Johnson
President
- 17 -
<PAGE> 18
KEYSTONE VENTURE IV, L.P.
By: Keystone Venture IV Management
Company, L.P., its
General Partner
By: Keystone IV MCGP, Inc.,
its General Partner
By: /s/ Kerry J. Dale
______________________________
Kerry J. Dale
Vice President
/s/ Robert M. Unnold
______________________________
ROBERT M. UNNOLD
/s/ Stephan G. Maloney
______________________________
STEPHEN G. MALONEY
/s/ Donald F. Christino
______________________________
DONALD F. CHRISTINO
/s/ W. Peter Daniels
______________________________
W. PETER DANIELS
- 18 -
<PAGE> 19
INTELLIGENT INVESTMENT PARTNERS, INC.
By: /s/ [illegible]
-----------------------------------
Name:
Title:
Address:
City, State:
Phone:
Fax:
- 19 -
<PAGE> 20
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Brian Graff
-------------------------------------
Brian Graff
Vice President
120 Long Ridge Road
Stamford, CT 06927
Phone: 203-357-3982
Fax: 203-961-2088
- 20 -
<PAGE> 21
NBC INTERACTIVE MEDIA, INC.
By: /s/ Margaret T. Murphy
-----------------------
Margaret T. Murphy
Vice President
30 Rockefeller Plaza
New York, NY 10020
Phone: 212-664-6163
- 21 -
<PAGE> 22
SPINNAKER CROSSOVER INSTITUTIONAL FUND, L.P.
By: /s/ Eric Moore
---------------
Name: Eric Moore
Title: Controller
Address: 1875 S. Grant St. Ste 600
San Mateo, CA 94402
Phone: (650) 287-2200
Fax: (605) 522-8497
SPINNAKER CROSSOVER FUND, L.P.
By: /s/ Eric Moore
---------------
Name: Eric Moore
Title: Controller
Address: 1875 S. Grant St. Ste 600
San Mateo, CA 94402
Phone: (650) 287-2200
Fax: (605) 522-8497
SPINNAKER CLIPPER FUND, L.P.
By: /s/ Eric Moore
---------------
Name: Eric Moore
Title: Controller
Address: 1875 S. Grant St. Ste 600
San Mateo, CA 94402
Phone: (650) 287-2200
Fax: (605) 522-8497
- 22 -
<PAGE> 23
KEYSTONE VENTURE V, L.P.
By: Keystone V Partners, L.P.,
Its General Partner
By: Keystone Management Co., Inc.,
the General Partner
of Keystone V Partners, L.P.
By: /s/ Kerry J. Dale
-------------------
Kerry J. Dale, Managing Director
- 23 -
<PAGE> 24
SONY CORPORATION OF AMERICA
By: /s/ Marinus N. Henny
-----------------------
Name: Marinus N. Henny
Title: CFO
SONY MUSIC, A GROUP OF SONY MUSIC
ENTERTAINMENT, INC.
By: /s/ Ron Wilcox
---------------------------
Name: Ron Wilcox
Title: Senior Vice President
Business Affairs and Administration
- 24 -
<PAGE> 25
SUSQUEHANNA PARTNERS, GP
By: /s/ Joel Greenberg
-------------------------
Joel Greenberg
Managing Director
401 City Line Ave., Suite 220
Bala Cynwyd, PA 19004-1122
Phone: 610-617-2614
Fax: 610-617-2908
with copies to:
Michael J. Howe
Associate Director
Susquehanna Financial Group
401 City Line Ave., Suite 220
Bala Cynwyd, PA 19004-1122
Phone: 610-617-2702
Fax: 610-617-2707
and
Michael L. Spolan, Esq.
General Counsel and Secretary
Susquehanna Financial Group
425 California Street, Suite 1100
San Francisco, CA 94104
Phone: 415-403-6500
Fax: 415-403-6525
- 25 -
<PAGE> 26
CLEARNET COMMUNICATIONS, INC.
By: /s/ John H. Phillips
-------------------------------------------
John H. Phillips
Executive Vice President, Carrier
Relations & General Counsel
200 Consilium, Suite 1600
Scarborough, Ont. M1H 3J3
Phone: 416-279-3009
Fax: 416-279-2995
- 26 -
<PAGE> 27
BT INVESTMENT PARTNERS, INC.
By: /s/ Kristine Cicardo
-------------------------------------------
Kristine Cicardo
Vice President
130 Liberty Street
New York, NY 10006
Phone: 212-250-2500
Fax: 212-669-1530
- 27 -
<PAGE> 28
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Donald G. Reed
------------------------------------
Donald G. Reed
Senior Vice President and
Managing Director
999 West Street
Rocky Hill, CT 06067
Phone: 860-258-7812
Fax: 860-257-7582
- 28 -
<PAGE> 1
Exhibit 10.18
MARKETING AGREEMENT
This Marketing Agreement ("Agreement") is entered into by and between
1-800-FLOWERS (the "Company"), a New York corporation with its principle offices
at 1600 Stewart Avenue, Westbury, N.Y. 11590, and Intelligent Information
Incorporated (the "Marketer"), a Delaware corporation with its principle offices
at One Dock Street, Suite 500, Stamford, CT 06902.
1. Definitions
a. Tag. The term "Tag" means a text reference to the name and/or
trademarks of the Company when included as part of the Service to Users and in
marketing materials distributed by the Marketer and its Business Partners.
b. Impressions. The term "Impressions" refers to the number of times a
User is exposed to the Tag.
c. Sales. The term "Sales" means the sales generated by the Company as
a result of a User making a purchase of Product.
d. Product. The term "Product" means the products or goods offered for
sale by the Company.
e. Business Partners. The term "Business Partners" means third parties
through which Marketer distributes the Services to Users, subject to the terms
of this Agreement.
f. Users. The term "Users" means those consumers who receive the
Service or who are prompted to use the Product.
g. Trademark. The term "Trademark" means the 1-800-FLOWERS name and
logo as such logo appears on marketing materials and in advertising by the
Company.
h. Service. The term "Service" means the information products and
services created by the Marketer and delivered to the User in such a manner that
provides or encourages access to order the Product, e.g., a Tag, an automatic
call feature, etc.
i. Incentives. Promotions offered or provided by the Company designed
to stimulate Sales.
2. Distribution
a. Grant of Rights. Subject to the terms and conditions of this
Agreement, Company grants Marketer a nonexclusive license, as provided for in
this Agreement, to (i) promote the Product to its Business Partners, who shall
have the right to market the Product and distribute it as part of the Service to
Users and (ii) to use the Trademark to market the Product provided the Company
gives its prior written consent to any such uses.
- 1 -
CONFIDENTIAL TREATMENT REQUESTED
BRACKETS HAVE BEEN USED TO IDENTIFY INFORMATION WHICH HAS BEEN OMITTED FROM
THIS EXHIBIT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 2
3. Marketing
a. Promotion. Marketer agrees to promote and market the Product to
prospective Business Partners and Users. The Company will use commercially
reasonable efforts to promote and market the wireless availability of the
Product to its Business Partners.
b. Tags. Marketer shall be responsible for including Tags in accordance
with its production schedule.
c. Use of Trademark. Marketer shall name Company in its formal
promotional and marketing materials relating to the Service. Company agrees that
Marketer has the right, during the term of this Agreement, to use the Trademark
in Marketer and its Business Partner marketing and advertising materials,
subject to the terms of this Agreement, provided Marketer and its Business
Partners include notice that the Trademarks are registered trademarks of
1-800-FLOWERS, Inc. used with permission and provided the Company gives prior
written approval to any such uses. Such use of the brand identification shall be
solely in a manner as previously approved by Company as set forth in
subparagraph d. below.
d. Prior Approval. Marketer agrees to submit to Company for prior
written approval all press releases, advertising or other promotional materials
that use Company names not less than twenty (20) days before the proposed use.
Company shall not unreasonably withhold its approval. Company may grant or
withhold its approval in its sole discretion, but agrees to notify the Marketer
within ten (10) days of any withholds.
e. Incentives. The Company agrees to extend its customary Incentives to
the Marketer and its Business Partners in order to stimulate Users to call for
Product and thereby increase Sales.
4. Provisioning
a. Provision of the Service. Subject to the terms and conditions of
this Agreement, Company shall make available to Marketer substantially all
Products. Company will provide to the Marketer: (i) toll free accesses to its
national customer call center(s), and (ii) call management that allows Company
customer service to acknowledge the User by Business Partner. Such functions
will be provided in conformance with the Technical Specifications set forth in
Exhibit C.
b. Audit. Both Marketer and Company may, during business hours and upon
reasonable notice, inspect and audit the relevant books and records of the other
party for the sole purpose of verifying all information related to payments
under this Agreement. Such inspection and audit shall be at the expense of the
inspecting party.
5. Reporting and Payment
a. Reporting. Company will provide to the Marketer by the 30th of each
month a report indicating the total number of Sales and gross revenues generated
from activity related to the Marketer and its Business Partners for the prior
calendar month.
- 2 -
CONFIDENTIAL TREATMENT REQUESTED
BRACKETS HAVE BEEN USED TO IDENTIFY INFORMATION WHICH HAS BEEN OMITTED FROM
THIS EXHIBIT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 3
b. Payment Schedule. Company shall pay Marketer the Fees set forth in
the Payment Schedule in Exhibit B.
6. Term and Termination
a. Term. This Agreement commences on the date last signed (the
"Effective Date"), and shall remain in effect for an Initial Term of three (3)
years. Thereafter this Agreement will automatically renew for one year terms,
unless terminated in writing ninety days prior to any term renewal date by
either party.
b. Insolvency. Either party may terminate this Agreement by written
notice to the other if the other party becomes insolvent, makes a general
assignment for the benefit of creditors, permits the appointment of a receiver
for its business or assets, or takes steps to wind up or terminate its business.
c. Notwithstanding anything to the contrary contained herein, the
Company shall have the right to terminate this Agreement at any time upon 90
days prior written notice to the Marketer.
7. Trademarks
Marketer acknowledges that Company trademarks are claimed to be the
sole and exclusive property of Company. Pursuant to Paragraph 3.d., Company
shall have the right to approve in writing in advance the use of its trademarks
by Marketer for all purposes, including, without limitation, for which approval
given to identify and promote use of the Service. Upon compliance with this
provision and Paragraph 3.d., use of such marks by Marketer for such purposes
shall be deemed approved during the term of this Agreement unless Company
specifically notifies Marketer to the contrary.
8. Limitation of Liability
In no event shall one party be liable to the other for any direct,
indirect, special, exemplary or consequential damages, sustained by a party,
including lost profits, whether or not foreseeable or alleged to be based on
breach of warranty, contract, negligence or strict liability, arising under this
Agreement or any performance under this Agreement.
9. Force Majeure
Neither party shall be liable for any delay or failure to perform under
this Agreement if caused by conditions beyond its control, including but not
limited to fire, flood, accident, storm, acts of war, riot, government
interference, strikes or walkouts; provided, however, no such event shall excuse
any delay or failure to perform by Company of its obligations to make payment to
Marketer under Paragraph 5 of this Agreement. The affected performing party
shall promptly notify the other party of the nature and anticipated length of
continuance of such force Majeure. Should any such failure or suspension of
performance by Company continue for more than one (1) month, then either party
shall have the right to terminate this Agreement without further liability or
obligation on the part of either party.
- 3 -
CONFIDENTIAL TREATMENT REQUESTED
BRACKETS HAVE BEEN USED TO IDENTIFY INFORMATION WHICH HAS BEEN OMITTED FROM
THIS EXHIBIT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 4
10. Notices
All notices and demands hereunder shall be in writing and delivered by
hand delivery, certified or registered mail, return receipt requested, or
confirmed facsimile transmission at the addresses set forth below (or at such
different address as may be designated by either party by written notice to the
other party). Delivery shall be deemed to occur (i) if by hand deliver, upon
such delivery, (ii) if by mail, four (4) days after deposit with the U.S. Postal
Service, and (iii) if by facsimile transmission, upon receipt.
If to Company:
1-800-FLOWERS
1600 Stewart Avenue
Westbury, NY 11590
Attn: Glenn Reed
If to Marketer:
Intelligent Information Incorporated
One Dock Street, Suite 500
Stamford, CT 06902
Attn: Robert Coletti
11. General Terms and Conditions
a. Not Agent. Neither party shall be considered an agent of the other
party, nor shall either party have the authority to bind the other party.
b. No Assignment. Neither party may assign this Agreement without the
written consent of the other party; provided, however, that either party may
assign this Agreement as part of a transaction in which substantially all of the
assets related to its rights and obligations under this Agreement are assigned
to a third party.
c. Governing Law. This Agreement and performance hereunder shall be
construed and governed by the laws of the State of New York. Any dispute agreed
hereunder shall be resolved before the courts of the State of New York of the
USDC in and for the Eastern District of New York.
d. Severability. In case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, and this Agreement shall be construed as
if such provision(s) had never been contained herein, provided that such
provision(s) shall be curtailed, limited or eliminated only to the extent
necessary to remove the invalidity, illegality or unenforceability.
e. Waiver. No waiver of any breach of any of the provisions of this
Agreement shall be deemed a waiver of any preceding or succeeding breach of the
same or any other provisions
- 4 -
CONFIDENTIAL TREATMENT REQUESTED
BRACKETS HAVE BEEN USED TO IDENTIFY INFORMATION WHICH HAS BEEN OMITTED FROM
THIS EXHIBIT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 5
hereof. No such waiver shall be effective unless in writing and then only to the
extent expressly set forth in writing.
f. Complete Agreement. The parties agree that this Agreement is the
complete and exclusive statement of the agreement between the parties, which
supersedes and merges all prior proposals, understandings and other agreements,
oral or written, between the parties relating to this Agreement.
g. Amendment. This Agreement may not be modified, altered or amended
except by written instrument duly executed by both parties.
h. Not Inference Against Author. No provision of this Agreement shall
be interpreted against any party because such party or its legal representative
drafted such provision.
i. Headings. The headings used in this Agreement are for convenience
only and are not to be construed to have a legal significance.
j. Read and Understood. Each party acknowledges that it has read and
understands this Agreement and agrees to be bound by its terms.
<TABLE>
<S> <C>
Marketer, by: Company, by:
/s/ Stephen G. Maloney /s/ Glenn Reed
- ------------------------------ ----------------------------------------
Signature Signature
Stephen G. Maloney Glenn Reed
- ------------------------------ ----------------------------------------
Printed Name Printed Name
President VP
- ------------------------------ ----------------------------------------
Title Title
Date: 5-6-97 Date: 5-2-97
</TABLE>
EXHIBIT A
Description of Product
a) Product shall include a complete set of current products for sale by 1-
800-FLOWERS. b) Marketer intends to include the Product of the Company in its
Service offerings to its Business Partners. A User will be afforded a convenient
and seamless means of connecting from the Business Partner to the Company. In
addition, the Marketer will be providing Service to Users and, under terms of
this Agreement, providing Tags highlighting the Company and/or its Product.
- 5 -
CONFIDENTIAL TREATMENT REQUESTED
BRACKETS HAVE BEEN USED TO IDENTIFY INFORMATION WHICH HAS BEEN OMITTED FROM
THIS EXHIBIT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 6
EXHIBIT B
Payment Schedule
a) Sales Fees. The Company shall pay Marketer [*], based upon the following
schedule, [*] as a part of the Service. This [*] will be [*]. b) Payment.
Marketer will receive payment by check monthly, by the 30th day of the month
following the month in which the sales were made. Revenue is defined as price of
merchandise net of service, shipping and handling charges, applicable taxes,
discounts, credits and appropriate chargebacks.
EXHIBIT C
Technical Specifications
a) Company will install and maintain toll free number(s) for Marketer to provide
to Users and will maintain the customer service center necessary to offer the
Service via such toll free number. b) Both parties further agree to discuss the
development of an automated interface that would provide the User with the
opportunity to place an order directly with the Company without accessing the
Company's call center.
EXHIBIT D
Addendum
1) Marketer shall operate the Service in compliance with all applicable
laws and regulations. Marketer is solely responsible for obtaining all
required governmental authorizations necessary for the full performance
of its Service as provided for under this Agreement.
2) Marketer hereby represents and warrants that:
a) It is a corporation duly organized and validly existing and in
good standing under the laws of Delaware.
b) It has the full power and authority to enter this Agreement and to
perform its obligations hereunder.
c) The Service and no service to be rendered by Marketer under this
Agreement knowingly infringes or violates any patent, copyright,
trade secret, trademark or other proprietary right of any third
party.
3) The Company shall have the right to treat any customers who purchase
from the Company as its permanent customers for any and all purposes
and that any such customers may be added to its customer lists; which
lists are periodically sold or leased. The Company agrees that it will
make reasonable efforts not to sell or lease such lists to competitors
of the Marketer.
4) That should there be any conflict between the terms of this Addendum
and the form Agreement, then the terms of this Addendum shall prevail.
- 6 -
CONFIDENTIAL TREATMENT REQUESTED
BRACKETS HAVE BEEN USED TO IDENTIFY INFORMATION WHICH HAS BEEN OMITTED FROM
THIS EXHIBIT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 7
5) Marketer will monitor and periodically test the general availability
and operation of the Service and its compliance with the terms of this
Agreement.
6) Company and Marketer agree to keep confidential all information and
materials supplied by the other party and limit access to such
information and materials to those who need to know in order to
implement and carry out the terms of this Agreement.
7) Marketer, its agents, servants and/or employees, agree to defend,
indemnify and hold the Company, is subsidiaries, affiliates and their
respective officers, directors and employees free and harmless from any
and all claims, expenses, costs and liabilities, whatsoever, including
reasonable attorneys fees, arising from the representations made by the
Marketer herein and arising from any acts and/or omissions of Marketer
in carrying out the terms of this Agreement.
- 7 -
CONFIDENTIAL TREATMENT REQUESTED
BRACKETS HAVE BEEN USED TO IDENTIFY INFORMATION WHICH HAS BEEN OMITTED FROM
THIS EXHIBIT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 1
Exhibit 10.19
i3MOBILE, INC. 2000 STOCK INCENTIVE PLAN
1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
i3Mobile, Inc. hereby establishes the i3Mobile, Inc. 2000 Stock
Incentive Plan (the "Plan"). The purpose of the Plan is to promote the long-term
growth and profitability of Intelligent Information Incorporated (the
"Corporation") by (i) providing key people with incentives to improve
stockholder value and to contribute to the growth and financial success of the
Corporation and (ii) enabling the Corporation to attract, retain and reward the
best-available persons for positions of substantial responsibility.
The Plan permits the granting of stock options (including incentive
stock options qualifying under Code section 422 and nonqualified stock options),
stock appreciation rights, restricted or unrestricted stock awards, phantom
stock, performance awards or any combination of the foregoing.
2. DEFINITIONS
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Affiliate" shall mean any entity, whether now or hereafter
existing, which controls, is controlled by, or is under common control with, the
Corporation (including, but not limited to, joint ventures, limited liability
companies and partnerships). For this purpose, "control" shall mean ownership of
50% or more of the total combined voting power or value of all classes of stock
or interests of the entity.
(b) "Award" shall mean any stock option, stock appreciation right,
stock award, phantom stock award or performance award.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
(e) "Common Stock" shall mean shares of common stock of the
Corporation, par value $0.01 per share.
(f) "Fair Market Value" shall mean, with respect to a share of the
Corporation's Common Stock for any purpose on a particular date, the value
determined by the Administrator in good faith. However, if the Common Stock is
registered under Section 12(b) of the Securities Exchange Act of 1934, as
amended, "Fair Market Value" shall mean, as applicable, either (i) the closing
price or the average of the high and low sale price on the relevant date, as
determined in the Administrator's discretion, quoted on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market; (ii) the
last sale price on the relevant date quoted on the Nasdaq SmallCap Market; (iii)
the average of the high bid and low asked prices on the relevant date quoted on
the Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Inc.
or a comparable service as determined in the Administrator's discretion; or (iv)
if the Common Stock is not quoted by any of the above, the average of the
closing bid and asked prices on the relevant date furnished by a professional
market maker for the Common Stock, or by such other source, selected by the
Administrator. If no public trading of the Common Stock occurs on the relevant
date, then Fair Market Value shall be determined as of the next preceding date
on which trading of the Common
<PAGE> 2
Stock does occur. For all purposes under this Plan, the term "relevant date" as
used in this Section 2.1(f) shall mean either the date as of which Fair Market
Value is to be determined or the next preceding date on which public trading of
the Common Stock occurs, as determined in the Administrator's discretion.
(g) "Grant Agreement" shall mean a written document memorializing the
terms and conditions of an Award granted pursuant to the Plan and shall
incorporate the terms of the Plan.
(h) "Parent" shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of "parent corporation" provided
in Code section 424(e), or any successor thereto.
(i) "Subsidiary" and "subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto.
3. ADMINISTRATION
(a) Administration of the Plan. The Plan shall be administered by the
Board or by such committee or committees as may be appointed by the Board from
time to time (the Board, committee or committees hereinafter referred to as the
"Administrator").
(b) Powers of the Administrator. The Administrator shall have all the
powers vested in it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the Plan, prescribe
Grant Agreements evidencing such Awards and establish programs for granting
Awards.
The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which, Awards shall be granted; (ii) determine
the types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew
outstanding Awards, or accept the surrender of outstanding Awards and substitute
new Awards (provided, however, that, except as provided in Section 7(d) of the
Plan, any modification that would materially adversely affect any outstanding
Award shall not be made without the consent of the holder); (vi) accelerate or
otherwise change the time in which an Award may be exercised or becomes payable
and waive or accelerate the lapse, in whole or in part, of any restriction or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Award following termination of any grantee's employment; and (vii) establish
objectives and conditions, if any, for earning Awards and determining whether
Awards will be paid after the end of a performance period.
The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.
(c) Non-Uniform Determinations. The Administrator's determinations
under the Plan (including, without limitation, determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the Grant Agreements evidencing such Awards) need
not be uniform and may be made by the Administrator selectively
-2-
<PAGE> 3
among persons who receive, or are eligible to receive, Awards under the Plan,
whether or not such persons are similarly situated.
(d) Limited Liability. To the maximum extent permitted by law, no
member of the Administrator shall be liable for any action taken or decision
made in good faith relating to the Plan or any Award thereunder.
(e) Indemnification. To the maximum extent permitted by law and by the
Corporation's charter and by-laws, the members of the Administrator shall be
indemnified by the Corporation in respect of all their activities under the
Plan.
(f) Effect of Administrator's Decision. All actions taken and decisions
and determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation, and their respective successors
in interest.
4. SHARES AVAILABLE FOR THE PLAN; MAXIMUM AWARDS
Subject to adjustments as provided in Section 7(d) of the Plan, the
shares of Common Stock that may be issued with respect to Awards granted under
the Plan shall not exceed an aggregate of 1,250,000 shares of Common Stock. The
Corporation shall reserve such number of shares for Awards under the Plan,
subject to adjustments as provided in Section 7(d) of the Plan. If any Award, or
portion of an Award, under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited or otherwise terminated, surrendered or canceled
as to any shares, or if any shares of Common Stock are surrendered to the
Corporation in connection with any Award (whether or not such surrendered shares
were acquired pursuant to any Award), the shares subject to such Award and the
surrendered shares shall thereafter be available for further Awards under the
Plan; provided, however, that any such shares that are surrendered to the
Corporation in connection with any Award or that are otherwise forfeited after
issuance shall not be available for purchase pursuant to incentive stock options
intended to qualify under Code section 422.
Subject to adjustments as provided in Section 7(d) of the Plan, the
maximum number of shares of Common Stock subject to Awards of any combination
that may be granted during any one fiscal year of the Corporation to any one
individual shall be limited to 300,000. Such per-individual limit shall not be
adjusted to effect a restoration of shares of Common Stock with respect to which
the related Award is terminated, surrendered or canceled.
5. PARTICIPATION
Participation in the Plan shall be open to all employees, consultants,
officers and directors of the Corporation, or of any Affiliate of the
Corporation, as may be selected by the Administrator from time to time.
6. AWARDS
The Administrator, in its sole discretion, establishes the terms of all
Awards granted under the Plan. Awards may be granted individually or in tandem
with other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement.
(a) Stock Options. The Administrator may from time to time grant to
eligible participants Awards of incentive stock options as that term is defined
in Code section 422 or nonqualified stock
-3-
<PAGE> 4
options; provided, however, that Awards of incentive stock options shall be
limited to employees of the Corporation or of any Parent or Subsidiary of the
Corporation. Options intended to qualify as incentive stock options under Code
section 422 must have an exercise price at least equal to Fair Market Value on
the date of grant, but nonqualified stock options may be granted with an
exercise price less than Fair Market Value. No stock option shall be an
incentive stock option unless so designated by the Administrator at the time of
grant or in the Grant Agreement evidencing such stock option.
(b) Stock Appreciation Rights. The Administrator may from time to time
grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An
SAR entitles the grantee to receive, subject to the provisions of the Plan and
the Grant Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Corporation of the amount receivable upon any
exercise of an SAR may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator. If, upon settlement of the exercise of an SAR, a grantee is
to receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment, and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.
(c) Stock Awards. The Administrator may from time to time grant
restricted or unrestricted stock Awards to eligible participants in such
amounts, on such terms and conditions and for such consideration, including no
consideration or such minimum consideration as may be required by law, as it
shall determine. A stock Award may be paid in Common Stock, in cash or in a
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator.
(d) Phantom Stock. The Administrator may from time to time grant Awards
to eligible participants denominated in stock-equivalent units ("phantom stock")
in such amounts and on such terms and conditions as it shall determine. Phantom
stock units granted to a participant shall be credited to a bookkeeping reserve
account solely for accounting purposes and shall not require a segregation of
any of the Corporation's assets. An Award of phantom stock may be settled in
Common Stock, in cash or in a combination of Common Stock and cash, as
determined in the sole discretion of the Administrator. Except as otherwise
provided in the applicable Grant Agreement, the grantee shall not have the
rights of a stockholder with respect to any shares of Common Stock represented
by a phantom stock unit solely as a result of the grant of a phantom stock unit
to the grantee.
(e) Performance Awards. The Administrator may, in its discretion, grant
performance awards which become payable on account of attainment of one or more
performance goals established by the Administrator. Performance awards may be
paid by the delivery of Common Stock or cash, or any combination of Common Stock
and cash, as determined in the sole discretion of the Administrator. Performance
goals established by the Administrator may be based on the Corporation's or an
Affiliate's operating income or one or more other business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit or the Corporation or an Affiliate as a whole, over such
performance period as the Administrator may designate.
7. MISCELLANEOUS
(a) Withholding of Taxes. Grantees and holders of Awards shall pay to
the Corporation or its Affiliate, or make provision satisfactory to the
Administrator for payment of, any taxes required to be withheld in respect of
Awards under the Plan no later than the date of the event creating the tax
-4-
<PAGE> 5
liability. The Corporation or its Affiliate may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the grantee or holder of an Award. In the event that payment to the Corporation
or its Affiliate of such tax obligations is made in shares of Common Stock, such
shares shall be valued at Fair Market Value on the applicable date for such
purposes.
(b) Loans. The Corporation or its Affiliate may make or guarantee loans
to grantees to assist grantees in exercising Awards and satisfying any
withholding tax obligations.
(c) Transferability. Except as otherwise determined by the
Administrator, and in any event in the case of an incentive stock option or a
stock appreciation right granted with respect to an incentive stock option, no
Award granted under the Plan shall be transferable by a grantee otherwise than
by will or the laws of descent and distribution. Unless otherwise determined by
the Administrator in accord with the provisions of the immediately preceding
sentence, an Award may be exercised during the lifetime of the grantee, only by
the grantee or, during the period the grantee is under a legal disability, by
the grantee's guardian or legal representative.
(d) Adjustments; Business Combinations.
(i) Upon a stock dividend of, or stock split or reverse stock
split affecting, the Common Stock of the Corporation, (A) the maximum number of
shares reserved for issuance or with respect to which Awards may be granted
under the Plan, as provided in Section 4 of the Plan, and (B) the number of
shares covered by and the exercise price and other terms of outstanding Awards,
shall, without further action of the Board, be adjusted to reflect such event,
unless the Administrator determines, at the time it approves such stock
dividend, stock split or reverse stock split, that no such adjustment shall be
made. The Administrator may make adjustments, in its discretion, to address the
treatment of fractional shares and fractional cents that arise with respect to
outstanding Awards as a result of the stock dividend, stock split or reverse
stock split.
(ii) In the event of any other changes affecting the
Corporation, the capitalization of the Corporation or the Common Stock of the
Corporation by reason of any spin-off, split-up, dividend, recapitalization,
merger, consolidation, business combination or exchange of shares and the like,
the Administrator, in its discretion and without the consent of holders of
Awards, shall make: (A) appropriate adjustments to the maximum number and kind
of shares reserved for issuance or with respect to which Awards may be granted
under the Plan, as provided in Section 4 of the Plan, and to the number, kind
and price of shares covered by outstanding Awards; and (B) any other adjustments
in outstanding Awards, including but not limited to reducing the number of
shares subject to Awards or providing or mandating alternative settlement
methods such as settlement of the Awards in cash or in shares of Common Stock or
other securities of the Corporation or of any other entity, or in any other
matters which relate to Awards as the Administrator shall, in its sole
discretion, determine to be necessary or appropriate.
(iii) The Administrator is authorized to make, in its
discretion and without the consent of holders of Awards, adjustments in the
terms and conditions of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events affecting the Corporation, or the financial
statements of the Corporation or any Affiliate, or of changes in applicable
laws, regulations or accounting principles, whenever the Administrator
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
(e) Substitution of Awards in Mergers and Acquisitions. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees or directors of entities who become or are about to become employees
or directors of the Corporation or an Affiliate as the result of a merger or
consolidation of the employing entity with the Corporation or an Affiliate, or
the acquisition by the Corporation or an Affiliate of the assets or stock of the
employing entity. The terms
-5-
<PAGE> 6
and conditions of any substitute Awards so granted may vary from the terms and
conditions set forth herein to the extent that the Administrator deems
appropriate at the time of grant to conform the substitute Awards to the
provisions of the awards for which they are substituted.
(f) Termination, Amendment and Modification of the Plan. The Board may
terminate, amend or modify the Plan or any portion thereof at any time.
(g) Non-Guarantee of Employment or Service. Nothing in the Plan or in
any Grant Agreement thereunder shall confer any right on an individual to
continue in the service of the Corporation or shall interfere in any way with
the right of the Corporation to terminate such service at any time.
(h) Compliance with Securities Laws. If at any time the Administrator
determines that the delivery of Common Stock under the Plan is or may be
unlawful under the laws of any applicable jurisdiction, or federal or state
securities laws, the right to exercise an Award or receive shares of Common
Stock pursuant to an Award shall be suspended until the Administrator determines
that such delivery is lawful.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Corporation and a grantee or any other
person. To the extent that any grantee or other person acquires a right to
receive payments from the Corporation pursuant to an Award, such right shall be
no greater than the right of any unsecured general creditor of the Corporation.
(j) Governing Law. The validity, construction and effect of the Plan,
Grant Agreements entered into pursuant to the Plan and any rules, regulations,
determinations or decisions made by the Administrator relating to the Plan or
such Grant Agreements, and the rights of any and all persons having or claiming
to have any interest therein or thereunder, shall be determined exclusively in
accordance with applicable federal laws and the laws of Delaware, without regard
to its conflict of laws principles.
(k) Effective Date; Termination Date. The Plan is effective as of the
date on which the Plan was adopted by the Board, subject to approval of the
stockholders within twelve months before or after such date. No Award shall be
granted under the Plan after the close of business on the day immediately
preceding the tenth anniversary of the effective date of the Plan. Subject to
other applicable provisions of the Plan, all Awards made under the Plan prior to
such termination of the Plan shall remain in effect until such Awards have been
satisfied or terminated in accordance with the Plan and the terms of such
Awards.
Date Approved by the Board: February 9, 2000
Date Approved by the Stockholders: February 9, 2000
-6-
<PAGE> 1
EXHIBIT 10.21
January 25, 2000
VIA OVERNIGHT DELIVERY
Sony Corporation of America
550 Madison Avenue, 33rd Floor
New York, NY 10022-3211
Attn: Elizabeth Coppinger
Re: i3 Mobile, Inc. (formerly known as Intelligent Information Incorporated)
Dear Ms. Coppinger:
This letter sets forth the understanding between i3 Mobile, Inc., formerly known
as Intelligent Information Incorporated (the "Company"), Sony Corporation of
America ("SCA") and Sony Music Entertainment, Inc. ("SMEI"). The purpose of this
letter is to set out a framework under which the Company can enter into content
distribution agreements with SCA, SMEI, Sony Online Entertainment ("SOE"), Sony
Pictures Entertainment Inc. or any other Sony affiliate (each, a "Sony Entity"
and collectively, "Sony Entities"). The terms of our understanding are as
follows:
1. Upon execution of each content distribution agreement (hereafter
"Distribution Agreement") by the Company and a Sony Entity, the Company
will grant to SCA for distribution to itself or, pursuant to SCA's
instructions, in whole or in part, to such Sony Entity, a fully-vested
warrant (each, a "Warrant") to purchase up to 20,000 shares of the
Company's Common Stock at an exercise price equal to ten ($10.00) dollars
per share. In the event the first Distribution Agreement is executed on or
before March 31, 2000, the Warrant granted in consideration therefore shall
be for 30,000 shares (the "Bonus Shares"). The aggregate number of shares
available hereunder, including the Bonus Shares, shall not exceed 110,000
shares.
2. Each Warrant shall expire three (3) years following its issuance and shall
not terminate upon an initial public offering or change of control of the
Company. Subject to any relevant securities laws, rules and regulations,
each Warrant, as well as the equity acquired through exercise thereof, will
be freely transferable by SCA or such Sony Entity and may be exercised in
whole or in part. When exercising any Warrant, SCA or such Sony Entity
shall have the right to either (i) purchase the total number of shares of
equity which such Warrant entitles SCA or such Sony Entity to purchase at
the exercise price described above or (ii) receive the net number of shares
of equity arising from the difference between the market price of such
equity at the date of exercise and the exercise price for the Warrant.
Prior to the grant of the first Warrant hereunder, the Company will provide
SCA with an opportunity to review the Company's standard Warrant form prior
to execution;
<PAGE> 2
Sony Corporation of America
January 25, 2000
Page 2
3. The Company will grant to SMEI a right of first offer to provide content
for any music related channel or service. In the event that the Company
reasonably believes that it will need to develop or produce a new channel
or service that is subject to this provision and is under no pre-existing
contractual obligation, entered into prior to the date of this letter, to
the contrary, the Company shall provide SMEI with a right to present an
offer ("Offer") to the Company to provide content necessary for such
channel or service prior to the Company's search for any other content
provider. The parties agree to negotiate in good faith for a period of
twenty (20) business days (which time may be extended by mutual agreement)
after the Company's receipt of SMEI's written notice to exercise the right
to present the Offer in an effort to reach a mutual agreement. The written
notice to exercise the right to present an Offer must be received by the
Company within five (5) business days of SMEI's receipt of the Company's
initial notice hereunder. In the event the parties do not reach agreement
as of the end of such period, the Company shall be permitted to enter into
an agreement with another content provider; provided, however, that such
agreement is not on terms relating to the specific business items more
favorable to the content provider than those included in the Offer as
mutually determined in the reasonable judgement of the parties;
4. The Company will grant to SOE a right of first offer to provide content for
any games related channel or service. In the event that the Company
reasonably believes that it will need to develop or produce a new channel
or service that is subject to this provision and is under no pre-existing
contractual obligation, entered into prior to the date of this letter, to
the contrary, the Company shall provide SOE with a right to present an
offer ("Offer") to the Company to provide content necessary for such
channel or service prior to the Company's search for any other content
provider. The parties agree to negotiate in good faith for a period of
twenty (20) business days (which time may be extended by mutual agreement)
after the Company's receipt of SOE's written notice to exercise the right
to present the Offer in an effort to reach a mutual agreement. The written
notice to exercise the right to present an Offer must be received by the
Company within five (5) business days of SOE's receipt of the Company's
initial notice hereunder. In the event the parties do not reach agreement
as of the end of such period, the Company shall be permitted to enter into
an agreement with another content provider; provided, however, that such
agreement is not on terms relating to the specific business matters more
favorable to the content provider than those included in the Offer as
mutually determined in the reasonable judgement of the parties;
5. The Company will grant to any and all Sony Entities the "most favored
provider" status on financial terms and Preferential Placement (as defined
below). Each Sony Entity shall be granted the "most favored provider"
status regarding financial terms when compared to any other similar content
provider of the Company with which the Company has a substantially similar
revenue sharing arrangement . The financial terms regarding the portion of
the revenues to be received by a Sony Entity under any revenue sharing
agreement between itself and the Company with respect to revenues received
by the Company from its subscribers for content shall be at least as
favorable as those terms offered or given to any other similarly situated
content provider, as mutually determined in the reasonable judgement of the
parties. Each Agreement shall provide, to the extent technically feasible
within the Company's wireless services, Preferred Placement (as defined
below) for SCA's interactive properties and affiliates with respect to the
type of content distributed pursuant to such content distribution agreement
(for example, a distribution agreement for SMEI would provide Preferred
Placement for SMEI in the music category); provided that the Company shall
not be required to provide such Preferred Placement if exclusivity or
Preferred Placement for such type of content has been provided, prior to
the execution of the content distribution agreement, to a third
<PAGE> 3
Sony Corporation of America
January 25, 2000
Page 3
party not affiliated with the Company. In the latter instance, the affected
Sony Entity shall be provided the next best available placement. Preferred
Placement shall mean (a) where a link to or display of content appears on a
list, such link or content is in the default, top-most and left-most
position; or (b) when a link to or display or content appears in a format
other than a list, the link or content is more visually prominent, or at a
higher rate of exposure, than other content partners;
6. The Company will grant to any and all Sony Entities the option to deliver
content via an existing category channel, a newly created category channel
or a channel branded exclusively for Sony content.
7. The Company may issue a press release announcing the relationship between
the parties, with each such press release subject to the approval of the
other party. SCA or SMEI will provide a reasonable level of public
relations resources to promote the strategic alliance between the Company
and the Sony Entities.
8. The term of this agreement shall be two (2) years and, during such period,
each Sony Entity shall have the right to enter into a Distribution
Agreement with a term of up to three (3) years, with each such term
commencing upon the execution of each such content distribution agreement.
Should the foregoing accurately reflect our understanding then kindly
countersign and return the enclosed copy of this letter to my attention.
Very truly yours,
i3 MOBILE, INC.
By: /s/ Stephen G. Maloney
----------------------
Name: Stephen G. Maloney
Title: President and CEO
AGREED AND ACCEPTED:
By: /s/ Elizabeth Coppinger
---------------------------------
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated February 14, 2000 relating to the financial statements and the
financial statement schedule of i3 Mobile, Inc., which appear in such
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 18, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM i3 MOBILE
INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 28,241
<SECURITIES> 0
<RECEIVABLES> 397
<ALLOWANCES> 143
<INVENTORY> 0
<CURRENT-ASSETS> 33,067
<PP&E> 2,085
<DEPRECIATION> 143
<TOTAL-ASSETS> 36,241
<CURRENT-LIABILITIES> 3,599
<BONDS> 0
55,338
0
<COMMON> 77
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,241
<SALES> 0
<TOTAL-REVENUES> 1,734
<CGS> 0
<TOTAL-COSTS> 1,302
<OTHER-EXPENSES> 6,962
<LOSS-PROVISION> 131
<INTEREST-EXPENSE> 539
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