<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 2000
REGISTRATION NO. 333-94191
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
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. [ ]
- ------------------------------
------------------------
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 MARCH 13, 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 7.
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;
Comtex; FOX News; 1-800-flowers.com; infoUSA; cnbc.com).
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; The
Weather Channel; Bell Mobility; Southwestern Bell Wireless).
The text of the DISTRIBUTION oval:
i3 Mobile has developed a network of distribution relationships with more than
15 wireless carriers 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 (Omnipoint Communications; Bell Mobility;
CellularOne; Southwestern Bell Wireless) 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 HISTORY OF OPERATING LOSSES
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.
1
<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.
RISK FACTORS
Investing in our shares of common stock involves a high degree of risk. We
face a number of risks that you should consider before you decide to invest in
our common stock. A number of these risks may make it more difficult for us to
achieve our objectives and the elements of our strategy. See the section
entitled "Risk Factors" which starts on page 7.
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.
2
<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.
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.
3
<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, 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:
- 1,939,084 shares of common stock issuable upon the exercise of warrants
at a weighted average exercise price of $3.53 per share;
- an aggregate of 988,500 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 $3.11;
- 200,000 shares of common stock issuable upon the exercise of outstanding
stock options under our 2000 Stock Incentive Plan at an exercise price
per share of $7.92; and
- 25,500 shares of common stock available for future grant under our 1995
Stock Incentive Plan and 1,050,000 shares of common stock available for
future grant under our 2000 Stock Incentive Plan.
4
<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>
5
<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:
- 1,939,084 shares of common stock issuable upon the exercise of warrants at
a weighted average exercise price of $3.53 per share, of which 1,929,084
shares were issuable upon the exercise of warrants issued as of December
31, 1999 at a weighted average exercise price of $3.50 per share and
10,000 shares were issuable upon the exercise of warrants issued after
December 31, 1999 at an exercise price of $10.00 per share;
- an aggregate of 988,500 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 $3.11, of which 914,000
shares were issuable upon the exercise of outstanding stock options issued
as of December 31, 1999 at a weighted average exercise price of $2.71 and
74,500 shares were issuable upon the exercise of outstanding stock options
issued after December 31, 1999 at an exercise price of $7.92;
- 200,000 shares of common stock issuable upon the exercise of outstanding
stock options issued after December 31, 1999 under our 2000 Stock
Incentive Plan at an exercise price per share of $7.92; and
- 25,500 shares of common stock available for future grant under our 1995
Stock Incentive Plan and 1,050,000 shares of our common stock available
for future grant under our 2000 Stock Incentive Plan.
6
<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 OPERATE 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. Our
business strategy may not be successful, and we may not successfully address
these risks.
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.
7
<PAGE> 11
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. 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
8
<PAGE> 12
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 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
9
<PAGE> 13
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;
- 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
10
<PAGE> 14
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.
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
11
<PAGE> 15
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
ENTERPRISES 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
12
<PAGE> 16
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 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
13
<PAGE> 17
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.
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.
14
<PAGE> 18
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.
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
15
<PAGE> 19
- 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.
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
16
<PAGE> 20
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 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. In July
1999, we experienced a systems failure due to a facility air conditioning outage
at our Stamford, Connecticut location for approximately six hours. The costs
related to the failure were less than $10,000.
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
17
<PAGE> 21
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
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.
18
<PAGE> 22
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, 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;
19
<PAGE> 23
- 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 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 3,127,584 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.
20
<PAGE> 24
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 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.
21
<PAGE> 25
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.
22
<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 $1.2 million for expansion of our data center;
- approximately $39.2 million for 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.
23
<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>
24
<PAGE> 28
- -------------------------
The outstanding share information shown in the table above excludes:
- 1,939,084 shares of common stock issuable upon the exercise of warrants
at a weighted average exercise price of $3.53 per share, of which
1,929,084 shares were issuable upon the exercise of warrants issued as of
December 31, 1999 at a weighted average exercise price of $3.50 per share
and 10,000 shares were issuable upon the exercise of warrants issued
after December 31, 1999 at an exercise price of $10.00 per share;
- an aggregate of 988,500 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 $3.11 of which 914,000
shares were issuable upon the exercise of outstanding stock options
issued as of December 31, 1999 at a weighted average exercise price of
$2.71 and 74,500 shares were issuable upon the exercise of outstanding
stock options issued after December 31, 1999 at an exercise price of
$7.92;
- 200,000 shares of common stock issuable upon the exercise of outstanding
stock options issued after December 31, 1999 under our 2000 Stock
Incentive Plan at an exercise price per share of $7.92; and
- 25,550 shares of common stock available for future grant under our 1995
Stock Incentive Plan and 1,050,000 shares of our common stock available
for future grant under our 2000 Stock Incentive Plan.
25
<PAGE> 29
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>
In the event that the underwriters' over-allotment option is exercised in
full, the New Investors line in the above table would include: 5,060,000 shares
purchased or 22.8%, $75,900,000 of total consideration paid or 58.9% and a
$15.00 average price per share and the Total line would include: 22,147,265
shares purchased, $128,856,929 of total consideration paid and a $5.82 average
price per share.
26
<PAGE> 30
- -------------------------
The outstanding share information shown in the table above excludes:
- - 1,939,084 shares of common stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price per share of $3.53, of which
1,929,084 shares were issuable upon the exercise of warrants issued as of
December 31, 1999 at a weighted average exercise price of $3.50 per share and
10,000 shares were issuable upon the exercise of warrants issued after
December 31, 1999 at an exercise price of $10.00 per share;
- - an aggregate of 988,500 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 $3.11, of which 914,000 shares
were issuable upon the exercise of outstanding stock options issued as of
December 31, 1999 at a weighted average exercise price of $2.71 and 74,500
shares were issuable upon the exercise of outstanding stock options issued
after December 31, 1999 at an exercise price of $7.92;
- - 200,000 shares of common stock issuable upon the exercise of outstanding stock
options issued after December 31, 1999 under our 2000 Stock Incentive Plan at
an exercise price per share of $7.92; and
- - 25,500 shares of common stock available for future grant under our 1995 Stock
Incentive Plan and 1,050,000 shares of our common stock available for future
grant under our 2000 Stock Incentive Plan.
27
<PAGE> 31
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 (excluding $14 of stock compensation)....... 190 465 700 1,081 1,302
------ ------- ------- ------- --------
Gross profit................................................ 197 180 125 324 432
------ ------- ------- ------- --------
Operating expenses:
Sales and marketing (excluding $94 of stock
compensation)........................................... 110 180 234 584 1,938
General and administrative (excluding $145 of stock
compensation)........................................... 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> 32
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. Microbrowser-based products allow users to access specially formatted
Web sites to obtain content and to conduct transactions from their 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
29
<PAGE> 33
into distribution agreements with AirTouch Cellular, Clearnet PCS, MTT Mobility
(Canada), US West Wireless and AT&T Wireless Services. Under these non-
exclusive distribution agreements, we provide the wireless network operators
with personalized content products and services which are marketed to their
subscribers and generally charge them a monthly fee based on the number of
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;
30
<PAGE> 34
- expanding our product offerings in content, commerce and technology;
- expanding our advertising and promotional activities; and
- 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 products and services are provided. Since we
sell information service products that are provided to our users, these products
are not considered tangible products for financial reporting purposes. Deferred
revenue is comprised of payments received from our distributors in advance of
wireless information services being provided.
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. Our more recent agreements,
that were signed in 1999, with wireless network operators require that we bill
the user directly. In these cases, the user would receive one bill from the
wireless network operator for phone services, and we would bill the user's
credit card directly 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.
31
<PAGE> 35
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
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
32
<PAGE> 36
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.
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.
Stock compensation represents non-cash charges related to the issuance of
stock options and stock purchase warrants for our common stock. In 1999, we
recognized $253,000 of stock compensation costs and at December 31, 1999 we had
deferred compensation included in our balance sheet of $764,000. We have also
recorded additional deferred compensation of approximately $1,596,000 related to
options and warrants issued since December 31, 1999. These deferred charges
represent future stock compensation expense that will be recognized over the
remaining vesting period of the related options or the remaining agreement term
for the related warrants. Deferred compensation will be amortized to the
statement of operations in the amount of $663,000 for 2000, $668,000 for 2001,
$641,000 for 2002 and $388,000 for 2003.
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
Commu-
33
<PAGE> 37
nications 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 $55,000 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 also increased by approximately $100,000 in the year ended December 31,
1999 compared to the year ended December 31, 1998 as a result of increased labor
costs to provide 24 hour customer care and operations support. 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.
34
<PAGE> 38
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.
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.
35
<PAGE> 39
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 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
36
<PAGE> 40
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
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.
37
<PAGE> 41
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 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.
38
<PAGE> 42
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.
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.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition(SAB 101) which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the Securities and Exchange Commission. SAB 101 outlines
the basic criteria that must be met to recognize revenue and provides guidance
for disclosures related to revenue recognition policies. We believe that SAB 101
has no material effect on our financial position, results of operations or cash
flows.
39
<PAGE> 43
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, sending and receiving e-mail, personal calendar and wireless
electronic commerce applications.
We believe that 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 provides us with significant
business opportunities. 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. In 1999 these agreements
represented less than 1% of our revenues.
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.
40
<PAGE> 44
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
41
<PAGE> 45
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 OFFERING
As dependence on access to information, e-mail services, corporate
intranets and other Internet-based services increases, we believe that mobile
individuals will
42
<PAGE> 46
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 provided to us by the user, 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 provide
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
43
<PAGE> 47
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.
44
<PAGE> 48
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]
45
<PAGE> 49
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 expand and diversify our distribution
relationships 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 technologies, know-how
and services to enable wireless delivery of their content. We currently have
agreements with four enterprises and engage in
46
<PAGE> 50
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. We will also 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
second half of 2000.
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
47
<PAGE> 51
text message response is sent back to the user upon confirmation of the
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. The aggregate
amount of revenue we received in 1999 from wireless network operators for
providing complimentary services to their customers was approximately $418,000.
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
48
<PAGE> 52
complimentary messages. We estimate that the typical advanced service 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. The cost of providing our basic service
is a function of our content and communication costs. We acquire content from
over 50 sources, and we have negotiated different pricing terms with each of
these sources, including user-based, flat fixed fees and a hybrid of flat fee
and user-based. The pricing terms vary by provider and range from a fixed
monthly cost to a specific charge per message. Accordingly, the cost per month
per user can vary significantly based on the user's content selection and the
method that is used to communicate that content.
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
49
<PAGE> 53
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 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
50
<PAGE> 54
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
CNBC.com LLC
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-
51
<PAGE> 55
pending Advanced Data Mining Advertising Tagging and Transaction system, 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.
Although the revenues we have received from providing advertising services to
date have been minimal, we believe this revenue will increase 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
transactional services.
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
52
<PAGE> 56
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
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.
53
<PAGE> 57
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.)
Cellular One of San Francisco TeleCorp
CFW Wireless Triton PCS
Clearnet PCS United States Cellular
MTT Mobility (Canada) U.S. West Wireless
Omnipoint Communications Services
</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
agreements with four enterprises, including Internet media network agreements
with RotoNews and The Weather Channel/Wireless Weather. We provide these
enterprises with customer support, billing services, Web site design and
hosting, software development, personal profiling and content delivery. 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 to allow these enterprises to provide their content to
their subscribers via wireless devices. We derive revenue through subscription
fees collected from their subscribers and pay the enterprises an agreed upon
portion of those fees for content and access to their subscribers. 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.
54
<PAGE> 58
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 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 wireless content services 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
55
<PAGE> 59
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.
- 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.
OTHER RELATIONSHIPS
We have entered into agreements with two of our investors, NBC Interactive
Media, Inc. and Sony Corporation of America. Each agreement has a term of two
years and provides affiliates of NBC Interactive Media, Inc. and Sony
Corporation of America with incentives to enter into wireless distribution
relationships with us. These incentives include preferred placement of content
and the issuance of warrants. We have agreed to issue warrants to purchase up to
20,000 shares of our common stock at a per share exercise price of $10.00 for
each distribution agreement entered into with affiliates of either NBC
Interactive Media, Inc. or Sony Corporation of America. The maximum number of
shares of common stock that may be issued under each of these arrangements is
110,000. We believe that affiliates of NBC Interactive Media, Inc. and Sony
Corporation of America will enter into distribution relationships with us to
enable them to capitalize on the growing market for the delivery of their
content on a wireless basis and to integrate our product offerings into their
products and services. The first distribution agreement under the NBC
Interactive Media, Inc. relationship was entered into as of March 7, 2000 with
CNBC.com LLC, and a warrant to purchase 10,000 shares of our common stock at
$10.00 per share was issued to CNBC.com LLC. This agreement has a term of two
years and provides for CNBC.com to make available to us three financial-related
headline messages per trading day for distribution through our wireless network
operators as a complimentary service. As part of the agreement, we have also
agreed to purchase $200,000 of banner advertising from CNBC.com.
We have also entered into an agreement with BroadcastEntertainment.com Inc.
During the five year term of the agreement, BroadcastEntertainment.com Inc. will
provide us with motion picture, concert, animation, radio, video and music
content for delivery to our users. The agreement also provides opportunities for
us to develop wireless event ticketing electronic commerce services with
BroadcastEntertainment.com Inc. We will provide BroadcastEntertainment.com Inc.
and up to five of its affiliates with enabling technology and development
services to deliver its content directly to the wireless devices of its
customers. BroadcastEntertainment.com Inc. has agreed to pay us $2 million for
these services and provide us with advertising credits on its affiliated
Internet websites and radio stations. We are in the process of determining the
value of these advertising credits.
56
<PAGE> 60
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. Since 1998, we have offered 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. We spent $47,000 in 1999 and $0 in 1998
under this program.
- Market Development Funds. Since 1999, we have made 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. During 1999 we
made available $31,000 in market development funds.
- 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 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
57
<PAGE> 61
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 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
58
<PAGE> 62
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
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
59
<PAGE> 63
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 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
platforms, 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.
60
<PAGE> 64
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 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.
61
<PAGE> 65
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,
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
62
<PAGE> 66
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.
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
63
<PAGE> 67
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 March 7, 2000, we had 89 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.
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.
64
<PAGE> 68
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The names and ages of our executive officers, directors and key employees
as of March 7, 2000 are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS AGE POSITION
- -------------------------------- --- --------
<S> <C> <C>
Stephen G. Maloney.............. 43 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.
65
<PAGE> 69
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
66
<PAGE> 70
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.
67
<PAGE> 71
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. In the future, we may adopt
new compensation arrangements for our directors. Directors are eligible to
receive options to purchase common stock under our option plans.
68
<PAGE> 72
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.
69
<PAGE> 73
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.
70
<PAGE> 74
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.
71
<PAGE> 75
ELIGIBILITY FOR PARTICIPATION. Grants may be made to any of our employees,
officers, directors and consultants. As of March 7, 2000, there were options to
purchase 988,500 shares of our common stock granted under the 1995 Stock
Incentive Plan at a weighted average exercise price of $3.11 per share and
200,000 shares of our common stock granted under the 2000 Stock Incentive Plan
at an exercise price of $7.92 per share.
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.
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);
72
<PAGE> 76
- 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."
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
73
<PAGE> 77
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.
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
74
<PAGE> 78
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
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
75
<PAGE> 79
$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 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
76
<PAGE> 80
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.
77
<PAGE> 81
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
our common stock, as of March 7, 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 March 7, 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...................... 58,015(4) * *
Kevin W. Ryan......................... 13,775(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
(14 persons)........................ 12,618,500 69.9 56.2
</TABLE>
- -------------------------
* less than 1% (one percent).
78
<PAGE> 82
(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 1,125,858 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.
79
<PAGE> 83
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> 84
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 988,500 options outstanding under the 1995 Stock
Incentive Plan at a weighted average exercise price of $3.11 per share, of which
344,707 will be exercisable upon the completion of this offering and 200,000
options outstanding under the 2000 Stock Incentive Plan at an exercise price of
$7.92 per share, none of which 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.
81
<PAGE> 85
WARRANTS
As of the date of this prospectus, the following warrants were outstanding
for the purchase of 1,939,084 shares of common stock at a weighted average
exercise price of $3.53:
<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
CNBC.com LLC................................................ 10,000
</TABLE>
Warrants to purchase up to an additional 100,000 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> 86
- 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> 87
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 16,820,717 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> 88
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
988,500 shares of common stock to specified persons pursuant to our 1995 Stock
Incentive Plan and 200,000 shares of common stock to one person pursuant to our
2000 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> 89
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> 90
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> 91
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 330,000 shares for our directors, officers,
employees, and their family members and other individual associates, vendors,
customers and other business associates, including Michael Hirschberg, a partner
of Piper Marbury Rudnick & Wolfe LLP, our counsel. 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> 92
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> 93
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> 94
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> 95
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> 96
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> 97
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> 98
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
Non-cash charges from the issuance of common stock
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> 99
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> 100
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 expected future 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 and the carrying amounts of
the assets. Fair value is defined as the amount for which the asset could be
bought or sold in a current transaction between willing parties. Where quoted
market prices in active markets are not available, management would estimate
fair value based on the best information available in the circumstances - the
price of similar assets, discounted cash flow analysis or other valuation
techniques.
At each balance sheet date, the Company evaluates the realizability of its
long-lived assets, including goodwill, based on estimates of future
non-discounted cash flows. In the event that the estimated expected future cash
flows from a long-lived asset, including goodwill, are less than the carrying
value, an impairment loss is calculated. This impairment loss is calculated as
the difference between the fair value of the asset, as defined above, and the
carrying value of the asset. In instances where goodwill is identified with
assets that are subject to an impairment loss, the carrying value of the
identified goodwill shall be eliminated before making any reduction of the
carrying amounts of impaired long-lived assets.
In November 1997, the Company suspended the funding of and,
correspondingly, the operations of its majority-owned subsidiary, Strategic
Communications Corporation, "SCC". The only long-lived asset of SCC was goodwill
of $64. Since
F-8
<PAGE> 101
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
the carrying amount of the goodwill of SCC at that date exceeded the estimate of
the expected future cash flows associated with such goodwill, an impairment loss
of $64, calculated as the difference between the fair value and carrying value
of the goodwill, 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.
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 products and services are provided to
subscribers or resellers. The products sold by the Company are information
service products provided to the Company's customers. These information products
are not considered tangible products for financial reporting purposes. 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 provided.
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.
The Company offers complimentary services to build awareness of its
products and services and to generate revenue. The wireless network operators
are responsible for determining the price, if any, to be charged to their
customers for this service. The fees charged by the Company to the wireless
network operators for this service varies by wireless network operator. Under
agreements with reduced pricing terms, the Company recognizes revenue at the
time these services are provided. In the instance where the Company agreed to
provide services directly to the customers of a wireless network operator at no
cost to the customer, no revenue is recognized.
F-9
<PAGE> 102
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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.
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.
F-10
<PAGE> 103
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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.
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
F-11
<PAGE> 104
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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
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
F-12
<PAGE> 105
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition (SAB 101) which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the Securities and Exchange Commission. SAB 101 outlines
the basic criteria that must be met to recognize revenue and provides guidance
for disclosures related to revenue recognition policies. Management believes
that SAB 101 has no material effect on its financial position, results of
operations or cash flows.
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 and recorded a
gain of $3.
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>
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.
F-13
<PAGE> 106
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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>
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%, a 6.9-year expected life, no
expected dividends 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
F-14
<PAGE> 107
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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%, a 1-year expected life, no expected
dividends 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%, a 3.1-year expected life, no expected
dividends 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%.
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%, a 5-year expected
life, no expected dividends and risk free rate of return of 4.8%. These notes
payable were converted in August 1998 into Series D mandatorily redeemable
convertible
F-15
<PAGE> 108
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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%, a 5-year expected life, no
expected dividends 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-16
<PAGE> 109
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-17
<PAGE> 110
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 the Company'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-18
<PAGE> 111
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-19
<PAGE> 112
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-20
<PAGE> 113
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%, a 5-year expected life, no expected dividends 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
F-21
<PAGE> 114
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
group was required to buy, 284 shares of Series B mandatorily redeemable
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%, a 1-year expected life, no expected
dividends 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%, a 1-year expected life, no expected dividends 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
F-22
<PAGE> 115
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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.
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
F-23
<PAGE> 116
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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 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-24
<PAGE> 117
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-25
<PAGE> 118
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%, a 6.9-year expected life, no expected
dividends 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, 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 fair value of the warrants issued with Series C convertible
preferred stock was determined to be $17 using the Black-Scholes pricing model
utilizing a volatility rate of 40%, a 1-year expected life, no expected
dividends and a risk free rate of return of 5.7% percent. The cash proceeds were
allocated to the warrants, recorded as additional paid-in capital, and to the
Series C convertible preferred stock. The difference between the 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
F-26
<PAGE> 119
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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
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
F-27
<PAGE> 120
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
using a Black-Scholes pricing model. Assumptions utilized included a volatility
rate of 40%, a 5-year expected life, no expected dividends 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 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
F-28
<PAGE> 121
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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.
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
F-29
<PAGE> 122
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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.
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
F-30
<PAGE> 123
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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 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 issued 274,500 stock options to
employees pursuant to employment agreements at an exercise price of $7.92 per
share. These options vest ratably over a four-year period and expire after ten
years. Based on the estimated the fair value of the common stock at the grant
date, the Company estimates that it will record deferred compensation for these
options of $1,532 in the first quarter of 2000. This represents compensation
that will be recognized over the remaining vesting period. This deferred
compensation charge will be amortized to the statement of operations over the
four-year vesting period at a rate of $383 per annum for years 2000, 2001, 2002
and 2003.
F-31
<PAGE> 124
I3 MOBILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
NOTE 15 - SUBSEQUENT EVENTS (UNAUDITED):
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. The Company
has issued 200,000 stock options to date under the 2000 Stock Incentive Plan.
On February 9, 2000, the Company entered into a 5-year agreement with
Broadcast-Entertainment.com under which Broadcast-Entertainment.com will be the
exclusive provider to i3 for certain entertainment related content. In
consideration, Broadcast-Entertainment.com will provide the Company with
advertising credits on its affiliated internet websites and radio stations.
Management is in the process of determining the value of these advertising
credits. The agreement also includes that the Company will provide enterprise
services to BroadcastEntertainment.com to upgrade its website for the delivery
of content and related services directly to wireless devices and to offer
BroadcastEntertainment.com the capability to provide these web-to-wireless
services to up to five companies. BroadEntertainment.com has agreed to pay
$2,000 in cash for these services.
On March 7, 2000, in conjunction with its agreement with NBC Interactive
Media, Inc. (Note 11), the Company entered into a two-year distribution
agreement with CNBC.com under which the Company is granted a non-exclusive
license to distribute specific types of CNBC.com's content to designated users
and resellers of the Company. In consideration the Company has granted CNBC.com
a warrant to purchase 10,000 shares of the Company's common stock at an exercise
price of $10.00 per share. These warrants have a three-year term and are
exercisable immediately. The value of these warrants has been estimated at $64
using a Black-Scholes option pricing model assuming a volatility of 40%, an
expected term of 3 years, no expected dividends and a risk free rate of return
of 5.8%. This value of the warrant will be amortized over the term of the
agreement as stock compensation. The original terms of the NBC Interactive
Media, Inc. agreement called for the initial warrant issuance to be for 30,000
shares of common stock, if issued prior to March 31, 2000, and subsequent
warrant issuances to be for the purchase of 20,000 shares of common stock. These
terms were adjusted to allow for the initial warrant to be for 10,000 shares of
common stock. All subsequent issuances will be subject to the original terms of
the agreement.
F-32
<PAGE> 125
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..................... 1
Risk Factors........................... 7
Forward Looking Statements............. 22
Use of Proceeds........................ 23
Dividend Policy........................ 23
Capitalization......................... 24
Dilution............................... 26
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> 126
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............................................. 7,540
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.................................. 24,460
Transfer Agent and Registrar fees and expenses.............. 25,000
Miscellaneous expenses...................................... 100,626
----------
Total:................................................. $2,180,000
==========
</TABLE>
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
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
II-1
<PAGE> 127
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> 128
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> 129
<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> 130
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> 131
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 Form of 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> 132
<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> 133
<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.+
10.22 Master Content Provider Agreement by and between i3 Mobile
and Broadcast Entertainment.com, Inc. dated February 9,
2000.** *
10.23 Content Distribution Agreement by and between i3 Mobile and
Dow Jones & Company, Inc. dated February 20, 1996.** *
10.24 Distribution Agreement by and between i3 Mobile and Fox News
Network LLC dated June 16, 1997.** *
10.24a Addendum to Distribution Agreement by and between i3 Mobile
and Fox News Network LLC dated June 4, 1998.*
10.24b Addendum to Distribution Agreement by and between i3 Mobile
and Fox News Network LLC dated August 20, 1998.*
10.25 Subscription Agreement by and between i3 Mobile and
SportsTicker Enterprises L.P. dated June 29, 1998.** *
10.25a Addendum to Subscription Agreement by and between i3 Mobile
and SportsTicker Enterprises L.P. dated June 29, 1998.** *
10.26 Distribution Agreement by and between i3 Mobile and LA Times
dated August 12, 1997.** *
10.26a Addendum to Distribution Agreement by and between i3 Mobile
and LA Times dated July 19, 1997.*
10.27 Database License Agreement -- Wireless Internet by and
between i3 Mobile, Inc. and InfoUSA Inc. dated December 28,
1999.** *
10.28 Distribution Agreement by and between i3 Mobile and Comtex
Scientific Corporation dated June 13, 1995.** *
10.28a Amendment I to Agreement by and between i3 Mobile and Comtex
Scientific Corporation dated July 1, 1995.*
10.29 Distribution Agreement by and between i3 Mobile and Press
News LTD dated December 14, 1998.** *
10.30 Distribution Agreement by and between i3 Mobile and Press
Association, a wholly owned subsidiary of The Associated
Press dated February 1, 1999.** *
10.31 Distribution Agreement by and between i3 Mobile and CNBC.com
LLC dated March 13, 2000.** *
</TABLE>
II-8
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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-9
<PAGE> 135
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-10
<PAGE> 136
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-11
<PAGE> 137
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-12
<PAGE> 138
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 March 13, 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 Officer March 13, 2000
- ------------------------------------------ and Director (Principal Executive
Stephen G. Maloney Officer)
/s/ MICHAEL P. NEUSCHELER Chief Financial Officer (Principal March 13, 2000
- ------------------------------------------ Financial and Accounting Officer)
Michael P. Neuscheler
* Chairman of the Board and Director March 13, 2000
- ------------------------------------------
Robert M. Unnold
* Director March 13, 2000
- ------------------------------------------
Kerry J. Dale
* Director March 13, 2000
- ------------------------------------------
James A. Johnson
* Director March 13, 2000
- ------------------------------------------
J. William Grimes
* Director March 13, 2000
- ------------------------------------------
Donald F. Christino
* Director March 13, 2000
- ------------------------------------------
W. Peter Daniels
*By: /s/ STEPHEN G. MALONEY March 13, 2000
- -----------------------------------------
Stephen G. Maloney
Attorney-In-Fact
</TABLE>
II-13
<PAGE> 139
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<C> <S> <C>
1.1 Form of 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> 140
<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.
Neuscheler dated as of January 10, 2000.*...................
</TABLE>
<PAGE> 141
<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.+.............
10.22 Master Content Provider Agreement by and between i3 Mobile
and Broadcast Entertainment.com, Inc. dated February 9,
2000.** *...................................................
10.23 Content Distribution Agreement by and between i3 Mobile and
Dow Jones & Company, Inc. dated February 20, 1996.** *......
10.24 Distribution Agreement by and between i3 Mobile and Fox News
Network LLC dated June 16, 1997.** *........................
10.24a Addendum to Distribution Agreement by and between i3 Mobile
and Fox News Network LLC dated June 4, 1998.*...............
10.24b Addendum to Distribution Agreement by and between i3 Mobile
and Fox News Network LLC dated August 20, 1998.*............
10.25 Subscription Agreement by and between i3 Mobile and
SportsTicker Enterprises LP dated June 29, 1998.** *........
10.25a Addendum to Subscription Agreement by and between i3 Mobile
and SportsTicker Enterprises L.P. dated January 1, 1998.*
**..........................................................
10.26 Distribution Agreement by and between i3 Mobile and LA Times
dated August 12, 1997.** *..................................
10.26a Addendum to Distribution Agreement by and between i3 Mobile
and LA Times dated July 19, 1997.*..........................
10.27 Database License Agreement -- Wireless Internet by and
between i3 Mobile, Inc. and InfoUSA Inc. dated December 28,
1999.** *...................................................
10.28 Distribution Agreement by and between i3 Mobile and Comtex
Scientific Corporation dated June 13, 1995.** *.............
10.28a Amendment I to Agreement by and between i3 Mobile and Comtex
Scientific Corporation dated July 1, 1995.*.................
10.29 Distribution Agreement by and between i3 Mobile and Press
News LTD (The Canadian Press) dated December 14, 1998.** *..
10.30 Distribution Agreement by and between i3 Mobile and Press
Association, a wholly owned subsidiary of The Associated
Press dated February 1, 1999.** *...........................
10.31 Distribution Agreement by and between i3 Mobile and CNBC.com
LLC dated March 13, 2000.** *...............................
21.1 Subsidiaries of the Registrant+.............................
23.1 Consent of PricewaterhouseCoopers LLP*......................
23.2 Consent of Counsel (included in Exhibit 5.1).++
</TABLE>
<PAGE> 142
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<C> <S> <C>
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 1.1
_______________ Shares
i3 MOBILE, INC.
Common Stock
($.01 Par Value)
FORM OF UNDERWRITING AGREEMENT
_______________, 2000
Deutsche Bank Securities Inc.
Chase Securities Inc.
Credit Suisse First Boston Corporation
As Representatives of the
Several Underwriters
c/o Deutsche Bank Securities Inc.
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
i3 Mobile, Inc., a Delaware corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as representatives (the "Representatives") an
aggregate of __________ shares of the Company's Common Stock, $.01 par value
(the "Firm Shares"). The respective amounts of the Firm Shares to be so
purchased by the several Underwriters are set forth opposite their names in
Schedule I hereto. The Company also proposes to sell at the Underwriters'
option an aggregate of up to __________ additional shares of the Company's
Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option
Shares if you elect to exercise the over-allotment option in whole or in part
for the accounts of the several Underwriters.
<PAGE> 2
The Firm Shares and the Option Shares (to the extent the aforementioned option
is exercised) are herein collectively called the "Shares."
Deutsche Bank Securities Inc. ("Deutsche Bank") has agreed to reserve
a portion of the Shares to be purchased by it under this Agreement for sale to
the Company's directors, officers, employees and business associates and other
parties related to the Company (collectively, "Participants"), as set forth in
the Prospectus under the heading "Underwriting" (the "Directed Share Program").
The Shares to be sold by Deutsche Bank pursuant to the Directed Share Program
are hereinafter referred to as the "Directed Shares." Any Directed Shares not
orally confirmed for purchase by any Participants by the end of the business
day on which this Agreement is executed will be offered to the public by the
Underwriters as set forth in the Prospectus.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the
Underwriters as follows:
(a) A registration statement on Form S-1 (File No. 333-94191)
with respect to the Shares has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules
and Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by
the Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means the form of prospectus first filed
with the Commission pursuant to Rule 424(b). Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective
is herein referred to as a "Preliminary Prospectus." Any reference herein to
any Prospectus shall be deemed to include any supplements or amendments
thereto, filed with the Commission after the date of the filing of the
Prospectus under Rules 424(b) or 430A, and prior to the termination of the
offering of the Shares by the Underwriters.
(b) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. Each of the
subsidiaries of the Company listed in Exhibit A hereto (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing
-2-
<PAGE> 3
under the laws of the jurisdiction of its incorporation, with corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement. The Subsidiaries are the only
subsidiaries, direct or indirect, of the Company. The Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification. The
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and are owned
by the Company or another Subsidiary free and clear of all liens, encumbrances
and equities and claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
(c) The outstanding shares of the Company's Common Stock and
Preferred Stock have been duly authorized and validly issued and are fully paid
and non-assessable; the shares of Common Stock to be issued upon conversion of
the Preferred Stock immediately prior to the closing of the offering of the
Shares have been duly authorized and when issued will be validly issued, fully
paid and non-assessable; the Shares to be issued and sold by the Company have
been duly authorized and when issued will be validly issued, fully paid and
non-assessable; and no preemptive rights of stockholders exist with respect to
any of the Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated
by this Agreement gives rise to any rights, other than those which have been
waived or satisfied, for or relating to the registration of any shares of
Common Stock.
(d) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the Shares
conform to the description thereof contained in the Registration Statement. The
form of certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(e) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and will
conform to, the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendments
and supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by
or on behalf of any Underwriter through the Representatives, specifically for
use in the preparation thereof.
-3-
<PAGE> 4
(f) The consolidated financial statements of the Company and
the Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results
of operations and cash flows of the Company and the consolidated Subsidiaries,
at the indicated dates and for the indicated periods. Such financial statements
and related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data included in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis consistent
with the financial statements presented therein and the books and records of
the Company. The pro forma financial statements and other pro forma financial
information included in the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma bases described
therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(g) PricewaterhouseCoopers LLP, who have certified certain of
the financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and of the Subsidiaries taken as a whole or to prevent the
consummation of the transactions contemplated hereby, except as set forth in
the Registration Statement.
(i) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described, subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and the
Subsidiaries occupy their leased properties under valid and binding leases
conforming in all material respects to the description thereof set forth in the
Registration Statement. The Company's assets are adequate for the conduct of
the Company's business as described in the Registration Statement.
(j) The Company and the Subsidiaries have filed all Federal,
State, local and foreign tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due and are not
being contested in good faith and for which an adequate reserve for accrual has
been established in accordance with generally accepted accounting principles.
All tax liabilities
-4-
<PAGE> 5
have been adequately provided for in the financial statements of the Company,
and the Company does not know of any actual or proposed additional material tax
assessments.
(k) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented,
there has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries taken as a whole,
whether or not occurring in the ordinary course of business, and there has not
been any material transaction entered into or any material transaction that is
probable of being entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and the Subsidiaries have no material contingent obligations which
are not disclosed in the Company's financial statements which are included in
the Registration Statement.
(l) Neither the Company nor any of the Subsidiaries is or
with the giving of notice or lapse of time or both, will be, in violation of or
in default under its Charter or Bylaws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the Company
and its Subsidiaries taken as a whole or the business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole. The execution, delivery and
performance of this Agreement and the consummation of the transactions herein
contemplated and the fulfillment of the terms hereof do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party, or
of the Charter or Bylaws of the Company or any order, rule or regulation
applicable to the Company or any Subsidiary of any court or of any regulatory
body or administrative agency or other governmental body having jurisdiction
over the Company or any Subsidiary.
(m) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the "NASD")
or such additional steps as may be necessary to qualify the Shares for public
offering by the Underwriters under state securities or Blue Sky laws) has been
obtained or made and is in full force and effect.
(n) The Company and each of the Subsidiaries hold all
material licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses; the Company and the
Subsidiaries each own or possess the right to use all patents, patent rights,
trademarks, trade names, service marks, service names, copyrights, license
rights, know-how (including trade secrets and other unpatented and unpatentable
proprietary or confidential information, systems or procedures) and other
intellectual property rights ("Intellectual
-5-
<PAGE> 6
Property") necessary to carry on their business in all material respects;
neither the Company nor any of the Subsidiaries has infringed, and none of the
Company or the Subsidiaries have received notice of conflict with, any
Intellectual Property of any other person or entity. There are no outstanding
options, licenses or agreements of any kind relating to the Intellectual
Property of the Company that are required to be described in the Prospectus and
are not described in all material respects. The Company is not a party to or
bound by any options, licenses or agreements with respect to the Intellectual
Property of any other person or entity that are required to be set forth in the
Prospectus and are not described in all material respects. None of the
technology employed by the Company has been obtained or is being used by the
Company in violation of any contractual obligation binding on the Company or
any of its officers, directors or employees or otherwise in violation of the
rights of any persons; the Company has not received any written or oral
communications alleging that the Company has violated, infringed or conflicted
with, or, by conducting its business as set forth in the Prospectus, would
violate, infringe or conflict with, any of the Intellectual Property of any
other person or entity. The Company knows of no infringement by others of
Intellectual Property owned by or licensed to the Company. The Company has
registered with Network Solutions, Inc. the Internet domain names _____________
and ______________, and has administrative control over such domain names. The
Company has no knowledge of a registered trademark held by a third party that
may be used to prevent the Company from using these domain names.
(o) Neither the Company, nor to the Company's knowledge, any
of its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares. The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on the Nasdaq Stock Market in
accordance with Regulation M under the Exchange Act.
(p) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act of
1940, as amended (the "1940 Act") and the rules and regulations of the
Commission thereunder.
(q) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is adequate
for the conduct of their respective
-6-
<PAGE> 7
businesses and the value of their respective properties and as is customary for
companies engaged in similar industries.
(s) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA)
for which the Company would have any liability; the Company has not incurred
and does not expect to incur liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
or 4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.
(t) To the Company's knowledge, there are no affiliations or
associations between any member of the NASD and any of the Company's officers,
directors or 5% or greater securityholders, except as set forth in the
Registration Statement.
(u) No material labor dispute with employees of the Company
exists or to the knowledge of the Company is threatened and the Company is not
aware of any existing, threatened or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors that
could result in any material adverse change in the condition, financial or
otherwise of the Company or the business, management, properties, assets,
rights, operations or prospects of the Company.
(v) The Company has full power and authority to enter into
this Agreement and to perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company.
(w) No relationship, direct or indirect, exists between or
among the Company or the Subsidiaries, on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or the
Subsidiaries, on the other hand, which is required to be described in the
Registration Statement or the Prospectus that is not so described.
(y) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(y) Neither the Company nor the Subsidiaries, nor, to the
best of the Company's knowledge, any director, officer, agent, employee or
other person associated with or acting on behalf of the Company or the
Subsidiaries, has used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity;
-7-
<PAGE> 8
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provisions of the Foreign Corrupt Practices Act of 1972; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(z) The Company has not been advised, and has no reason to
believe, that it and each of its Subsidiaries are not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, except where failure to be so in compliance
would not materially adversely affect the earnings, business, management,
properties, assets, rights, operations or prospects of the Company and the
Subsidiaries, taken as a whole.
(aa) The business, operations and facilities of the Company
and the Subsidiaries have been and are being conducted in compliance with all
applicable laws, ordinances, rules, regulations, licenses, permits, approvals,
plans, authorizations or requirements relating to occupational safety and
health, pollution, protection of health or the environment (including, without
limitation, those relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants or hazardous or toxic substances,
materials or wastes into ambient air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes, whether
solid, gaseous or liquid in nature) or otherwise relating to remediating real
property in which the Company or the Subsidiaries have or had any interest,
whether owned or leased, of any governmental department, commission, board,
bureau, agency or instrumentality of the United States, any state or political
subdivision thereof and all applicable judicial or administrative agency or
regulatory decrees, awards, judgments and orders relating thereto, except for
such failures to so comply as would not, individually or in the aggregate, have
a material adverse affect on the Company's and the Subsidiaries' earnings,
business, management, properties, assets, rights, operations or prospects,
taken as a whole; and neither the Company nor either of the Subsidiaries has
received any notice from a governmental instrumentality or any third party
alleging any violation thereof or liability thereunder (including, without
limitation, liability for costs of investigating or remediating sites
containing hazardous substances or damage to natural resources), except for
such violations or liabilities which would not, individually or in the
aggregate, have a material adverse affect on the Company's and the
Subsidiaries' earnings, business, management, properties, assets, rights,
operations or prospects, taken as a whole.
(bb) The Company has reviewed its operations and that of its
Subsidiaries to evaluate the extent to which the business or operations of the
Company or any of its Subsidiaries will be affected by the Year 2000 Problem.
As a result of such review, the Company has no reason to believe, and does not
believe, that the Year 2000 problem will have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company and its Subsidiaries or result in any material loss or interference
with the Company's business or operations. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software used in
the receipt, transmission, processing, manipulation, storage,
-8-
<PAGE> 9
retrieval, retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of dates or
time periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring prior to January
1, 2000. There are no Year 2000 Problems related to the Company or the
Subsidiaries that are of a character required to be described or referred to in
the Registration Statement or Prospectus by the Act or by the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and
regulations of the Commission thereunder which have not been accurately
described in the Registration Statement or Prospectus.
(cc) The Common Stock has been approved for quotation on the
Nasdaq National Market, subject to official notice of issuance.
(dd) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any preliminary prospectuses, the
Prospectus, the Registration Statement and other materials, if any, permitted
by the Act.
(ee) There are no contracts, agreements or understandings
between the Company and any person granting such person (i) the right to
require the Company to file a registration statement under the Act with respect
to any securities of the Company, except as disclosed in the Prospectus or (ii)
to require the Company to include such securities with the Shares registered
pursuant to the Registration Statement.
(ff) The Company has those number of "users" and
"subscribers," as such terms are used and defined in the Prospectus, as is set
forth in the Prospectus at such dates as is set forth in the Prospectus.
(gg) Neither the Company nor its Subsidiaries nor, to the
Company's best knowledge, any of its or their officers, directors or affiliates
(as defined in Rule 501(b) of Regulation D ("Regulation D") under the Act) has
taken or will take, directly or indirectly, any action designed to cause or to
result in or that has constituted, or might reasonably be expected to cause or
result in or constitute, under the Exchange Act, or otherwise, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(hh) Except as described in the Registration Statement and
the Prospectus, the Company has not sold or issued any shares of capital stock
within the six month period preceding the date of the Prospectus, all of which
sales and issuances were made in compliance with the Act and the Rules and
Regulations.
Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the
matters set forth therein.
-9-
<PAGE> 10
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set forth, the
Company agrees to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $_____ per share, the
number of Firm Shares set forth opposite the name of each Underwriter in
Schedule I hereof, subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be
made in New York Clearing House funds by Federal (same day) against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made through the facilities
of the Depository Trust Company, New York, New York at 10:00 a.m., New York
time, on the third business day after the date of this Agreement or at such
other time and date not later than five business days thereafter as you and the
Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and are not permitted by law or executive order to be closed.)
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase the Option Shares at the price per share as set forth in the first
paragraph of this Section 2. The option granted hereby may be exercised in
whole or in part by giving written notice (i) at any time before the Closing
Date and (ii) only once thereafter within 30 days after the date of this
Agreement, by you, as Representatives of the several Underwriters, to the
Company setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in which
the Option Shares are to be registered and the time and date at which such
certificates are to be delivered. The time and date at which certificates for
Option Shares are to be delivered shall be determined by the Representatives
but shall not be earlier than three nor later than 10 full business days after
the exercise of such option, nor in any event prior to the Closing Date (such
time and date being herein referred to as the "Option Closing Date"). If the
date of exercise of the option is three or more days before the Closing Date,
the notice of exercise shall set the Closing Date as the Option Closing Date.
The number of Option Shares to be purchased by each Underwriter shall be in the
same proportion to the total number of Option Shares being purchased as the
number of Firm Shares being purchased by such Underwriter bears to __________,
adjusted by you in such manner as to avoid fractional shares. The option with
respect to the Option Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters. You, as
Representatives of the several Underwriters, may cancel such option at any time
prior to its expiration by giving written notice of such cancellation to the
Company. To the extent, if any, that the option is exercised, payment for the
Option Shares shall be made on the Option Closing Date in Federal (same day
funds) through the facilities of the Depository Trust Company in New York, New
York drawn to the order of the Company.
-10-
<PAGE> 11
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a
form approved by the Representatives containing information previously omitted
at the time of effectiveness of the Registration Statement in reliance on Rule
430A of the Rules and Regulations and (ii) not file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representatives shall not previously have been advised and furnished with a
copy or to which the Representatives shall have reasonably objected in writing
or which is not in compliance with the Rules and Regulations.
(b) The Company will advise the Representatives promptly (i) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (ii) of receipt of any comments from the Commission, (iii) of
any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of the
institution of any proceedings for that purpose. The Company will use its best
efforts to prevent the issuance of any such stop order preventing or suspending
the use of the Prospectus and to obtain as soon as possible the lifting
thereof, if issued.
(c) The Company will cooperate with the Representatives in endeavoring
to qualify the Shares for sale under the securities laws of such jurisdictions
as the Representatives may reasonably have designated in writing and will make
such applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so qualified or
required to file such a consent. The Company will, from time to time, prepare
and file such statements, reports, and other documents, as
-11-
<PAGE> 12
are or may be required to continue such qualifications in effect for so long a
period as the Representatives may reasonably request for distribution of the
Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representatives such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), and of all amendments thereto, as
the Representatives may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of
the Shares as contemplated in this Agreement and the Prospectus. If during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Underwriters, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus so that
the Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with the law.
(f) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15
months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period
of at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(g) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim financial statements of the Company
for any period subsequent to the period covered by the most recent financial
statements appearing in the Registration Statement and the Prospectus.
(h) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of Common
Stock (or agreement for such) will be made for a
-12-
<PAGE> 13
period of 180 days after the date of this Agreement, directly or indirectly, by
the Company otherwise than hereunder or with the prior written consent of
Deutsche Bank Securities Inc.
(i) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on the Nasdaq National Market.
(j) The Company has caused each officer and director of the Company
and certain beneficial owners of the issued and outstanding shares of capital
stock of the Company (including shares of Common Stock which may be deemed to
be owned on the date hereof in accordance with the rules and regulations of the
Commission, shares of Common Stock of the Company which may be issued upon
exercise of a stock option or warrant, and any other security convertible into
or exchangeable for Common Stock) listed in Exhibit B hereto to furnish to you,
on or prior to the date of this agreement, a letter or letters, in form and
substance satisfactory to the Underwriters, pursuant to which each such person
shall agree not to offer, sell, sell short or otherwise dispose of any shares
of Common Stock of the Company or other capital stock of the Company, or any
other securities convertible, exchangeable or exercisable for Common Shares or
derivative of Common Shares owned by such person or request the registration
for the offer or sale of any of the foregoing (or as to which such person has
the right to direct the disposition of) for a period of 180 days after the date
of this Agreement, directly or indirectly, except with the prior written
consent of Deutsche Bank Securities Inc. ("Lockup Agreements").
(k) The Company shall apply the net proceeds of its sale of the Shares
as set forth in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the 1940 Act.
(m) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
-13-
<PAGE> 14
Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation
Letter, the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees and
expenses (including legal fees and disbursements) incident to securing any
required review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Shares; the Listing Fee of the Nasdaq
Stock Market; and the expenses, including the fees and disbursements of counsel
for the Underwriters, incurred in connection with the qualification of the
Shares under State securities or Blue Sky laws. The Company agrees to pay all
costs and expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, incident to the offer and sale of the Directed
Shares. The Company shall not, however, be required to pay for any of the
Underwriters expenses (other than those related to qualification under NASD
regulation and State securities or Blue Sky laws) except that, if this
Agreement shall not be consummated because the conditions in Section 6 hereof
are not satisfied, or because this Agreement is terminated by the
Representatives pursuant to Section 11 hereof, or by reason of any failure,
refusal or inability on the part of the Company to perform any undertaking or
satisfy any condition of this Agreement or to comply with any of the terms
hereof on its part to be performed, unless such failure to satisfy said
condition or to comply with said terms be due to the default or omission of any
Underwriter, then the Company shall reimburse the several Underwriters for
reasonable out-of-pocket expenses, including fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and proposing
to market the Shares or in contemplation of performing their obligations
hereunder; but the Company shall not in any event be liable to any of the
several Underwriters for damages on account of loss of anticipated profits from
the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the representations and warranties of the Company
contained herein, and to the performance by the Company of its covenants and
obligations hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule
424 and Rule 430A of the Rules and Regulations shall have been made, and any
request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission and no injunction, restraining order, or order
of any nature by a Federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the issuance of the
Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Piper Marbury Rudnick &
Wolfe LLP, counsel for
-14-
<PAGE> 15
the Company, dated the Closing Date or the Option Closing Date, as the case may
be, addressed to the Underwriters (and stating that it may be relied upon by
counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; each of the Subsidiaries
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; the Company and each of
the Subsidiaries are duly qualified to transact business in all jurisdictions
in which the conduct of their business requires such qualification, or in which
the failure to qualify would have a materially adverse effect upon the business
of the Company and the Subsidiaries taken as a whole; the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable and are owned by the Company or a
Subsidiary; and, to the best of such counsel's knowledge, the outstanding
shares of capital stock of each of the Subsidiaries are owned free and clear of
all liens, encumbrances and equities and claims, and no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into any shares of capital stock or of
ownership interests in the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Company's Common Stock have been duly authorized; the outstanding
shares of the Company's Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable; the shares of Common Stock to be
issued upon conversion of the Preferred Stock immediately prior to the closing
of the offering of the Shares have been duly authorized and when issued will be
validly issued, fully paid and non-assessable; the authorized capital stock of
the Company and all of the Shares conform to the description thereof contained
in the Prospectus; the certificates for the Shares, assuming they are in the
form filed with the Commission, are in due and proper form; the shares of
Common Stock, including the Option Shares, if any, to be sold by the Company
pursuant to this Agreement have been duly authorized and will be validly
issued, fully paid and non-assessable when issued and paid for as contemplated
by this Agreement; and no preemptive rights of stockholders exist with respect
to any of the Shares or the issue or sale thereof.
(iii) Except as described in or contemplated by the Prospectus, to the
knowledge of such counsel, there are no outstanding securities of the Company
convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of
the Company or any other person has the right, contractual or otherwise, which
has not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to
-15-
<PAGE> 16
permit them to underwrite the sale of, any of the Shares or the right to have
any Common Stock or other securities of the Company included in the
Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company.
(iv) Based solely upon the oral advice of the staff of the
Commission, the Registration Statement has become effective under the Act and,
to the best of the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the
Act.
(v) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with the
requirements of the Act, and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial
statements and related notes and schedules and other financial and statistical
data included therein).
(vi) The statements under the captions "Risk Factors," "Business,"
"Management," "Certain Relationships and Related Transactions," "Description of
Capital Stock," and "Shares Eligible for Future Sale" in the Prospectus and
Items 14 and 15 of the Registration Statement, insofar as such statements
constitute a summary of documents referred to therein or of matters of law,
fairly summarize in all material respects the information called for with
respect to such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are no so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries except as set forth in the Prospectus.
(ix) The execution, delivery and performance of this Agreement and
the consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Charter or Bylaws of the Company, or any
agreement or instrument known to such counsel to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the Subsidiaries
may be bound.
(x) This Agreement has been duly authorized, executed and delivered
by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in
-16-
<PAGE> 17
connection with the execution and delivery of this Agreement and the
consummation of the transactions herein contemplated (other than as may be
required by the NASD or as required by State securities and Blue Sky laws as to
which such counsel need express no opinion) except such as have been obtained
or made, specifying the same.
(xii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
In rendering such opinion Piper Marbury Rudnick & Wolfe LLP may rely as to
matters governed by the laws of states other than Delaware, New York or Federal
laws on local counsel in such jurisdictions, provided that in each case Piper
Marbury Rudnick & Wolfe LLP shall state that they believe that they and the
Underwriters are justified in relying on such other counsel. In addition to the
matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications incorporated
therein pursuant to Rule 430A under the Act) and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading (except that
such counsel need express no view as to financial statements, related notes and
schedules and other financial and statistical information therein). With
respect to such statement, Piper Marbury Rudnick & Wolfe LLP may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Representatives shall have received from Morrison & Foerster LLP,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, substantially to the effect specified in
subparagraphs (iv) and (v) of Paragraph (b) of this Section 6, the due
organization and valid existence of the Company under the laws of the State of
Delaware and the validity of the Shares, and the Company shall have furnished
to such counsel such documents as such counsel may reasonably request for the
purpose of passing upon such matters. In rendering such opinion Morrison &
Foerster LLP may rely as to all matters governed other than by the laws of the
State of Delaware, New York or Federal laws on the opinion of counsel referred
to in Paragraph (b) of this Section 6. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, or any amendment thereto, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
-17-
<PAGE> 18
misleading, and (ii) the Prospectus, or any supplement thereto, on the date it
was filed pursuant to the Rules and Regulations and as of the Closing Date or
the Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact, necessary in order to make
the statements, in the light of the circumstances under which they are made,
not misleading (except that such counsel need express no view as to financial
statements, related notes and schedules and other financial and statistical
information therein). With respect to such statement, Morrison & Foerster LLP
may state that their belief is based upon the procedures set forth therein, but
is without independent check and verification.
(d) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in
form and substance satisfactory to you, of PricewaterhouseCoopers LLP
confirming that they are independent public accountants within the meaning of
the Act and the applicable published Rules and Regulations thereunder and
stating that in their opinion the financial statements and schedules examined
by them and included in the Registration Statement comply in form in all
material respects with the applicable accounting requirements of the Act and
the related published Rules and Regulations; and containing such other
statements and information as is ordinarily included in accountants' "comfort
letters" to Underwriters with respect to the financial statements and certain
financial and statistical information contained in the Registration Statement
and Prospectus.
(e) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company to
the effect that, as of the Closing Date or the Option Closing Date, as the case
may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or
the Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and
the Prospectus and, in his opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have
been set forth in a supplement to or an
-18-
<PAGE> 19
amendment of the Prospectus which has not been so set forth in such supplement
or amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business.
(f) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as
the Representatives may reasonably have requested.
(g) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq National Market.
(h) The Lockup Agreements described in Section 4(j) are in full force
and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Morrison &
Foerster LLP, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing or
by telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
-19-
<PAGE> 20
8. INDEMNIFICATION.
(a) The Company agrees:
(1) To indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which such Underwriter or any such controlling person
may become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading any act or failure to act, or (iii) any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Shares or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action arising
out of or based upon matters covered by clause (i) or (ii) above (provided,
that the Company shall not be liable under this clause (iii) to the extent that
it is determined in a final judgment by a court of competent jurisdiction that
such loss, claim, damage, liability or action resulted directly from any such
acts or failures to act undertaken or omitted to be taken by such Underwriter
through its gross negligence or willful misconduct); provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof.
(2) To reimburse each Underwriter and each such controlling
person upon demand for any legal or other out-of-pocket expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to
the offering of the Shares, whether or not such Underwriter or controlling
person is a party to any action or proceeding. In the event that it is finally
judicially determined that the Underwriters were not entitled to receive
payments for legal and other expenses pursuant to this subparagraph, the
Underwriters will promptly return all sums that had been advanced pursuant
hereto.
(3) To indemnify and hold harmless Deutsche Bank and each
person, if any, who controls, or is controlled by, Deutsche Bank or any
Underwriter within the meaning of Section 15 of the Act and Section 20 of the
Exchange Act (the "Deutsche Bank Entities"), against any losses, claims,
damages or liabilities to which such Underwriter or any such controlling person
may become subject under the Act or the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any material
prepared by or with the consent of the Company for distribution to Participants
in connection with
-20-
<PAGE> 21
the Directed Share Program, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading any act or failure to act, (iii) caused by
the failure of any Participant to pay for and accept delivery of Directed
Shares that the Participant agreed to purchase or (iv) any alleged act or
failure to act by any Deutsche Bank Entity in connection with, or relating in
any manner to, the Directed Share Program, other than any loss, claim, damage,
liability or action that are finally judicially determined to have resulted
from the bad faith or gross negligence of the Deutsche Bank Entities; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof.
(4) To reimburse each Deutsche Bank Entity upon demand for
any legal or other out-of-pocket expenses reasonably incurred by such Deutsche
Bank in connection with investigating or defending any such loss, claim, damage
or liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Directed Shares, whether or
not such Deutsche Bank Entity is a party to any action or proceeding. In the
event that it is finally judicially determined that the Deutsche Bank Entities
were not entitled to receive payments for legal and other expenses pursuant to
this subparagraph, the Deutsche Bank Entities will promptly return all sums
that had been advanced pursuant hereto.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company
or any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
-21-
<PAGE> 22
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a) or (b). In case any such proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred (or within 30 days of presentation) the fees and
expenses of the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. In
addition, the indemnifying party will not, without the prior written consent of
the indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party
is an actual or potential party to such claim, action or proceeding) unless
such settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a)(1), (a)(2) or (b) above in respect of any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions or
-22-
<PAGE> 23
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, (or actions or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter, and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations in this
Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless a Deutsche Bank Entity under
Section 8(a)(3) or(a)(4) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then the Company shall contribute to the amount paid or payable by such
Deutsche Bank Entity as a result of such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Deutsche Bank Entity on the other from the offering of the
Directed Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law then the Company shall
contribute to such amount in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Deutsche Bank Entity on the other in connection with the
statements or
-23-
<PAGE> 24
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof),as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Deutsche Bank Entities on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Directed
Shares (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Deutsche Bank Entity in
connection therewith. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the Deutsche
Bank Entity on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Deutsche Bank Entities agree that it would not be
just and equitable if contributions pursuant to this Section 8(e) were
determined by pro rata allocation (even if the Deutsche Bank Entities were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above
in this Section 8(e). The amount paid or payable by a Deutsche Bank Entity as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(e) shall be deemed to
include any legal or other expenses reasonably incurred by such Deutsche Bank
Entity in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (e), (i) no Deutsche Bank
Entity shall be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Directed Shares purchased by such
Deutsche Bank Entity, and (ii) no Deutsche Bank Entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the
-24-
<PAGE> 25
Company, its directors or officers, or any person controlling the Company,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or
any others, to purchase from the Company such amounts as may be agreed upon and
upon the terms set forth herein, the Firm Shares or Option Shares, as the case
may be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 36 hours you, as such Representatives, shall not have procured such
other Underwriters, or any others, to purchase the Firm Shares or Option
Shares, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of shares with
respect to which such default shall occur does not exceed 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
numbers of Firm Shares or Option Shares, as the case may be, which they are
obligated to purchase hereunder, to purchase the Firm Shares or Option Shares,
as the case may be, which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the Company or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 36-hour period to the
parties to this Agreement, to terminate this Agreement without liability on the
part of the non-defaulting Underwriters or of the Company except to the extent
provided in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option
Closing Date, as the case may be, may be postponed for such period, not
exceeding seven days, as you, as Representatives, may determine in order that
the required changes in the Registration Statement or in the Prospectus or in
any other documents or arrangements may be effected. The term "Underwriter"
includes any person substituted for a defaulting Underwriter. Any action taken
under this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to Deutsche Bank Securities
Inc., One South Street, Baltimore, Maryland 21202, Attention: General Counsel,
and Deutsche Bank Securities Inc., One Bankers Trust Plaza, 130 Liberty Street,
New York, New York 10006, Attention: Equity Syndicate; if to the Company, to i3
Mobile, Inc., 181 Harbor Drive, Third Floor, Stamford, Connecticut 06902,
Attention: Chief Financial Officer; with a copy to Piper Marbury Rudnick &
Wolfe LLP, 1251 Avenue of the Americas, New York, New York 10020, Attention:
Michael Hirschberg, Esq.
-25-
<PAGE> 26
11. TERMINATION.
(a) This Agreement may be terminated by you by notice to the
Company at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change or
any development involving a prospective material adverse change in or affecting
the condition, financial or otherwise, of the Company and its Subsidiaries
taken as a whole or the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or
change on the financial markets of the United States would, in your reasonable
judgment, make it impracticable or inadvisable to market the Shares or to
enforce contracts for the sale of the Shares, or (iii) suspension of trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on either such Exchange, (iv) the enactment,
publication, decree or other promulgation of any statute, regulation, rule or
order of any court or other governmental authority which in your opinion
materially and adversely affects or may materially and adversely affect the
business or operations of the Company, (v) declaration of a banking moratorium
by United States or New York State authorities, (vi) any downgrading, or
placement on any watch list for possible downgrading, in the rating of the
Company's debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Exchange Act);
(vii) the suspension of trading of the Company's common stock by the Nasdaq
Stock Market, the Commission, or any other governmental authority or, (viii)
the taking of any action by any governmental body or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(b) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any
-26-
<PAGE> 27
Prospectus or the Registration Statement consists of the legends required by
Item 502 of Regulation S-K under the Act and the first and third paragraphs
under the caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants
in this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the
Company or its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
-27-
<PAGE> 28
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
i3 MOBILE, INC.
By:
------------------------------------------------
Name: Stephen G. Maloney
Title: President and Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
DEUTSCHE BANK SECURITIES INC.
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
As Representatives of the several
Underwriters listed on Schedule I
By: Deutsche Bank Securities Inc.
By:
----------------------------------
Authorized Officer
-28-
<PAGE> 29
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriter to be Purchased
----------- --------------------
<S> <C>
Deutsche Bank Securities Inc.
Chase Securities Inc.
Credit Suisse First Boston Corporation
----------
Total
----------
</TABLE>
-29-
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
NUMBER [i3 MOBILE LOGO] SHARES
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 465713 10 5
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE, OF
i3 MOBILE, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney, upon surrender of this certificate properly
endorsed.
This certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
i3 MOBILE, INC.
DELAWARE
CORPORATE SEAL 1991
/s/ ALAN KATZMAN /s/ STEPHEN G. MALONEY
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE> 2
The Corporation shall furnish without charge to each stockholder who
so requests a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation or to the
Transfer Agent and Registrar named on the front of this Certifcate.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM- as tenants in common UNIF GIFT MIN ACT-_________________
TEN ENT- as tenants by the entireties (Cust)
JT TEN- as joint tenants with right of Custodian________________________
survivorship and not as tenants (Minor)
in common under Uniform Gifts to Minors Act
---------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value received, _________________________________hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________________
_________________________Attorney to transfer the said stock on the books of the
within-named Corporation with full power of substitution in the premises.
Dated,
----------------
X
-----------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT,OR ANY CHANGE
WHATSOEVER.
SIGNATURE GUARANTEED:
-----------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of this 10th day of January, 2000 by and between i3
MOBILE, INC., a Delaware corporation with principal executive offices at 181
Harbor Drive, Stamford, Connecticut 06902 ("i3 Mobile"), and MICHAEL P.
NEUSCHELER, residing at 25 Ridge Brook Drive, Stamford, Connecticut 06903
("Neuscheler").
W I T N E S S E T H :
i3 Mobile is desirous of employing Neuscheler as Vice President and
Chief Financial Officer of i3 Mobile and Neuscheler is desirous of serving in
such capacity for i3 Mobile, all upon the terms and subject to the conditions
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound, agree as
follows:
1. Employment.
i3 Mobile agrees to employ Neuscheler, and Neuscheler agrees to be
employed by i3 Mobile, upon the terms and subject to the conditions of this
Agreement.
2. Term.
The employment of Neuscheler by i3 Mobile as provided in Section 1 will
be for a period of three (3) years commencing on the date hereof, unless sooner
terminated as hereinafter provided (the "Term"), and shall automatically renew
from year to year thereafter unless either party gives at least ninety (90) days
prior written notice of termination.
3. Duties; Best Efforts; Indemnification.
Neuscheler shall serve as Vice President and Chief Financial Officer of
i3 Mobile and shall perform, subject to the policy directions of the President
and Chief Executive Officer and the Board of Directors of i3 Mobile, such duties
as are customarily performed by the Vice President and Chief Financial Officer.
Neuscheler shall also have such other powers and duties as may be from time to
time prescribed by the President and Chief Executive Officer or the Board of
Directors of i3 Mobile, provided that the nature of Neuscheler's powers and
duties so prescribed shall not be inconsistent with Neuscheler's position and
duties hereunder.
<PAGE> 2
Neuscheler shall devote his business time, attention and energies to
the business and affairs of i3 Mobile, shall use his best efforts to advance the
best interests of i3 Mobile and shall not, during the Term, be actively engaged
in any other business activity, whether or not such business activity is pursued
for gain, profit or other pecuniary advantage, that will interfere with the
performance by Neuscheler of his duties hereunder or Neuscheler's availability
to perform such duties or that will adversely affect, or negatively reflect
upon, i3 Mobile.
Subject to the provisions of i3 Mobile's Certificate of Incorporation
and Bylaws, each as amended from time to time, i3 Mobile shall indemnify
Neuscheler to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as amended from time to time, for all amounts (including,
without limitation, judgments, fines, settlement payments, expenses and
attorney's fees) actually and reasonably incurred or paid by Neuscheler on a
when- and as-incurred basis in connection with any action, suit, investigation
or proceeding arising out of or relating to the performance by Neuscheler of
services for, or the acting by Neuscheler as a director, officer, or employee
of, i3 Mobile, or any other person or enterprise at i3 Mobile's request if
Neuscheler acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of i3 Mobile, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. i3 Mobile shall use its best efforts to obtain and maintain in
full force and effect during the Term directors' and officers' liability
insurance policies providing full and adequate protection to Neuscheler for his
capacity, provided that the Board of Directors of i3 Mobile shall have no
obligation to purchase such insurance if, in its opinion, coverage is available
only on unreasonable terms. Neuscheler agrees that, if it is finally judicially
determined or finally determined by an arbitrator that he is not or was not
entitled to any amounts paid on his behalf or for which he has been reimbursed
under this third paragraph of this section 3 by virtue of having failed to have
met the standards set forth in the first sentence of this third paragraph of
this section 3, Neuscheler shall promptly reimburse i3 Mobile for such amounts.
4. Place of Performance.
In connection with his employment by i3 Mobile, Neuscheler shall be
based at the principal executive offices of i3 Mobile, which shall be in the
Stamford, Connecticut area. If i3 Mobile's principal executive offices are
relocated more than fifty (50) miles from their present location without the
consent of Neuscheler, Neuscheler shall have the right prior to such relocation
to terminate his employment hereunder pursuant to Section 6(c) hereof; provided,
however, that if Neuscheler does not exercise such right and instead remains in
the employ of i3 Mobile following such relocation, i3 Mobile will promptly pay
(or reimburse Neuscheler for) all reasonable moving and moving-related expenses
incurred by Neuscheler as a consequence of a change of his principal residence
in connection with any such relocation of i3 Mobile's principal executive
offices.
5. Compensation.
(a) Base Salary. i3 Mobile shall pay Neuscheler a base salary (the "Base
Salary") at a rate of not less than $150,000 per annum, payable in equal
semi-monthly installments during the Term. The President and Chief Executive
Officer of i3 Mobile at least annually will review the Base Salary and other
compensation during the Term with a view to increase thereof based upon then
prevailing industry salary scales for equivalently valued businesses for the
Chief
-2-
<PAGE> 3
Financial Officer position, Neuscheler's performance, the performance of i3
Mobile, inflation and other relevant factors.
(b) Out-of-Pocket Expenses. i3 Mobile shall promptly pay to Neuscheler the
reasonable expenses incurred by him in the performance of his duties hereunder,
including, without limitation, those incurred in connection with business
related travel or entertainment, or, if such expenses are paid directly by
Neuscheler, shall promptly reimburse him for such payment, provided that
Neuscheler properly accounts therefor in accordance with i3 Mobile's policy. i3
Mobile shall provide Neuscheler with corporate credit and phone cards to be used
with respect to the foregoing expenses.
(c) Participation in Benefit Plans. Neuscheler shall be eligible to
participate in the current i3 Mobile health, accident, life and disability
insurance, pension, profit sharing, stock option, stock purchase plans or
arrangements. Neuscheler shall also be entitled to participate in any other
employee benefit plan or arrangement made available in the future by i3 Mobile
to its executives and key management employees.
(d) Life Insurance. i3 Mobile shall purchase a key-man life insurance
policy on the life of Neuscheler in the aggregate amount of at least $500,000,
the proceeds of which shall be payable directly to i3 Mobile. Neuscheler agrees
to submit to such medical examinations, to complete such documentation and
otherwise to cooperate with i3 Mobile as may be required to enable i3 Mobile to
obtain and maintain such key-man life insurance.
(e) Automobile. i3 Mobile shall provide Neuscheler with an automobile
allowance of $1,000 per month for each month during the Term.
(f) Vacation. Neuscheler shall be entitled to paid vacation days in each
calendar year determined by i3 Mobile from time to time, but not less than four
(4) weeks in any calendar year, prorated in any calendar year during which
Neuscheler is employed hereunder for less than an entire year in accordance with
the number of days in such year during which he is so employed. Neuscheler shall
also be entitled to all paid holidays given by i3 Mobile to its executives and
key management employees.
(g) Incentive Compensation. i3 Mobile agrees to pay Neuscheler a bonus (the
"Bonus") which shall be determined by the President and Chief Executive Officer
of i3 Mobile, in addition to and separate from his Base Salary and subject to
the achievement of certain mutually agreed upon performance goals, in an amount
up to fifty percent (50%) of his Base Salary. Neuscheler shall be entitled to
the Bonus on a pro-rata basis for partial achievement of the performance goals.
-3-
<PAGE> 4
6. Termination.
Neuscheler's employment hereunder shall be terminated upon Neuscheler's
death and may be terminated as follows:
(a) By i3 Mobile for "Cause." For purposes of this Agreement, a termination
for Cause shall occur if Neuscheler has (i) willfully failed to comply with any
of the material terms of this Agreement, (ii) willfully and repeatedly failed to
perform his duties hereunder, (iii) engaged in gross misconduct materially
injurious to i3 Mobile or (iv) been convicted of, or pleaded nolo contendere to,
a felony or a crime of moral turpitude; provided, however, that Neuscheler shall
receive thirty (30) days' advance written notice specifying the actions
constituting Cause and Neuscheler shall not have cured the actions constituting
Cause during such thirty (30) day period.
(b) By i3 Mobile due to Neuscheler's "Disability." For purposes of this
Agreement, a termination for Disability shall occur (i) upon the thirtieth
(30th) day after i3 Mobile has provided a written termination notice to
Neuscheler supported by a written statement from a reputable independent
physician to the effect that Neuscheler shall have become so incapacitated as to
be unable to resume, within the ensuing twelve (12) months, his employment
hereunder by reason of physical or mental illness or injury, or (ii) upon
rendering of a written termination notice by i3 Mobile after Neuscheler has been
unable to substantially perform his duties hereunder for six (6) consecutive
months or for nine (9) months in any twelve (12) month period (exclusive of any
vacation permitted under Section 5(f) hereof) by reason of any physical or
mental illness. For purposes of this Section 6(b), Neuscheler agrees to make
himself available and to cooperate in any reasonable examination by a reputable
independent physician retained by i3 Mobile.
(c) By Neuscheler for "Good Reason." For purposes of this Agreement, Good
Reason shall mean (i) any circumstance that has the effect of significantly
reducing Neuscheler's duties or authority provided for or contemplated herein (a
"Material Change"), (ii) a breach by i3 Mobile of its material obligations under
this Agreement (a "Material Breach"), (iii) the relocation of the principal
executive offices of i3 Mobile in excess of fifty (50) miles from their present
location not consented to by Neuscheler, (iv) the acquisition by any person or
group (as such term is defined in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended), directly or indirectly, of securities of i3
Mobile representing fifty percent (50%) or more of the combined voting power of
i3 Mobile's then outstanding securities in a transaction to which Neuscheler
does not consent or (v) the future acquisition of all or substantially all of
the business or assets of i3 Mobile (whether direct or indirect, by sale of
assets or stock, merger, consolidation or otherwise) in a transaction to which
Neuscheler does not consent; provided, however, that a Material Change or a
Material Breach shall constitute Good Reason only if Neuscheler has notified i3
Mobile in writing of the existence and particulars of such Material Change or
Material Breach and i3 Mobile has failed to remedy such Material Change or
Material Breach within thirty (30) days of such notice.
-4-
<PAGE> 5
7. Compensation upon Termination.
(a) In the event of the termination of Neuscheler's employment as a result
of Neuscheler's death, i3 Mobile shall (i) pay to Neuscheler's estate his Base
Salary and Bonus through the date of his death and (ii) for the longer of
eighteen (18) months following his death or the balance of the Term (as if such
termination had not occurred) provide continuation coverage to the members of
Neuscheler's family under all major medical and other health, accident, life or
other disability plans and programs in which such family members participated
immediately prior to his death.
(b) In the event of the termination of Neuscheler's employment by i3 Mobile
for Cause or by Neuscheler other than for Good Reason, i3 Mobile shall pay to
Neuscheler his Base Salary and accrued Bonus through the date of his
termination, and Neuscheler shall have no further entitlement to any other
compensation or benefits from i3 Mobile.
(c) In the event of the termination of Neuscheler's employment by i3 Mobile
due to Disability, i3 Mobile shall pay to Neuscheler his Base Salary and accrued
Bonus through the date of his termination. In addition, for eighteen (18) months
following any such termination, i3 Mobile shall (i) continue to pay Neuscheler
the Base Salary in effect at the time of such termination less the amount, if
any, then payable to Neuscheler under any disability benefits of i3 Mobile and
(ii) provide Neuscheler continuation coverage under all major medical and other
health, accident, life or other disability plans and programs in which
Neuscheler participated immediately prior to such termination.
(d) In the event that Neuscheler's employment is terminated (i) by i3
Mobile other than (A) as a result of Neuscheler's death or (B) for reasons
specified in Section 6(a) or (b) or (ii) by Neuscheler for Good Reason, i3
Mobile shall continue to pay to Neuscheler his Base Salary and Bonus for the
greater of (x) eighteen (18) months following any such termination or (y) the
balance of the Term (as if such termination had not occurred) and provide
Neuscheler continuation coverage under all major medical and other health,
accident, life or other disability plans or programs in which Neuscheler
participated immediately prior to such termination for the same period.
Notwithstanding the foregoing, the amounts otherwise payable to Neuscheler
pursuant to this Section 7(d) shall be subject to reduction (but not below zero)
to the extent determined necessary by i3 Mobile to prevent any payments or
benefits to or for the benefit of Neuscheler (whether pursuant to this Agreement
or any other plan, arrangement or agreement) from being treated as a "parachute
payment" under Section 280G of the Internal Revenue Code of 1986, as amended. In
the event that Neuscheler's employment is terminated by Neuscheler for Good
Reason (but only as defined in clauses (iv) and (v) of section 6(c) hereof), all
stock options and other equity incentive awards granted to Neuscheler by i3
Mobile shall immediately fully vest on an accelerated basis and be exercisable
for a 30-day period following the occurrence of the event comprising Good
Reason.
(e) If Neuscheler disputes the termination of his employment by i3 Mobile
pursuant to Section 6(a) or 6(b) herein and such dispute results in a final
determination to the effect that i3 Mobile did not have a proper basis for such
termination, i3 Mobile shall promptly pay to Neuscheler all payments Neuscheler
would have been entitled to receive had his employment hereunder had not been
improperly terminated; provided, however, that any payments or benefits
-5-
<PAGE> 6
under this Section 7(e) shall be reduced by the amount of any payments or
benefits provided under any other provision of Section 7 hereof.
(f) The continuation coverage under any major medical and other health,
accident, life or other disability plans and programs for the periods provided
in Section 7(a), 7(c) and 7(d) shall be provided (i) at the expense of i3 Mobile
and (ii) in satisfaction of i3 Mobile's obligation under Section 4980B of the
Internal Revenue Code (and any similar state law) with respect to the period of
time such benefits are continued hereunder.
(g) This Section 7 sets forth the only obligations of i3 Mobile with
respect to the termination of Neuscheler's employment with i3 Mobile, and
Neuscheler acknowledges that, upon the termination of his employment, he shall
not be entitled to any payments or benefits which are not explicitly provided
herein.
8. Covenant Regarding Inventions and Copyrights.
Neuscheler shall disclose promptly to i3 Mobile any and all inventions,
discoveries, improvements and patentable or copyrightable works initiated,
conceived or made by him, either alone or in conjunction with others, during the
Term and related to the business or activities of i3 Mobile and he assigns all
of his interest therein to i3 Mobile or its nominee; whenever requested to do so
by i3 Mobile, Neuscheler shall execute any and all applications, assignments or
other instruments which i3 Mobile shall deem necessary to apply for and obtain
letters patent or copyrights of the United States or any foreign country, or
otherwise protect i3 Mobile's interest therein. These obligations shall continue
beyond the conclusion of the Term with respect to inventions, discoveries,
improvements or copyrightable works initiated, conceived or made by Neuscheler
during the Term and shall be binding upon Neuscheler's assigns, executors,
administrators and other legal representatives.
9. Protection of Confidential Information.
Neuscheler acknowledges that he has been and will be provided with
information about, and his employment by i3 Mobile will, throughout the Term,
bring him into close contact with, many confidential affairs of i3 Mobile and
its subsidiaries, including proprietary information about costs, profits,
markets, sales, products, key personnel, pricing policies, operational methods,
technical processes and other business affairs and methods, plans for future
developments and other information not readily available to the public, all of
which are highly confidential and proprietary and all of which were developed by
i3 Mobile at great effort and expense. Neuscheler further acknowledges that the
services to be performed by him under this Agreement are of a special, unique,
unusual, extraordinary and intellectual character, that the business of i3
Mobile will be conducted throughout the world (the "Territory"), that its
services will be marketed throughout the Territory, that i3 Mobile competes and
will compete in all of its business activities with other organizations which
are located in any part of the Territory and that the nature of the relationship
of Neuscheler with i3 Mobile is such that Neuscheler is capable of
-6-
<PAGE> 7
competing with i3 Mobile from nearly any location in the Territory. In
recognition of the foregoing, Neuscheler covenants and agrees during the Term
and for a period of five (5) years thereafter:
(i) That he will keep secret all confidential matters of i3 Mobile and not
disclose them to anyone outside of i3 Mobile, either during or after the Term,
except with i3 Mobile's prior written consent or, if during the Term, in the
performance of his duties hereunder, Neuscheler makes a good faith determination
that it is the best interest of i3 Mobile and to disclose such matters;
(ii) That he will not make use of any such confidential matters for his own
purposes or the benefit of anyone other than i3 Mobile; and
(iii) That he will deliver promptly to i3 Mobile on termination of this
Agreement, or at any time i3 Mobile may so request, all confidential memoranda,
notes, records, reports and other confidential documents (and all copies
thereof) relating to the business of i3 Mobile, which he may then possess or
have under his control.
10. Restriction on Competition, Interference and Solicitation.
In recognition of the considerations described in Section 9 hereof,
Neuscheler covenants and agrees that, during the Term and for a period of one
(1) year or such longer period of time during which Neuscheler is continuing to
receive compensation from the Company after such termination, Neuscheler will
not, directly or indirectly, (A) enter into the employ of, or render any
services to, any person, firm or corporation engaged in any business directly
competitive with the business of i3 Mobile in any part of the Territory in which
i3 Mobile is actively engaged in business on the date of termination; (B) engage
in any such business for his own account; (C) become interested in any such
business as an individual, partner, shareholder, creditor, director, officer,
principal, agent, employee, trustee, consultant, advisor, franchisee or in any
other relationship or capacity; or (D) interfere with i3 Mobile's relationship
with, or endeavor to employ or entice away from i3 Mobile any person, firm,
corporation, governmental entity or other business organization who or which is
or was an employee, customer or supplier of, or maintained a business
relationship with, i3 Mobile at any time (whether before or after the Term), or
which i3 Mobile has solicited or prepared to solicit; provided, however, that
the provisions of clause (A) shall not be deemed to preclude Neuscheler from
engagement by a corporation some of the activities of which are competitive with
the business of i3 Mobile if Neuscheler's engagement does not relate, directly
or indirectly, to such competitive business, and nothing contained in this
Section 10 shall be deemed to prohibit Neuscheler from acquiring or holding,
solely for investment, publicly traded securities of any corporation some of the
activities of which are competitive with the business of i3 Mobile so long as
such securities do not, in the aggregate, constitute more than five percent (5%)
of any class or series of outstanding securities of such corporation.
-7-
<PAGE> 8
11. Specific Remedies.
For purposes of Sections 8, 9 and 10 of this Agreement, references to
i3 Mobile shall include all current and future majority-owned subsidiaries of i3
Mobile and all current and future joint ventures in which i3 Mobile may from
time to time be involved. It is understood by Neuscheler and i3 Mobile that the
covenants contained in this Section 11 and in Sections 8, 9 and 10 hereof are
essential elements of this Agreement and that, but for the agreement of
Neuscheler to comply with such covenants, i3 Mobile would not have agreed to
enter into this Agreement. i3 Mobile and Neuscheler have independently consulted
with their respective counsel and have been advised concerning the
reasonableness and propriety of such covenants with specific regard to the
nature of the business conducted by i3 Mobile and all interests of i3 Mobile.
Neuscheler agrees that the covenants of Sections 8, 9 or 10 hereof are
reasonable and valid. If Neuscheler commits a breach of any of the provisions of
Sections 8, 9 or 10 hereof, such breach shall be deemed to be grounds for
termination for Cause. In addition, Neuscheler acknowledges that i3 Mobile may
have no adequate remedy at law if he violates any of the terms hereof.
Neuscheler therefore understands and agrees that i3 Mobile shall have (i) the
right to have such provisions specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach will cause
irreparable injury to i3 Mobile and that money damages will not provide an
adequate remedy to i3 Mobile, and (ii) the right to require Neuscheler to
account for and pay over to i3 Mobile all compensation, profits, monies,
accruals, increments and other benefits (collectively "Benefits") derived or
received by Neuscheler as a result of any transaction constituting a breach of
any of the provisions of Sections 8, 9 or 10 and Neuscheler hereby agrees to
account for and pay over such Benefits to i3 Mobile.
12. Independence, Severability and Non-Exclusivity.
Each of the rights enumerated in Sections 8, 9 or 10 hereof and the
remedies enumerated in Section 11 hereof shall be independent of the others and
shall be in addition to and not in lieu of any other rights and remedies
available to i3 Mobile at law or in equity. If any of the covenants contained in
Sections 8, 9 or 10, or any part of any of them, is hereafter construed or
adjudicated to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants or right or remedies which shall be given
full effect without regard to the invalid portions. The parties intend to and do
hereby confer jurisdiction to enforce the covenants contained in Section 8, 9 or
10 and the remedies enumerated in Section 11 upon the federal and state courts
of Connecticut sitting in Fairfield County. If any of the covenants contained in
Sections 8, 9 or 10 is held to be invalid or unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall be the power to reduce the duration
and/or area of such provision and in its reduced from said provision shall then
be enforceable. No such holding of invalidity or unenforceability in one
jurisdiction shall bar or in any way affect i3 Mobile's right to the relief
provided in Section 11 or otherwise in the courts of any other state or
jurisdiction within the geographical scope of such covenants as to breaches of
such covenants in such other respective states or jurisdictions, such covenants
being, for this purpose, severable into diverse and independent covenants.
-8-
<PAGE> 9
13. Disputes. If i3 Mobile or Neuscheler shall dispute any termination of
Neuscheler's employment hereunder or if a dispute concerning any payment
hereunder shall exist:
(a) either party shall have the right (but not the obligation), in addition
to all other rights and remedies provided by law, to compel binding, enforceable
and non-appealable arbitration of the dispute in the City of New York under the
rules of the American Arbitration Association by giving written notice of
arbitration to the other party within thirty (30) days after notice of such
dispute has been received by the party to whom notice has been given; and
(b) if such dispute (whether or not submitted to arbitration pursuant to
Section 13(a) hereof) results in a determination that (i) i3 Mobile did not have
the right to terminate Neuscheler's employment under the provisions of this
Agreement or (ii) the position taken by Neuscheler concerning payments to
Neuscheler is correct, i3 Mobile shall promptly pay, or if theretofore paid by
Neuscheler, shall promptly reimburse Neuscheler for, all costs and expenses
(including reasonable attorneys' fees) reasonably incurred by Neuscheler in
connection with such dispute.
14. Successors; Binding Agreement.
In the event of a future disposition by i3 Mobile (whether direct or
indirect), by sale of assets or stock, merger, consolidation or otherwise of all
or substantially all of its business and/or assets in a transaction to which
Neuscheler consents, i3 Mobile will require any successor, by agreement in form
and substance satisfactory to Neuscheler, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that i3 Mobile
would be required to perform if no such disposition had taken place.
This Agreement and all rights of Neuscheler hereunder shall inure to
the benefit of, and be enforceable by, Neuscheler's personal or legal
representatives, executors, administrators, administrators cta, successors,
heirs, distributees, devisees and legatees. If Neuscheler should die while any
amount would still be payable to him hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Neuscheler's estate.
15. Notices.
All notices, consents and other communications required or permitted to
be given by any party hereunder shall be in writing (including telecopy or other
similar writing) and shall be given be personal delivery, certified or
registered mail, postage prepaid, or telecopy (or other similar writing) as
follows:
-9-
<PAGE> 10
<TABLE>
<S> <C>
To i3 Mobile: 181 Harbor Drive
Stamford, CT 06902
Attn: President and Chief Executive Officer
Telecopy: (203) 428-3005
With a copy to: Piper Marbury Rudnick & Wolfe LLP
1251 Avenue of the Americas
New York, New York 10020
Attn: Michael Hirschberg, Esq.
Telecopy: (212) 835-6001
To Neuscheler: 25 Ridge Brook Drive
Stamford, CT 06903
</TABLE>
or at such other address or telecopy number (or other similar number) as either
party may from time to time specify to the other. Any notice, consent or other
communication required or permitted to be given hereunder shall have been deemed
to be given on the date of mailing, personal delivery or telecopy or other
similar means (provided the appropriate answer back is received) thereof and
shall be conclusively presumed to have been received on the second business day
following the date of mailing or, in the case of personal delivery or telecopy
or other similar means, the day of delivery thereof, except that a change of
address shall not be effective until actually received.
16. Modifications and Waivers.
No term, provision or condition of this Agreement may be modified or
discharged unless such modification or discharge is authorized by the President
and Chief Executive Officer or Board of Directors of i3 Mobile and is agreed to
in writing and signed by Neuscheler. No waiver by either party hereto of any
breach by the other party hereto of any term, provision or condition of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
17. Entire Agreement.
This Agreement constitutes the entire understanding between the parties
hereto relating to the subject matter hereof, superseding all negotiations,
prior discussions, preliminary agreements and agreements relating to the subject
matter hereof made prior to the date hereof.
18. Law Governing.
Except as otherwise explicitly noted, this Agreement shall be governed
by and construed in accordance with the laws of the State of Connecticut
(without giving effect to the principles of conflicts of law).
-10-
<PAGE> 11
19. Invalidity.
Except as otherwise specified herein, the invalidity or
unenforceability of any term or terms of this Agreement shall not invalidate,
make unenforceable or otherwise affect any other term of this Agreement which
shall remain in full force and effect.
20. Headings.
The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year set forth above.
i3 MOBILE, INC.
By:_______________________________________
Stephen G. Maloney
President and Chief Executive Officer
_______________________________________
Michael P. Neuscheler
-11-
<PAGE> 1
EXHIBIT 10.22
MASTER CONTENT PROVIDER AGREEMENT
This Content Provider Agreement ("Agreement") is entered into this 9th day of
February, 2000 by and between Broadcast Entertainment.com, Inc., a corporation
with its principal offices at 443 Congress Street, Portland, ME 04101
("Provider") and i3 Mobile, Inc. ("i3"), a Delaware corporation, with its
principal offices at 181 Harbor Drive, Third Floor, Stamford, CT 06902.
WHEREAS, i3 has developed proprietary systems, procedures and technologies to
deliver to its customers a wide assortment of content, data and transactional
services directly to wireless devices and enables such customers to personalize
such delivery to meet their specific needs and preferences; and
WHEREAS, Provider is in the business of aggregating entertainment related
content and services; and
WHEREAS, Provider is desirous of aggregating and providing i3 with certain
entertainment related content, data and transactional services for delivery to
i3's wireless customers either directly or through i3's distributors in
accordance with the terms and provisions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. BUSINESS OVERVIEW. Provider shall provide i3 with exclusive access to a wide
variety of customizable entertainment related content, data and transactional
services aggregated by Provider from a variety of third party sources which may
include Provider's own content (hereafter referred to collectively as "Content
Providers").
(a) CONTINUOUS JOINT MARKETING. Throughout the term of this Agreement,
Provider and i3 will use their reasonable best efforts to work together to
develop and produce wireless products based on content received from Content
Providers and related promotional materials that are designed to enhance the
demand for wireless entertainment content and services by end-users (services
based on Provider's content shall be referred to as "Wireless Content
Services").
(b) EXCLUSIVE RELATIONSHIP. Subject to the exclusion for "Existing
Contracts," as set forth below, during the term of this Agreement i3 hereby
appoints Provider as i3's exclusive content provider and aggregator for the
entertainment related content as is more specifically defined on Appendix A,
which is attached hereto and made a part hereof. i3 and Provider acknowledge
that i3 has entered into agreements with other parties including other content
providers prior to the date hereof which content providers are listed on
Appendix A attached hereto and made a part hereof (the "Existing Contracts").
The Provider understands and agrees that i3 will honor all current and future
obligations under the Existing Contracts (including renewals) without violating
the exclusivity provisions of this Agreement. It is understood, however, that i3
agrees that it will use its commercially reasonable, good faith efforts to
arrange a meeting with each of the Existing Contracts to enable Provider and i3
to formally present this relationship and request that the Existing Contracts,
in their sole discretion, consider directing their content through Provider.
(c) PROTOCOL. Provider shall provide or require the Content Providers
to provide the Wireless Content Services to i3 in conformance with the Technical
Specifications set forth in Appendix C attached hereto and made a part hereof.
(d) ADDITIONAL SERVICES. At any time during the term of this Agreement,
Provider may request that i3 provide deliverables and materials or perform
additional work and services ("Additional Services"). In the event i3 elects to
perform such Additional Services, the parties shall outline the specifications,
cost
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 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
and delivery dates of the project on a statement of work ("Statement of Work").
Each Statement of Work must be mutually agreed upon by the parties and shall
only be effective and incorporated into this Agreement when executed by both
parties. Each Statement of Work shall be dated for identification and must
include a detailed description of the agreed upon work, services and/or
deliverables to be furnished together with any available standard commercially
available specifications, documentation and descriptions for same
("Specifications"), the location for the delivery and installation (if
applicable) ("Delivery Location"), a Milestone Schedule listing performance,
delivery and other key dates for the work effort involved (each, a "Scheduled
Delivery Date"), the fixed price or time and materials charges, including
support charges, if any, and whether such are monthly, quarterly or annual, if
applicable, and any additional terms the parties mutually agree to include. The
first Statement of Work issued hereunder is set forth on Appendix E attached
hereto and made a part hereof.
(e) ADVERTISING In all instances in which Provider is the sole
aggregator of the content, data, or transactional services delivered or
otherwise made available to end users pursuant to Appendix A Part A of this
Agreement, i3 hereby assigns Provider and its affiliate, AlliedAdvertising.com,
all of i3's rights to place advertising at prevailing market rates, on an
exclusive basis, in connection with the Wireless Content Services. The
determination of whether Provider is the sole aggregator for purposes of the
preceding sentence shall exclude any icons, marks or text that may be included
in the Wireless Content Services to identify either i3 or its distributor as the
provider of the service. All net revenues generated from the activities of
Provider in connection with this provision, either directly or through any of
its affiliates, shall be subject to the terms of Appendix B. Provider shall use
for itself, and cause its affiliates to use, commercially reasonable efforts to
obtain the highest placement rates for the advertising placed pursuant to the
terms of this Agreement.
In those instances where Provider is not the sole aggregator of
content, data or transactional services delivered or otherwise made available to
the end users but in which i3 otherwise controls the placement of such
advertising, i3 shall not permit any third party to advertise products that
compete with the content, data and transactional services aggregated by Provider
pursuant to Appendix A Part A. The determination of whether a third party's
products compete with Providers shall be made by i3 using its commercially
reasonable business judgement. In those instances where i3 does not control the
placement of such advertising, it shall use commercially reasonable efforts to
protect each of the parties' respective interests.
2. DISTRIBUTION AND FEES. (a) Subject to the terms and conditions of this
Agreement, Provider grants i3 an exclusive worldwide license and right to
distribute the Wireless Content Services to distributors and end-users. The term
"end-users" refers to all individuals who receive wireless information and
messaging services from i3 through the i3 Network either directly or indirectly
through its distributors such as Wireless Network Operators and other
enterprises under contract with i3. Distributors shall have the right to market
the Wireless Content Services and distribute the Wireless Content Services to
end-users. The exclusive worldwide license and right granted to i3 hereunder
extends to any and all current or future wireless communications devices
including, but not limited to, SMS and WAP based PCS telephones, WAP browsers,
PDA's, pagers, in vehicle and in airline devices and all other enabling wireless
devices for worldwide distribution. Payments relating to revenues derived from
the marketing of the Wireless Content Services are set forth on Appendix B.
(b) If Provider identifies an end-user or distributor that Provider
wants to receive the Wireless Information Services, i3 shall use its
commercially reasonable efforts to secure an agreement with such end-user or
distributor. If i3 is unsuccessful, for whatever reason, Provider shall have the
right to enter into direct negotiations with such end-user or distributor and to
enter into any contract or agreement resulting therefrom subject to the payment
provisions set forth on Appendix B.
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 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
3. CONTENT. i3 acknowledges that this Agreement does not transfer to i3,
distributors or end-users any proprietary right, title or interest, including
copyright, in and to the content made available by Content Providers as part of
the Wireless Content Services. i3 shall not directly edit, abridge, rewrite or
in any way alter the content of the Wireless Content Service or create any work
derived from the content of the Wireless Content Services that changes its
meaning or tone. Provider agrees that i3 may make changes to the content to meet
wireless display equipment formats.
4. SELECTION OF CONTENT PROVIDERS. (a) i3 and the Provider hereby agree that all
content delivered by Content Providers shall be mutually agreed upon by i3 and
Provider, each in the exercise of good faith and reasonable commercial and
technical business judgement. i3 and Provider agree and acknowledge that, from
time to time, Provider may engage the services of Content Providers to assist
Provider in fulfilling its obligations hereunder. i3 and Provider agree and
acknowledge that before the Provider engages the services of any Content
Provider, the Provider shall give written notice to i3 of the name of the
Content Provider and a brief summary of the content that such Content Provider
will provide (such notice being hereinafter referred to as a "Content Provider
Notice"). Within five (5) days of i3's receipt of a Content Provider Notice, i3
may provide written notice to the Provider that i3 rejects the Content Provider
in which case i3 may provide Provider with an alternative content provider (any
such notice being hereinafter referred to as a "Content Provider Replacement
Notice"). If i3 provides a Content Provider Replacement Notice, the Provider
shall not enter into an agreement with the Content Provider specified in the
Content Provider Notice and shall, instead, engage in good faith negotiations to
agree upon the terms upon which the Provider will retain the content provider
specified in the Content Provider Replacement Notice. To the extent possible,
Provider shall utilize the form of agreement set forth on Appendix D as the
basis of contract. i3 and Provider agree and acknowledge that Provider may
receive compensation from Content Providers. i3 agrees and acknowledges that any
fees, compensation or other consideration paid by any Content Provider to
Provider shall be the sole and exclusive property of Provider and, unless
otherwise agreed upon, i3 shall have no right to receive any portion thereof.
(b) If i3 identifies a potential content provider covered by the
exclusivity provisions hereof, Provider shall use its commercially reasonable
efforts to secure an agreement with such content provider. If Provider is
unsuccessful, for whatever reason, i3 shall have the right to enter into direct
negotiations with such content provider and to enter into any contract or
agreement resulting therefrom subject to the payment provisions set forth on
Appendix B.
5. TRADENAMES, TRADEMARKS AND LOGOS. i3 hereby grants Provider the right to use
and publish in connection with the Wireless Content Services and promotional
materials describing the Wireless Content Services, the trademarks, trade names
and logos now or hereafter owned or used by i3 which are associated with i3 or
the Wireless Content Services ("i3's Marks") provided such use and publication
complies with the applicable guidelines available to Provider on i3's web site.
(a) RIGHT OF APPROVAL. Provider agrees to submit to i3 a sample of the
proposed use of i3's Marks on or with the Wireless Content Services, boxes,
containers and/or packaging, and i3 shall have approved such proposed use in
writing prior to any sale of the Wireless Content Services using such of i3's
Marks in the proposed manner or any other public use of i3's Marks in the
proposed manner by Provider. Approval will not be unreasonably withheld, and if
i3 does not provide a written response within ten (10) days of the receipt of
such a request, approval shall be considered granted.
(b) PROVIDER'S TRADEMARKS. Provider shall use commercially reasonable
best efforts to procure for i3 the right to use the respective trademarks, logos
and trade names of all Content Providers in connection subject to their
respective published branding guidelines. The parties acknowledge that this is a
material element of this business relationship. i3 acknowledges that all service
marks, trademarks, brands, logos and trade names used by Content Providers
(collectively the "Provider Marks") are the exclusive property of the Content
Providers and are authorized for use by the Content Providers. i3 shall not use
any
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 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
of the Provider Marks for any purpose or in any medium without the express prior
written consent of Provider. i3 acknowledges that this Agreement does not
transfer any rights to use any Provider Marks and that this Agreement does not
and will not confer any goodwill or other interest in any Provider Marks upon
i3, all rights to which shall remain with Provider.
6. TERM. The term of this Agreement shall be five (5) years beginning on March
1, 2000 (the "Effective Date") subject to the approval of this Agreement by i3's
board of directors prior to such date. In the event i3's board does not approve
this Agreement prior to the Effective Date, this Agreement shall terminate
without any further obligation or liability of any kind. At least three (3)
months prior to the expiration of the initial term or any subsequent term
hereof, Provider shall give i3 notice of its intention to renew the Agreement.
The parties shall thereupon work in good faith to reach mutually acceptable
terms on which to continue this relationship.
7. REPORTING AND PAYMENT. (a) i3 will deliver to Provider an activity report by
the 30th day following the end of each calendar quarter containing a summary
review of the Wireless Content Services delivered to users and revenues received
for the preceding calendar quarter. i3 may issue the report in electronic format
provided that Provider can access such format. Additional reporting information
may be made available to Provider upon request. All payments hereunder with
respect to any calendar quarter shall be made in immediately available U.S.
funds at Provider's address within thirty (30) days of the end of such quarter.
Any amount not paid when due shall bear a late payment charge, until paid, at
the rate of [*] or, if lesser, the maximum amount permitted by law.
(b) Provider will make all payments due i3 hereunder in immediately
available U.S. funds at i3's address within thirty (30) days of receipt of
invoice. Any amount not paid when due shall bear a late payment charge, until
paid, at the rate of [*] or, if lesser, the maximum amount permitted by law.
8. i3 WARRANTIES AND REPRESENTATIONS.
(a) TITLE. i3 warrants that it has all necessary right, power and authority
to grant the rights and licenses granted Provider hereunder with respect to the
Wireless Content Services and neither the license or use as permitted hereunder
will in any way constitute an infringement or other violation of any trademark,
copyright, patent, trade secret or other intellectual property right of any
third party. i3 further warrants that the Wireless Content Services licensed
hereunder shall be free and clear of all claims, security interests, liens and
encumbrances of any kind.
(b) EXISTING CONTRACTS. Attached hereto as EXHIBIT A is a true and accurate
excerpt from the S-1 filed by i3 on January 7, 2000, relating to certain of i3's
existing distribution relationships with wireless network operators. i3
represents and warrants that the statements set forth therein remain true and
accurate in all material respects as of the date hereof.
(c) DISCLAIMER. EXCEPT AS SPECIFICALLY STATED IN THIS SECTION, NEITHER i3
NOR ITS DISTRIBUTORS MAKE ANY WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY (INCLUDING, WITHOUT LIMITATION, TIMELINESS, TRUTHFULNESS, SEQUENCE,
COMPLETENESS, ACCURACY, FREEDOM FROM INTERUPTION), ANY IMPLIED WARRANTIES
ARISING FROM TRADE USAGE, COURSE OF DEALING, OR COURSE OF PERFORMANCE, OR THE
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND
SHALL HAVE NO LIABILITY FOR THE ACCURACY OF, OR FOR DELAYS OR OMISSIONS IN, THE
PROVIDED WIRLESS CONTENT SERVICES.
9. PROVIDER WARRANTIES AND REPRESENTATIONS. Provider warrants and represents
that it has (a) the necessary power and authority to enter into and perform its
obligations under this Agreement and has properly authorized the same by all
requisite action; (b) all necessary rights to grant the license under this
Agreement; and (c) the content collected from the Content Providers and
associated trademarks do not
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 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
infringe upon any intellectual property rights of any third party.
Notwithstanding any other provision in this Agreement, Provider shall defend or
settle at its own expense any claim or suit against i3 arising out of or in
connection with an assertion that the Wireless Content Services infringes any
intellectual property rights, and Provider shall indemnify and hold i3 harmless
from damages if any, finally awarded in such suit or the amount of the
settlement thereof.
10. LIMITATION OF LIABILITY. In no event shall i3 be liable to anyone for any
delays, inaccuracies, errors or omissions with respect to the Wireless Content
Services or the transmission or delivery of all or any parts thereof, except to
the extent that such delays, inaccuracies, errors or omissions are the result of
the gross negligence or intentional misconduct of i3. IN NO EVENT WILL i3 OR ITS
DISTRIBUTORS BE LIABLE TO ANY PARTY (A) FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO DAMAGES FOR LOSS
OF BUSINESS PROFITS, BUSINESS INTERRUPTION AND THE LIKE), OR ANY OTHER DAMAGES
ARISING IN ANY WAY OUT OF THE AVAILABILITY, USE, RELIANCE ON, OR INABILITY TO
USE WIRELESS CONTENT SERVICES EVEN IF i3 HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES AND REGARDLESS OF THE FORM OF ACTION WHETHER IN CONTRACT, TORT OR
OTHERWISE; OR (B) FOR ANY CLAIM ATTRIBUTABLE TO ERRORS, OMISSIONS, OR OTHER
INACCURACIES IN ANY CONTENT.
11. INDEMNIFICATION. Provider shall indemnify, defend and hold i3, its officers,
agents and employees harmless from and against any and all suits, proceedings at
law or in equity, and any and all loss or damage (including reasonable attorney
fees) arising out of or in connection with any claim made by any person, firm,
or corporation in respect of delays, errors or omissions in providing Wireless
Content Services, except that the foregoing indemnity shall not apply to the
gross negligence or intentional misconduct of i3, its officers, agents or
employees. i3 shall indemnify, defend and hold Provider, its officers, agents
and employees harmless from and against any and all suits, proceedings at law or
in equity, and any and all loss or damage (including reasonable attorney fees)
arising out of or in connection with any claim made by any person, firm, or
corporation that is an end-user or distributor in respect of any content
provided by any Content Providers.
12. BREACH AND TERMINATION. (a) FOR CAUSE: If either party is in breach or
default of any material term, condition, or covenant of this Agreement, then the
non-breaching party shall give the other party written notice of such breach or
default. If such breach or default shall continue for sixty (60) days after the
non-breaching party gives the other party written notice, then in addition to
all other rights and remedies of law or equity or otherwise, the non-breaching
party may cancel this Agreement without any charge, obligation, or liability
whatsoever, except as to the payment for Wireless Content Services already
received and accepted by i3 and except for the obligations set forth in Sections
10 and 13 which obligations shall survive the termination of this Agreement.
(b) INJUNCTIVE RELIEF; SPECIFIC PERFORMANCE: i3 expressly acknowledges
and agrees that the benefits to be obtained by Provider pursuant to this
Agreement, and Provider's business relationship with i3 are unique and have
value to Provider which would be difficult or impossible to quantify. i3 further
acknowledges that, in the event of a breach of this Agreement by i3, (i) damages
resulting from such breach would be difficult or impossible to quantify, and
(ii) the harm suffered by Provider as a result of such breach would be
irreparable and could not be compensated solely by an award of money damages.
Therefore, i3 expressly agrees that, in the event of a breach or threatened
breach of this Agreement by i3, in addition to all other remedies available to
Provider (expressly including, but not limited to, money damages to the extent
calculable), Provider shall be entitled to injunctive relief to prevent or
enjoin such breach (including temporary and preliminary injunctive relief)
expressly including specific performance hereof. I3 further agrees that Provider
shall not be required to post any bond or surety as a condition to such relief,
and, if such surety shall be required by any court granting such relief, i3
irrevocably agrees that a bond in the amount of $10,000 shall be sufficient
surety.
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 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
13. CONFIDENTIALITY. (a) Any i3 information, whether business or technical
information, written, oral, or otherwise (collectively "i3's Information"),
furnished to Provider under this Agreement or in contemplation hereof shall
remain i3's property. At i3's request, Provider shall return promptly to i3 all
copies in written, graphic or other tangible form of such i3's Information.
Provider agrees to keep all i3's Information confidential unless Provider had
previous knowledge and had no obligation to keep it confidential, i3 has
subsequently made it public, or a third party has lawfully made it public.
Provider shall only use i3's Information for the purpose of providing
Information Services under this Agreement.
(b) Any Provider information, whether business or technical
information, written, oral, or otherwise (collectively "Provider's
Information"), furnished to i3 under this Agreement or in contemplation hereof
shall remain Provider's property. At Provider's request, i3 shall return
promptly to Provider all copies in written, graphic or other tangible form of
such Provider's Information. i3 agrees to keep all Provider's Information
confidential unless i3 had previous knowledge and had no obligation to keep it
confidential, Provider has subsequently made it public, or a third party has
lawfully made it public. i3 shall only use Provider's Information for the
purpose of providing Wireless Content Services under this Agreement.
(c) Provider and i3 agree that they shall use commercially reasonable,
good faith efforts to keep the terms of this Agreement confidential. Provider
and i3 acknowledge that i3 has an obligation to disclose this Agreement and
certain of its terms to the Securities and Exchange Commission pursuant to
applicable law. i3 shall request confidential treatment of any such disclosure.
14. AUDIT RIGHTS. Upon ten (10) business days prior written notice at any time
during the Term or for a period of one (1) year thereafter but no more than once
during any twelve (12) month period, either party and its representatives shall
have the right during normal business hours and at such party's expense to
examine and make copies and extracts from the books and records of the other
party relating to the Wireless Content Services or to Provider's distribution of
content per section 2. (b). for the purpose of verifying the accuracy of
statements and payments and the performance of each party's obligations
hereunder.
15. FORCE MAJEURE. Notwithstanding anything herein to the contrary, i3, Content
Providers or Provider shall not be required to perform or observe their
respective obligations in this Agreement (except for obligations to make
payments) if prevented or hindered from doing so by any circumstances beyond
their reasonable control.
16. ASSIGNMENT. Neither Provider nor i3 may assign this Agreement, either
voluntarily or by operation of law, without the prior written consent of the
other party hereto; provided, however, that (a) in the event of a consolidation
or merger of i3 involving all or substantially all of i3's assets, i3 may assign
this Agreement to its successor in interest provided that such successor
undertakes to fulfill all of i3's obligations hereunder; and (b) in the event of
a consolidation or merger of Provider involving all or substantially all of
Provider's assets, Provider may assign this Agreement to its successor in
interest provided that such successor undertakes to fulfill all of Provider's
obligations hereunder.
17. CHOICE OF LAW. This Agreement will be controlled by the laws of the State of
New York without regard to its conflict of laws rules. Any action brought in
connection with this Agreement shall be filed in the County of New York in the
State of New York.
18. ENTIRE AGREEMENT. This Agreement represents the entire understanding between
the parties and supersedes all previous agreements and understandings, written
or oral, which may have been entered into prior to the date of execution hereof.
In the event of a conflict between the terms of this Agreement and any Appendix
attached hereto, the terms of the Appendix shall prevail. In the event of a
conflict between the terms of this Agreement and Provider's purchase order(s),
if any, the terms of this Agreement
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 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
shall prevail. This Agreement shall not be altered except by written agreement
executed by the parties hereto. No waiver by either party of any breach or
default hereunder shall be deemed to be a waiver of any preceding or subsequent
breach or default. This Agreement shall not be effective until executed by an
authorized officer of i3 at its Stamford, CT headquarters.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed as of
the date set forth above.
i3 MOBILE, INC. BROADCASTENTERTAINMENT.COM
BY: BY:
----------------------------- -----------------------------
NAME: NAME:
--------------------------- ---------------------------
TITLE: TITLE:
-------------------------- --------------------------
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 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> 8
APPENDIX A
EXCLUSIVITY
A. Subject to the terms of this Agreement, Provider is granted an exclusive
right to provide i3 with wireless content strictly within the following
entertainment related areas:
1. Movie Reviews, Trailers, Listings and related Transactional Services
2. Concert Information and Related Transactional Services
3. . Animation Offerings/Cartoon Network
4. AM/FM Radio Broadcasts and Listings
5. Video Downloads with or without Interactive Availability Menu
6. Music Downloads with or without Interactive Availability Menu
B. The following are the "Existing Contracts" for purposes of this agreement:
Sony Corporation and associated properties
NBC Interactive Properties
Culturefinder
Tourdates
Uwire
C. Provider will deliver the following Content Providers as part of this
Agreement:
Broadcast America.com
BaliHai.com
Broadcast Hollywood.com or Hollywood Stock Exchange.com
In addition to the foregoing, i3 agrees that LTV and FTV are approved
Content Providers but nothing herein shall require Provider to provide Content
from LTV and/or FTV.
D. Nonexclusive Rights:
1. Restaurant Reservations, Listings and Information
2. Any other Entertainment Related Content not set forth in subsection A.
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 8
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> 9
APPENDIX B
WIRELESS CONTENT SERVICES DESCRIPTION AND FEES
A. Rights Fees
In consideration of the exclusive rights being granted by i3 to Provider
hereunder, Provider shall [*], relating to advertising on broadcast radio, which
[*] may be used at any time during the term of this Agreement and when [*] are
available to Provider [*].
Provider agrees, upon request of i3, to use commercially reasonable best efforts
to [*].
B. Allocation of Net Proceeds
Net proceeds will be [*]. Net proceeds shall be defined as proceeds derived from
the worldwide marketing of Wireless Content Services by i3 or Provider, as the
case may be, less any and all costs associated with generating such proceeds
including, but not limited to, content, distribution, billing and collection
expenses and any other expenses associated with generating such proceeds fees
due distributors.
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 9
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> 10
APPENDIX C
WIRELESS CONTENT DELIVERY SPECIFICATIONS
To Be Provided
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 10
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> 11
APPENDIX D
FORM OF CONTENT PROVIDER AGREEMENT
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is entered into by and between
____________ ("Provider"), a ________ corporation with its principal offices at
___________________, and (" "), a corporation, with its principal offices at
1. Definitions
a. Content Providers. The term "Content Providers" means third parties
from whom the Provider acquires the right to distribute Content
provided or made available as part of the Service.
b. Service. The term "Service" means the electronic content and
transactional services identified in Exhibit A to this Agreement.
c. Content. The term "Content" means all information and material, whether
or not protected by copyright, including but not limited to text,
images, and other multimedia data, provided or made available
to as part of the Service.
d. Resellers. The term "Resellers" means third parties through which
distributes the Service to Users, subject to the terms of this
Agreement.
e. Users. The term "Users" means all third parties to whom may
license, sell, transfer, make available or otherwise distribute the
Service.
2. Distribution
a. Grant of Rights. Subject to the terms and conditions of this Agreement,
Provider grants a nonexclusive license and right to distribute the
Service to Resellers and Users in the Territory. Resellers shall have
the right to market the Service and distribute the Service to Users.
Nothing herein precludes from entering into similar agreements
with other content providers offering the same or substantially the
same Content as Provider.
b. Territory. Wireless telephones, pagers, PDAs, receivers, transmitters
and all other Internet enabling wireless devices for worldwide
distribution.
c. Exclusive. Provider grants a three-year period of exclusivity,
to start concurrent with the signing of this agreement. During this
period of exclusivity Provider shall not permit the Service to be used
by any other party including Provider in the Territory defined in 2(b),
above.
3. Marketing
a. Expenses. shall be responsible for all expenses incurred by
in connection with the promotion and marketing of the
Service.
b. Prior Approval. Provider and agree to submit to the other party
for written approval all press releases, advertising and other
promotional materials that use Service names or a party's company name
not less than fifteen (15) days before the proposed use. Each party
shall not unreasonably withhold its approval. Unless notice of
approval or disapproval is received within (10) days of receipt of
promotional materials, approval shall be deemed
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 11
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> 12
granted. Either party, however, may identify the other in its
published listing of available services or Distributors without such
written approval.
4. Delivery of the Service
a. Provision of the Service. Subject to the terms and conditions of this
Agreement, Provider shall provide the Service to via e-mail
or other mutually agreed upon electronic means.
b. Timeliness. Provider shall use commercially reasonable efforts to
maintain the timeliness of the Content. acknowledges that,
in part, Provider relies on the performance of Content Providers
outside the control of Provider in order to provide the Service.
c. Modifications. shall not edit, abridge, rewrite or in any way
alter the Content of the Service or create any work derived from the
Content of the Service, that changes its meaning or tone. Provider
agrees that may make changes to the content to meet wireless
display equipment formats.
d. Review by Provider. Throughout the term of this Agreement, shall
provide Provider reasonable access to 's system for distribution
of the Service to Users for the sole purpose of reviewing 's
implementation of the Service.
e. Audit. Provider or its representative may, during business hours and
upon reasonable notice, inspect and audit the relevant books and
records of 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 Provider.
5. Reporting and Payment
a. Reporting. shall provide to Provider by the 15th of each month
a report indicating the number of users of the Service for the prior
calendar month.
b. Payment Schedule. shall pay Provider the Monthly Fees set
forth in the Payment Schedule in Exhibit B.
c. Notwithstanding anything contained herein to the contrary, provider
grants the right to offer Content to all Distribution Partners
at no charge for a period not to exceed ninety (90) days from the date
Content is first made available to end-users of such Distribution
Partner.
6. Term and Termination
a. Term. This Agreement commences on the date of the last signature hereto
or the first commercial distribution of the Service, whichever occurs
first (the "Effective Date"), and shall remain in effect for an Initial
Term of two (2) years. This Agreement shall renew automatically for
successive one year Renewal Terms unless either party notifies the
other party in writing, at least ninety (90) days be fore the end of
the Initial Term or any Renewal Term, of its election not to renew.
b. Termination. Either party may terminate this Agreement at any time if
the other party breaches any material provision of this Agreement. Such
termination shall take effect (i) if the breach is incapable of cure,
then immediately upon the breaching party's receipt of a
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 12
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> 13
written notice of termination which identifies the breach, or (ii) if
the breach, capable of being cured, has not been cured within sixty
(60) days after receipt of written notice from the non-breaching party
identifying the breach, then immediately upon receipt of a written
notice of termination received within thirty (30) days of the end or
such sixty (60) day period.
c. 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.
d. Obligations upon Termination. Effective upon termination of the
Agreement, shall not license, sell, transfer, make available or
otherwise distribute the Service or Content nor access, use or
retransmit the Service or Content. Within thirty (30) days of
termination, shall (i) report to and pay Provider all amounts owed
under this Agreement, and (ii) for all Content, either (A) erase and
purge the Content from any on-line and off-line storage media and
certify, in writing to Provider that such eraser and purge has been
completed, or (B) certify, in writing, to Provider that certain Content
has been retained in creating back-ups during the normal course of
business and that such Content shall not be used in any manner
whatsoever without the prior consent of the Provider.
7. Content
acknowledges that this Agreement does not transfer to ,
Resellers or Users any proprietary right, title or interest, including
copyright, in and to the Content made available as part of the Service.
8. Warranties
(a) Provider warrants that it has all necessary right, power and authority
to provide Content and Service to for the term hereunder. In
addition, Provider warrants that neither the license nor use as
permitted hereunder will in any way constitute an infringement or other
violation of any trademark, copyright, patent, trade secret or other
intellectual property right of any third party. Provider shall
indemnify and hold harmless from and against all liabilities
that may result by reason of any infringement or claim of infringement
of any patent, trademark, copyright, trade secret or other proprietary
right relating to the Content and/or Service delivered hereunder.
Provider will defend and/or settle at its own expense any action
brought against to the extent that it is based on a claim that
Content and/or Service infringe any patent, trademark, copyright, trade
secret or other proprietary right.
(b) EXCEPT AS SPECIFICALLY SET FORTH IN (a) ABOVE, EACH PARTY DISCLAIMS ALL
OTHER WARRANTIES, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, RELATING TO
THIS AGREEMENT, PERFORMANCE UNDER THIS AGREEMENT, THE SERVICE AND
CONTENT, AND EACH PARTY'S COMPUTING AND DISTRIBUTION SYSTEM.
9. Limitation of Liability
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 13
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> 14
Except for Provider's indemnification for proprietary right infringement,
in no event shall either party be liable to the other for any direct,
indirect, special, exemplary or consequential damages, 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.
10. Notices
All notices and demands hereunder shall be in writing and delivered by hand
delivery, certified or registered mail, return receipt requested, express
delivery service or confirmed facsimile transmission at the addresses set
forth above (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 delivery, upon such delivery, (ii) if by mail, express
delivery service upon such delivery, and (iii) if by facsimile
transmission, upon receipt of confirmation.
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.
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 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. Attorney's Fees. Should any action be brought by either party to
enforce the provision of this Agreement, the prevailing party, whether
by settlement, adjudication or arbitration, shall have the right to
collect reasonable attorneys' fees, expenses and costs form the
nonprevailing party.
i. 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.
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 14
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> 15
j. Headings. The headings used in this Agreement are for convenience only
and are not to be construed to have a legal significance.
AGREED:
- -------------------- Provider, by:
by:
- -------------------- -------------------
Signature Signature
- -------------------- --------------------
Printed Name Printed Name
- -------------------- --------------------
Title Title
- --------------------------------------------------------------------------------
Date: _______________ Date: _______________
- --------------------------------------------------------------------------------
EXHIBIT A
The Service
The Provider agrees to deliver or make available to
EXHIBIT B
Payment Schedule
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 15
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> 16
APPENDIX E
ADDITIONAL SERVICES
STATEMENT OF WORK #1
Provider hereby retains i3 to provide services to update Provider's website to
provide for the delivery of content and related services directly to wireless
devices and to offer Provider the capability to offer these web to wireless
services to up to five (5) affiliated companies.
Charges for i3's initial consultation, web site design, development and
deployment services and deliverables shall be based on a [*]. The agreed upon
value for the services and deliverables shall be [*] payable in three
installments as follows: [*] payable immediately upon execution of this
Agreement; [*] payable upon successful completion of Milestone Checkpoint #1 and
[*] payable upon successful completion of Milestone Checkpoint #2.
I. The parties agree to the following schedule:
A. The Initial Consultation and Scoping Phase commenced on January 11, 2000,
prior to the execution date of this agreement. The parties agree that any
activities performed by i3 prior to the execution date of this Statement of
Work shall be incorporated into and be governed by the terms hereof. The
initial consultation phase is primarily a fact-finding exercise whereby i3
will work with Provider to scope the wireless needs of Provider's business.
It is anticipated that this phase will be completed by no later than
February 29, 2000.
B. The Detailed Design Phase shall commence immediately upon the conclusion of
the Initial Consultation and Scoping Phase. During this phase the parties
will work together to produce mutually agreed upon specifications for the
final wireless solution based on the findings of the Initial Consultation
and Scoping Phase. It is anticipated that this phase will be completed by
no later than March 31, 2000.
C. MILESTONE CHECK POINT #1: Provider understands that payment of the second
installment due hereunder shall be deemed complete acceptance of i3's
products and services under A and B above.
D. The Wireless Solution Development Phase shall commence immediately upon the
successful completion of the Detailed Design Phase. Based on the
specifications developed during the Detailed Design Phase, i3 shall begin
building Provider's wireless solution. It is anticipated that a version of
the solution ready for testing shall be completed by May 15, 2000.
E. The Testing and Feedback Phase shall commence immediately upon the delivery
of the initial version of the solution. Provider shall test the solution
and i3 shall offer Provider full support services during this testing and
feedback phase. The Testing and Feedback Phase shall end no later than June
10, 2000.
F. The Deployment and Implementation Phase shall commence immediately upon the
conclusion of the Testing and Feedback Phase. i3 undertakes to incorporate
mutually agreed upon enhancements to the wireless solution and to perform
final QA and prepare the solution
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 16
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> 17
for deployment and implementation by Provider. The Deployment and
Implementation Phase shall end no later than June 30, 2000.
G. MILESTONE CHECK POINT #2: Provider understands that payment of the third
installment due hereunder shall be deemed complete acceptance of i3's
products and services under D, E and F above.
H. Maintenance and Support Services. Under this Statement of Work #1, i3 will
provide maintenance and support services for the deliverables through
December 31, 2000.
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 17
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> 18
EXHIBIT A
EXISTING DISTRIBUTION ARRANGEMENTS
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. We have established
relationships with wireless network operators that represent more than 50% of
the North American market for wireless phone users at June 30, 1999. 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 nonexclusive, 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. Some of the wireless network operators with which we have
distribution relationships include:
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
BellSouth Wireless Data
Cellular One (Boston, Cellular One of Oregon Baltimore, Washington, D.C.)
CFW Wireless
SkyTel
Clearnet PCS
Triton PCS
MTT Mobility (Canada)
TSR Wireless
Omnipoint Communications Services
United States Cellular
PageMart
U.S. West Wireless
i3Mobile, Inc. - CONFIDENTIAL INFORMATION (FODA0100) Page 18
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 10.23
CONTENT DISTRIBUTION AGREEMENT
THIS AGREEMENT is between DOW JONES & COMPANY, INC., U.S. Highway No. 1
at Ridge Road, South Brunswick, New Jersey 08852 ("Dow Jones"), and INTELLIGENT
INFORMATION INCORPORATED, One Dock Street, Stamford, Connecticut 06902
("Intelligent Information").
INTRODUCTION
A. Dow Jones publishes and distributes the Dow Jones Online News, a
business and financial newswire ("DJON").
B. Intelligent Information owns and distributes electronic products or
services that deliver to subscribers via wireless transmission technologies
quotation information from various equity and commodity exchanges, as well as
sports information, stock quotes, and weather information ("Direct Services").
Intelligent Information also authorizes third parties ("Authorized Resellers")
to redistribute the Direct Services (either with the same or a different brand
name from the name used by Intelligent Information for the Direct Services), and
to redistribute some or all of the content from the Direct Services as part of
the Authorized Resellers' own wireless transmission technology product or
service ("Reseller Services"). The Direct Services and the Reseller Services
shall collectively be referred to herein as the "Intelligent Information
Services".
C. Intelligent Information wishes to obtain from Dow Jones, and Dow Jones
wishes to grant to Intelligent Information, a license to incorporate headlines
from DJON into the Intelligent Information Services.
1. GRANT OF LICENSE
(a) LICENSE AND DELIVERY. Subject to Intelligent Information's compliance
with all of the terms and conditions hereof, Dow Jones hereby grants to
Intelligent Information a license to incorporate only those headlines from DJON
defined and specified on Exhibit A ("DJ Headlines"), into Direct Services, and
to make such DJ Headlines available: (1) directly to individual subscribers to
the Direct Services located in the United States and Canada ("Direct
Subscribers"); and (2) through Authorized Resellers of the Direct Services or
through Reseller Services to individuals located in the United States and Canada
("Reseller Subscribers"). The Direct Subscribers and Reseller Subscribers shall
collectively be referred to as the "Intelligent Information Subscribers". Dow
Jones shall make available from its South Brunswick, New Jersey facility the Dow
Jones composite feed containing DJON and the DJ Headlines (the "Composite
Feed"). Intelligent Information, at its expense, shall install, operate and
maintain (i) all communications lines and equipment necessary to accept such
feed at Intelligent Information's office set forth above or at 1101 Arwyn Court,
Euliss, Texas 76040, and (ii) the computer system that will receive the
Composite Feed and display the DJ Headlines. Intelligent Information shall not
receive the Composite Feed at any location other than the locations set forth
above, without Dow Jones' prior written consent. Immediately upon receipt of the
Composite Feed, Intelligent Information shall cause its computer systems to
dispose of the text of the stories contained in DJON, as well as the headlines
and text of all other stories contained on the Composite Feed, keeping, in
accordance with the terms hereof, only the DJ Headlines coded with the code set
forth on Exhibit A.
(b) ADDITIONAL LICENSE RESTRICTIONS. Intelligent Information shall not
permit, and shall cause all Authorized Resellers not to permit, Intelligent
Information Subscribers to store any DJ Headline
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
for more than 24 hours after it is received. Intelligent Information shall be
permitted to store DJ Headlines for its internal billing purposes only;
provided, however, that in no event shall Intelligent Information distribute any
DJ Headline more than 24 hours after such DJ Headline is received. Other than as
expressly permitted or required pursuant to this Agreement (including, but not
limited to, Section 2), Intelligent Information shall not, and shall cause all
Authorized Resellers not to, edit, alter, change, add to or delete any DJ
Headline without the prior written consent of Dow Jones.
Intelligent Information shall not, and shall cause its Authorized
Resellers not to, distribute DJ Headlines or other Dow Jones content other than
as part of an Intelligent Information Service set forth on Exhibit C, or
otherwise approved in advance in writing by Dow Jones (and, therefore, deemed
incorporated into Exhibit C).
Intelligent Information shall not, and shall cause its Authorized
Resellers not to, distribute any Intelligent Information Service containing DJ
Headlines through or using any distribution method other than wireless
transmission technology, including, without limitation, email, cable or dial-up
communications via a modem. Intelligent Information shall not, and shall cause
its Authorized Resellers not to, deliver any Intelligent Information Service
containing DJ Headlines via an interactive online or electronic information
service, such as but not limited to, America Online, CompuServe, Microsoft
Network, Prodigy, AppleLink, eWorld, AT&T Interchange, Delphi, networkMCI, or
Telebase System, Inc.
All rights not expressly granted to Intelligent Information herein shall
be retained by Dow Jones.
(c) ADDITIONAL AUTHORIZED RESELLERS. Intelligent Information acknowledges
and agrees that all Authorized Resellers that Dow Jones has authorized to
distribute DJ Headlines to Intelligent Information Subscribers as of the date of
this Agreement are listed on Exhibit B attached hereto. Intelligent Information
shall notify Dow Jones in writing of its desire to add resellers to Exhibit B
and such proposed resellers shall be so added, and for all purposes hereof
deemed Authorized Resellers, unless within thirty (30) days of receipt of such
notice Dow Jones notifies Intelligent Information that such proposed reseller
is, in Dow Jones' reasonable discretion, unacceptable to Dow Jones. Intelligent
Information shall not make any DJ Headlines available to any third party who
does not qualify as an Authorized Reseller hereunder, other than Direct
Subscribers.
(d) RELATIONSHIP WITH RELATED COMPANIES. Beginning sixty (60) days after
the Effective Date (as defined below), Intelligent Information shall not
distribute any DJ Headlines to Mobile Telecommunications Corp. or any parent,
subsidiary or affiliate of Mobile Telecommunications Corp., without the express
prior written consent of Dow Jones. Notwithstanding anything to the contrary in
this Agreement or the License and Sales Representation Agreement between Dow
Jones and Intelligent Information dated as of July 1, 1993, if within thirty
(30) days after the Effective Date (as defined below) Dow Jones and Mobile
Telecommunications Corp. or SkyTel have not executed a mutually acceptable
agreement pursuant to which Dow Jones provides certain content from DJON to
SkyTel for redistribution by SkyTel, Intelligent Information shall request to
negotiate with Dow Jones to permit Intelligent Information to distribute DJ
Headlines to Mobile Telecommunications Corp. or SkyTel, subject to payment of an
increased renegotiated Royalty and other terms and conditions as may be
acceptable to Dow Jones and Intelligent Information.
2. COPYRIGHT. Intelligent Information acknowledges and agrees that the
copyright to the DJ Headlines, DJON and the coding and contents thereof is and
shall remain the sole and exclusive property of Dow Jones. Intelligent
Information shall take appropriate measures to insure that notice of such
copyright is made known to all persons with access to the Intelligent
Information Services, including
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
displaying in a conspicuous location in all documentation distributed to
Intelligent Information Subscribers by Intelligent Information or its Authorized
Resellers ("Subscriber Materials") the following: "Copyright 19__ Dow Jones &
Company, Inc. All Rights Reserved. Distributed by Intelligent Information (or
Reseller name) under license from Dow Jones & Company, Inc. The headlines
contained in this Intelligent Information Service are the sole and exclusive
property of Dow Jones & Company, Inc. and are protected by copyright. Such
headlines may not be copied, republished or redistributed without the prior
written consent of Dow Jones & Company, Inc." Intelligent Information shall also
cause, and shall cause all Authorized Resellers to cause, the words "DJ NEWS" to
appear on each screen and printout containing a DJ Headline received, displayed
or printed by any Intelligent Information Subscriber; provided, however, that if
there is insufficient character space or other capacity to include all of the
words "DJ NEWS" in a particular display from the Intelligent Information Service
because of the length of the DJ Headline, Intelligent Information or an
Authorized Reseller may truncate this message to read "DJ"; if insufficient
character space is available to display the letters "DJ", this sentence shall
not apply.
3. ROYALTIES
(a) CALCULATION OF ROYALTY. In consideration of the rights granted
herein, Intelligent Information shall pay to Dow Jones monthly royalties
("Royalties") equal to [*] Intelligent Information Subscriber who receives DJ
Headlines on up to four companies or news categories, plus [*] for each
additional company or news category received by such Intelligent Information
Subscriber.
(b) PAYMENT. Within 20 days after the end of each month during the term
hereof, Intelligent Information shall deliver to Dow Jones a report showing the
name of each Direct Service and Reseller Service, each Authorized Reseller, and
each Direct Subscriber, and the calculation of the Royalties due in respect
thereof, together with a check payable to Dow Jones for such Royalties.
(c) MAINTENANCE AND INSPECTION OF RECORDS. Intelligent Information shall
maintain, and shall cause its Authorized Resellers to maintain, complete and
accurate records of all Intelligent Information Subscribers receiving DJ
Headlines hereunder and of the Royalties payable with respect thereto
("Intelligent Information Records"). Dow Jones shall have the right, upon at
least 20 days' prior written notice to inspect and copy the Intelligent
Information Records during normal business hours not more frequently than twice
per year; provided, however, that if such inspection reveals an underpayment to
Dow Jones of four percent (4%) or more, then the cost of such inspection shall
be borne by Intelligent Information. All information gained by Dow Jones or its
authorized representatives from such inspection will be kept in strict
confidence and will be used solely for the purpose of verifying the accuracy of
the Royalties payable hereunder.
(d) INCREASES. By written notice to Intelligent Information at least 60
days prior to the end of the Initial Term, Dow Jones may [*] for the first
Renewal Term by a [*] during the Initial Term. Subsequent [*] by Dow Jones shall
not [*].
4. INDEMNIFICATION
(a) BY DOW JONES. In the event of any claim, suit or action by any third
party (other than an Authorized Reseller) against Intelligent Information
arising out of the DJ Headlines (except for claims described in Section 4(b)),
Intelligent Information shall promptly notify Dow Jones, and Dow Jones shall
defend such claim, suit or action in Intelligent Information's name but at Dow
Jones' expense and under Dow Jones' control. Dow Jones shall indemnify and hold
harmless Intelligent Information against any judgment, liability, loss, cost or
damage (including litigation costs and reasonable attorneys' fees) arising
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
from or related to such claim, suit or action, whether or not such claim, suit
or action is successful.
(b) BY INTELLIGENT INFORMATION. In the event of any claim, suit or action
by any third party against Dow Jones arising out of any error caused by: (i)
Intelligent Information in receiving, storing or transmitting the DJ Headlines
on or through any Direct Service, or (ii) an Authorized Reseller transmitting
the DJ Headlines on or through any Reseller Service, Dow Jones shall promptly
notify Intelligent Information, and Intelligent Information shall defend such
claim, suit or action in Dow Jones' name but at Intelligent Information's
expense and under Intelligent Information's control. Intelligent Information
shall indemnify and hold harmless Dow Jones against any judgment, liability,
loss, cost or damage (including litigation costs and reasonable attorneys' fees)
arising from or related to such claim, suit or action, whether or not such
claim, suit or action is successful.
5. SERVICE MARKS; PRESS RELEASES AND PROMOTIONAL MATERIALS. Intelligent
Information acknowledges and agrees that (i) Dow Jones is the sole and exclusive
owner of the service marks Dow Jones Online News and DOW JONES, and (ii)
Intelligent Information and its Authorized Resellers neither have nor shall
obtain any right, except as expressly provided herein, to use any such service
mark or any other service mark, trademark or trade name of Dow Jones.
Intelligent Information shall not, and shall cause its Authorized Resellers not
to, publish or distribute any advertising, promotional materials or other
printed matter including, but not limited to, Subscriber Materials, or make any
public announcements using any service mark, trademark or trade name of Dow
Jones or otherwise referring to the availability of the DJ Headlines on the
Intelligent Information Services without the prior written consent of Dow Jones,
which consent shall not be unreasonably withheld. If within ten (10) business
days after delivery of samples of any such materials, Dow Jones has not notified
the sending party of its disapproval, such material shall be deemed approved.
Any breach of this Section 5 shall be deemed a material breach of this
Agreement.
6. TERM; TERMINATION
(a) TERM. The parties hereby terminate the License and Sales
Representation Agreement between Dow Jones and Intelligent Information dated as
of July 1, 1993, provided, however, that Sections 2 and 3 shall survive the
termination of such agreement regarding actions occurring prior to the
termination date. The initial term of this Agreement (the "Initial Term") shall
commence on the date hereof and, unless terminated earlier or extended pursuant
hereto, shall expire twelve (12) months after the date hereof. Unless either
party sends to the other written notice of its election not to renew at least
sixty (60) days prior to the end of the Initial Term, or any Renewal Term, as
the case may be, the term hereof shall be extended for an additional one-year
term (a "Renewal Term").
(b) TERMINATION FOR DEFAULT. If either party shall default in the
performance of or compliance with any provision contained in this Agreement and
such default shall not have been cured within 30 days after written notice
thereof shall have been given to the appropriate party, the party giving such
notice may then give further written notice to such other party terminating this
Agreement, in which event this Agreement and rights granted hereunder shall
terminate on the date specified in such further notice.
(c) CHANGE IN CONTROL. If there occurs during the term hereof any change
in the effective voting control of Intelligent Information, or any merger into
or acquisition by any third party of Intelligence Information, or the sale or
transfer of one or more Intelligent Information Services, or the sale or
transfer of all or substantially all of the other assets of Intelligent
Information to any third party, including, without limitation, to or by Mobile
Telecommunications Corp., SkyTel, or any other corporate parent, subsidiary or
affiliate (collectively, a "Control Event"), Intelligent Information shall
notify Dow
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
Jones in writing of such Control Event within 10 days after its effectiveness.
Dow Jones may, within 30 days after receipt of such written notice, terminate
this Agreement upon at least 60 days' prior written notice. Intelligent
Information may notify Dow Jones in writing of any proposed Control Event prior
to its proposed effectiveness, and Dow Jones shall within 30 days after receipt
of such notice, notify Intelligent Information in writing whether Dow Jones
would exercise its right to terminate this Agreement if such proposed Control
Event were consummated.
7. MISCELLANEOUS
Sections 1(b), 2, 4, 5 and 7 shall survive the expiration or termination
of this Agreement for any reason. Intelligent Information hereby represents and
warrants to Dow Jones that it will cause all Authorized Resellers to comply with
and be bound by the terms and conditions of Sections 1(b), 2 and 5 of this
Agreement. This Agreement may not be amended except by written instrument
executed by Intelligent Information and Dow Jones. This Agreement shall be
binding upon and shall inure to the benefit of the undersigned parties and their
respective successors and permitted assigns. No assignment of this Agreement, by
operation of law or otherwise, shall be made by either party without the prior
written consent of the other. Except with respect to third party claims
described in Section 4 above, neither party shall be liable to the other for any
lost revenue, lost profits or other consequential damages, even if advised of
the possibility of such damages. If any term or provision of this Agreement is
found to be invalid, illegal or unenforceable, in whole or in part, for any
reason, such term or provision shall be deemed to be severed from this
Agreement, and all remaining terms and provisions shall not be affected or
impaired thereby and shall be enforced in accordance with their terms. This
Agreement contains the entire understanding of the parties and supersedes all
previous verbal and written agreements on the subject thereof, including,
without limitation, the July 1, 1993 License and Sales Representation Agreement.
This Agreement does not and shall not be deemed to constitute a partnership or
joint venture between the parties. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey applicable to
contracts wholly made and wholly performed in New Jersey.
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
IN WITNESS WHEREOF, the parties have executed this Agreement as of Feb. 20, 1996
(the "Effective Date").
INTELLIGENT INFORMATION INC. DOW JONES & COMPANY, INC.
By: /s/ R M Unnold By: /s/ Jessica Perry
-------------------------- --------------------------
Name: R. M. Unnold Name: Jessica Perry
Title: CEO Title: Assistant Director
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
EXHIBIT A
DJ HEADLINES
Headlines containing the P/DHL transmission code which also carry company stock
symbol and/or news category subcodes.
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> 8
EXHIBIT B
AUTHORIZED RESELLERS
As of 2/96
Air Call Northwest
Airtouch
American Personal Communications
American Paging
Axcess Global
Bell Atlantic
Bell Mobility Canada
Comwest
Flower City Paging
MCI Paging
Metrocall
Message Center USA
National Dispatch Center
Nextel Communications
PageMart
Paging Dimensions
Paging Partners
Telecom
USA Mobile
US Healthcare
5 By 5 Communications
8
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> 9
EXHIBIT C
INTELLIGENT INFORMATION SERVICES
The Intelligent Information Service provides data in the form of short messages
to a user's wireless device based on the user's personal criteria as that
criteria is met.
9
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 10.24
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is entered into by and between Fox
News Network, LLC, a division of News Corporation. ("Provider"), a Delaware
Limited Liability Company with its principle offices at 1211 Avenue of the
Americas, New York, NY 10036, and Intelligent Information Incorporated (the
Distributor"), a Delaware corporation with its principle offices at One Dock
Street, Suite 500, Stamford, CT 06902.
1. Definitions
a. Information Providers. The term "Information Providers" means third
parties from whom the Provider acquires the right to distribute Content provided
or made available as part of the Service for use solely in connection with the
Product as described below.
b. Service. The term "Service" refers to the act of parsing and
delivering the Content, as defined below and other information provided by
approved third party content providers, to Users.
c. Content. The term "Content" means all material, whether or not
protected by copyright, including but not limited to text, images, and other
multimedia data, delivered by Provider as part of the Service and as further
defined in Exhibit A.
d. Business Partners. The term "Business Partners" means third parties
through which Distributor distributes the Services to Users, subject to the
terms of this Agreement.
e. Users. The term "Users" sometimes referred to as subscribers, means
those consumers who purchase the Service or use the Product.
f. Product. The term "Product" means the Service as packaged with and
delivered to a device distributed by the Distributor and its' Business Partners.
g. Trademark. The term Trademark means the FOX NEWS name and logo as such
logo appears on its Web site on marketing materials and in advertising by the
Provider,
h. Wireless. The term wireless means public networks including paging,
narrowband PCS, broadband PCS, specialized mobile radio, cellular.
2. Distribution
a. Grant of Rights. Subject to the terms and conditions of this
Agreement, Provider grants Distributor a nonexclusive license, except as
provided for in this Agreement, and right to, (i) distribute the Content in
connection with the Service for use with the Product; and (ii) license the use
of the Trademark to market the Service as part of the Product. Business Partners
shall have the right to market the Service and distribute the Service to Users
and to use the Service for their internal use subject to the terms of this
Agreement.
Intelligent Information Incorporated Confidential & Proprietary (FOXNWDA697)
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
b. User Agreements. Distributor shall require that each Business Partner
enter into an agreement prior to utilizing Content or Trademarks. Such
agreements are to be approved by the Provider twenty (20) days in advance of
utilizing Content or Trademarks.
c. Reservation. Provider reserves the right to add or withdraw all or
portions of Content with ten (10) days notice to Distributor or immediately if
Provider has good cause.
d. Exclusive. Provider grants Distributor a three year period of
exclusivity solely with respect to the Content and the Trademark license to use
in the Wireless market, to start concurrent with signing of this agreement.
Distributor grants Provider a three year period of exclusivity as it pertains to
cable news channels CNN and MSN BC.
3. Marketing
a. Expenses. Distributor shall be responsible for all expenses incurred
by distributor in promoting and marketing the Service, unless such expenses have
been agreed to be paid by the Provider or a third party advertiser in writing in
advance.
b. Use of Trademark. Distributor acknowledges that Provider Trademarks
are the sole and exclusive property of the Provider, Distributor shall use its
best efforts to name Provider as one of its information services in its formal
promotional and marketing materials relating to the Service. Provider agrees
that Distributor has the right to use the Trademark in Distributor and its'
Business Partner marketing and advertising materials, subject to the terms of
this Agreement, provided Distributor and its Business Partners include notice
that the Trademark are registered trademarks of FOX NEWS.
c. Prior Approval. Distributor agrees to submit to Provider for prior
written approval all press releases, advertising or other promotional materials
that use Service names or a party's company name not less than fifteen (15) days
before the proposed use. Provider shall not unreasonably withhold its approval.
Unless notice of approval or disapproval is received within (10) days of receipt
of promotional materials, approval shall be deemed granted. Distributor shall be
solely responsible for insuring that Business Partner and Users use the
Trademark solely in such form as has been previously approved by Provider.
d. Referral. Provider and Distributor agree to provide Users with
references back to the FOX NEWS web site for additional information on a subject
delivered to a User based upon Content from the Provider.
4. Delivery of the Service
a. Provision of the Service. Subject to the terms and conditions of this
Agreement, Provider shall provide the Service to Distributor and Distributor
shall receive the Service from Provider in conformance with the Technical
Specifications set forth in Exhibit C.
b. Timeliness. Provider shall use commercially reasonable efforts to
maintain the timeliness of the Content. Distributor acknowledges that, in part,
Provider relies on the performance of Information Providers outside the control
of Provider in order to provide the Service.
c. Modifications. Distributor shall not rewrite or alter the Content of
the Service or create any
Intelligent Information Incorporated Confidential & Proprietary (FOXNWDA697)
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
work derived from the Content of the Service, without the prior written approval
of Provider. Provider agrees that Distributor may make changes to the format of
the content in order to meet wireless display equipment formats.
d. Review by Provider. Throughout the term of this Agreement, Distributor
shall provide Provider reasonable access to Distributor's system for
distribution of the Service to Users for the sole purpose of reviewing
Distributors implementation of the Service.
5. Reporting and Payment
a. Reporting. Distributor shall provide to Provider by the 15th of each
month a report indicating the number of Users of the Service for the prior
calendar month and any such additional information as may reasonably be
requested by Provider, including the defined Service packages purchased, the
number of impressions generated.
b. Payment Schedule. Provider shall pay Distributor the Monthly 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.
b. Termination. Provider may terminate this Agreement for any and no
reason at any time upon ninety (90) days prior written notice to Distributor.
Either party may terminate this Agreement at any time if the other party
materially breaches any provision of this Agreement. Such termination shall take
effect (i) if the breach is incapable of cure, then immediately upon the
breaching party's receipt of a written notice of termination which identifies
the breach, or (ii) if the breach, capable of being cured, has not been cured or
a satisfactory plan to cure has not been developed within ten (10) days after
receipt of written notice from the non-breaching party identifying the breach,
then immediately upon receipt of a written notice of termination received within
five (5) days of the end of such ten (10) day period.
c. 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.
7. Content
a. Ownership. Distributor acknowledges that Provider is the sole
copyright proprietor of the Content and that this Agreement does not transfer to
Distributor, Business Partners or Users any proprietary right, title or
interest, including copyright, in the Content made available as part of the
Service.
8. Limited Warranties of Provider and Distributor
a. Distributor acknowledges that Provider's trademarks are the sole and
exclusive property of Provider Pursuant to Paragraph 3b, Provider shall have the
right to approve in writing in advance the use of its Trademarks by Distributor
to identify and promote use of the Service.
Intelligent Information Incorporated Confidential & Proprietary (FOXNWDA697)
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
b. Agreement. Provider warrants that its entry into this Agreement does
not violate any agreement between Provider and any third party.
c. Laws and Regulations. Provider warrants that its performance under
this Agreement and the use of the Content conforms to all applicable laws and
government rules and regulations, subject to the terms of this Agreement.
c. The Content. Distributor agrees that the Content is provided by
Provider "AS IS", without any warranty or representation of any kind.
9. Limitation of Liability
In no event shall one party be liable to the other party for any direct,
indirect, special, exemplary or consequential damages, 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.
10. Indemnification
Distributor shall indemnify and hold harmless Provider and its
Information Providers from and against any claims, losses, expenses,
liabilities, and damages, including reasonable legal fees and expenses, arising
out of Distributor's, Business Partners' or Users' breach of any provision of
this Agreement. Provider agrees to notify Distributor of any such claim promptly
in writing. The parties agree to cooperate fully during such proceedings.
Distributor shall defend and settle at its sole expense all proceedings arising
out of the foregoing.
11. 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 Provider of its obligations to make payment
to Distributor 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 Provider 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.
12. 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 of confirmation.
If to Provider:
FOX NEWS
Intelligent Information Incorporated Confidential & Proprietary (FOXNWDA697)
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
1211 Avenue of the Americas
New York, N. Y. 10036-8795
Attn: Vice President, Finance
If to Distributor:
Intelligent Information Incorporated
One Dock Street, Suite 500
Stamford, CT 06902
Attn: Controller
13. 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, such consent shall not be unreasonably
withheld: 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.
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 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
Intelligent Information Incorporated Confidential & Proprietary (FOXNWDA697)
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
Agreement and agrees to be bound by its terms.
AGREED PROVIDER:
III Fox News
- ---------------------- ----------------------
Distributor, by: Provider, by:
/s/ Stephen G. Maloney /s/ Jack Abernathy
- ---------------------- ----------------------
Signature Signature
Stephen G. Maloney Jack Abernathy
- ---------------------- ----------------------
Printed Name Printed Name
President VP Finance and Admin.
- ---------------------- ----------------------
Title Title
Date: 6/16/97 Date: 6/13/97
Intelligent Information Incorporated Confidential & Proprietary (FOXNWDA697)
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
EXHIBIT A
Description of Content, Brand and Distributor use of Service
a. Content shall be determined by Provider in consultation with Distributor.
b. The use of the Service will be to bundle the Content (if and when provided)
with information provided by Distributor from third parties so as to provide to
the User a branded Product containing limited information from Provider and
other information e.g. national and business news.
c. The Distributor will include the Provider on all Packages sold with its brand
and will include periodic reference to either the Providers world wide web
address (URL).
d. The Provider agrees that the Distributor will use the Trademark and
associated brands to market and differentiate its Service in the Wireless
market.
EXHIBIT B
Payment Schedule
a. Fees. Distributor shall pay Provider according to the following fee schedule:
- - Use of the Trademark and Brand only, will be at [*] to the Distributor or
Provider.
b. Demo Units. Distributor may set up [*] demonstration accounts for sales and
marketing purposes, but will use its best efforts to minimize the number and
duration of such accounts.
c. Cross Promotion. Distributor will use reasonable efforts tp "push" Users to
the Provider's web site for additional information.
EXHIBIT C
Provision of the Service
Technical Specifications
Service is to be delivered to Distributor in an electronic manner that is
mutually agreeable.
EXHIBIT D
Confidential Information
a. This Agreement and all Exhibits thereto.
Intelligent Information Incorporated Confidential & Proprietary (FOXNWDA697)
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 10.24a
ADDENDUM TO DISTRIBUTION AGREEMENT
BETWEEN
FOX NEWS NETWORK, LLC AND INTELLIGENT INFORMATION INCORPORATED
DATED AUGUST 13, 1997
This Addendum is to the Distribution Agreement between Fox News Network, LLC
(Provider) and Intelligent Information Incorporated (Distributor) signed by
Provider on June 13, 1997.
The parties, Provider and Distributor, agree to the assignment of this
Distribution Agreement from Fox News Network, LLC to News America Digital
Publishing, a Division of News Corporation.
IN WITNESS WHEREOF, the parties have hereto hereby execute this Addendum.
<TABLE>
<S> <C>
Fox News Network, LLC Intelligent Information Incorporated
/s/ Jack Abernathy /s/ R. M. Unnold
- --------------------------------------- ----------------------------------
Authorized Signature Authorized III Signature
Jack Abernathy R. M. Unnold
- --------------------------------------- ----------------------------------
Name Name
Vice President-Finance & Administration CEO
- --------------------------------------- ----------------------------------
Title Title
6/4/98 May 11, 1998
- --------------------------------------- ----------------------------------
Date Date
</TABLE>
<TABLE>
<S> <C>
Fox News Network, LCC and Intelligent Information Incorporated Confidential Information
</TABLE>
<PAGE> 1
EXHIBIT 10.24b
ADDENDUM TO DISTRIBUTION AGREEMENT
BETWEEN
FOX NEWS NETWORK, LLC MAD INTELLIGENT INFORMATION INCORPORATED
DATED JUNE 16,1997
This Addendum is to the Distribution Agreement between News America Digital
Publishing, a Division of News Corporation (Provider) and Intelligent
Information Incorporated (Distributor) dated June 16, 1997.
The parties, Provider and Distributor agree to the following changes in the
Distribution Agreement:
1. Elimination of the first sentence under 6.b of the Term and Termination
Clause "Provider may terminate this Agreement for any and no reason at
any time upon ninety (90) days prior written notice to Distributor";
2. Redefinition of Content under Section a in Exhibit A of the Agreement
from "Content shall be determined by Provider in consultation with
Distributor" to "All Content News America Digital Publishing (NADP)
provides, including, but not limited to Fox News Online, Fox Sports
Online and TV Guide Entertainment Network (TVGEN)";
3. Redefinition of Exclusive under Section 2 d of the Agreement from
"Provider grants Distributor a three year period of exclusivity solely
with respect to the content and the Trademark license to use in the
Wireless market, to start concurrent with signing of this agreement.
Distributor grants Provider a three year period of exclusivity as it
pertains to a cable News Channels CNN, and MSNBC" to "Provider grants
Distributor a one and one half year period of exclusivity solely with
respect to the content and the Trademark license to use in the Wireless
market, to start concurrent with signing of this agreement or June
16, 1997. Distributor grants Provider a one and one half year period of
exclusivity as it pertains to a cable News Channels CNN, and MSNBC."; and
IN WITNESS WHEREOF, the parties have hereto hereby execute this Addendum.
News America Digital Publishing Intelligent Information Incorporated
/s/ John Linguin /s/ Stephen G. Maloney
- ----------------------------------- ------------------------------------
Authorized Signature Authorized III Signature
John Linguin Vice President-Finance Stephen G. Maloney, President
- ----------------------------------- ------------------------------------
Name, Title Name, Title
August l0, 1998 August 20, 1998
- ----------------------------------- ------------------------------------
Date Date
<PAGE> 1
EXHIBIT 10.25
[LOGO] SportsTicker(R)
HARBORSIDE FINANCIAL CENTER, 600 PLAZA TWO, JERSEY CITY, NEW JERSEY
07311 - (201) 309-1200
SUBSCRIPTION AGREEMENT
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMPANY NAME AREA CODE/PHONE NO.
INTELLIGENT INFORMATION, INC. (203) 969-0011
- ---------------------------------------------------------------------------------------------------------------------------
INSTALLATION
ADDRESS ONE DOCK STREET, SUITE 500 STAMFORD, CT 06902
-----------------------------------------------------------------------------------------------------------------
(Street) (City/State) (Zip)
NEAREST CROSS STREET
-------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
INSTALL LOCATION CONTACT AT ADDRESS ABOVE TYPE OF BUSINESS
DEPT./FLOOR ROOM #. (INCLUDE PHONE NUMBER)
MS. JOAN DALE VENDOR/WIRELESS
- -------------------------------------------------------------------------------------------------------------------------
BILLING INFORMATION IF OTHER THAN ABOVE:
---------------------------------------------------------------------------------
(Contact Name and Phone Number)
- -------------------------------------------------------------------------------------------------------------------------
(Company Name) (Street) (City/State)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SERVICES MONTHLY NON-RECURRING TOTAL MONTHLY
SUBJECT TO AGREEMENT SERVICE FEE CHARGES FEES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Monthly Information:
1/1/98 -- 12/31/98: [*] --- [*]
1/1/99 -- 4/30/99: [*] --- [*]
5/1/99 -- 8/31/99: [*] --- [*]
9/1/99 -- 12/31/99: [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUBSCRIPTION TERM AND RATES
- --------------------------------------------------------------------------------
The subscription service period is for a minimum of 24 months (beginning on the
first day of service operation or _________) and service shall continue on a
revolving 12-month renewal term basis thereafter until terminated effective at
the end of the term or any renewal with thirty (30) days prior written notice by
either party. The monthly service fee is $ (*) . The installation charge is $
N/A. The security deposit is $ XXX and will be returned to the subscriber upon
cancellation and return of all Sports Ticker equipment.
- --------------------------------------------------------------------------------
INTENDED USE
- --------------------------------------------------------------------------------
Specify intended use of
SportsTicker information SEE ADDENDUM
- --------------------------------------------------------------------------------
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
ACCEPTANCE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE SUBSCRIBER HEREBY ACKNOWLEDGES RECEIPT OF CURRENT SportsTicker RATES AND ACKNOWLEDGES THAT SUBSCRIBER HAS CAREFULLY READ AND
UNDERSTANDS THE PROVISIONS OF THE AGREEMENT WHICH INCLUDE THE TERMS AND CONDITIONS AS INDICATED ABOVE AND THE REVERSE SIDE HEREOF.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
SUBSCRIPTION ACCEPTED BY
SERVICE REQUESTED BY SportsTicker Enterprises L.P.
Intelligent Information Incorporated
- ------------------------------------------------------------------------ -----------------------------------------------------
(Company Name) Authorized SportsTicker Officer
6/29/98
- ------------------------------------------------------------------------ -----------------------------------------------------
(Signature & Title of duly authorized officer, partner, or proprietor) (Date)
- ------------------------------------------------------------------------------------------------------------------------------------
THIS AGREEMENT IS SUBJECT TO ACCEPTANCE BY Sports Ticker Enterprises, L.P.
WHITE AND YELLOW COPIES - CUSTOMER SERVICE PINK COPY - ACCOUNTING DEPT. GOLD COPY - SUBSCRIBER
</TABLE>
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
[LOGO] SportsTicker(R)
SUBSCRIPTION AGREEMENT
The subscriber listed on the forepart hereof ("the Subscriber") hereby orders
the sports information service provided by SportsTicker Enterprises, L.P. ("ST")
, hereinafter referred to as the "Service", to be furnished to the subscriber at
the address shown on the front of this Agreement.
Notice of any change in the name, nature, or place of business shall at once be
given to ST, and Subscriber represents and warrants to and agrees with ST as
follows:
1. The SportsTicker information contained in the service is proprietary to or
copyrighted by ST and/or its sources of data and is to be received by
Subscriber only for its private and individual use in its said business at
its office or place designated on the front of this Agreement, and
Subscriber will not communicate, sell, recirculate, redistribute or
otherwise furnish, or permit to be furnished, said information to any
person, branch office, firm or corporation nor to any other place than the
designated place of business without the express prior written consent of
ST. The prohibitions on recirculation or redistribution shall not apply if
Subscriber is in the TV, Cable or Radio broadcasting business, or to
newspaper reprints of the Service if Subscriber is in the newspaper
publishing business. Recirculation or redistribution of the Service for
textual or electronic information services such as videotext or teletext is
expressly prohibited. Subscriber further agrees that it will comply with
any and all regulations concerning the location of any and all equipment
furnished. Subscriber by ST ("Equipment") in its place of business and will
adopt and enforce all reasonable regulations which ST requires in order to
prevent such information from being taken improperly from said place of
business.
2. Subscriber's office or place of business designated on the front of this
Agreement shall not be directly or indirectly connected by any private or
other means of outgoing communication with any office or place of business
engaged in the business of supplying sports information without the express
prior written consent of ST.
3. Subscriber will not attach, or permit or cause to be attached, any
equipment to the printer or other equipment supplied by ST, or the Service
line/modem nor will Subscriber use any equipment not provided as part of
the Service without the prior written approval of ST. Subscriber shall not
copy, manipulate or redistribute computer programs associated with the
Service without the prior written consent of ST and upon non-renewal by
Subscriber or termination for whatever reason of this Agreement. Subscriber
shall promptly return any such program or related media to ST. In addition,
any copies of ST computer programs or related media shall be destroyed by
Subscriber. Any equipment subsequently attached to Equipment previously
provided by ST shall be subject to the terms and conditions of this
Agreement.
4. At all times upon 24 hours notice to Subscriber, any person or persons
designated by ST will have full and free access to the place herein
designated to observe the use of the Service and to inspect, maintain, and
replace any Equipment.
5. Subscriber agrees to pay to ST in advance on the first day of each month
its monthly fee for the Service (as set forth on the forepart of this
Agreement), plus any applicable federal, state and local taxes as follows:
a) In the case of the standard Service, the monthly fee will [*] All
paper supplies will be available for purchase from independent
suppliers. [*].
b) In the case of the Service without a printer, for use with Subscriber
provided equipment, the [*].
Invoices are payable by the Subscriber on receipt and are subject to a [*]
for any amounts due ST hereunder which are not paid within 30 days of
invoicing.
6. ST may at its sole discretion and at any time following the minimum
subscription period or any renewal term, change the monthly fee as
specified herein by giving six (6) weeks written notice to Subscriber. In
addition, in the event the tariffs on which communications charges or other
network carrier charges are based or charged, ST shall have the right to
modify such charges to subscriber on a pro-rate basis at the time such
tariffs are applied.
7. The furnishing of the Service to Subscriber by ST is conditioned upon
strict compliance with the provisions in this Agreement and with all local,
state and federal regulations which might pertain to the use of the
Service. ST may discontinue the Service, without notice, whenever the terms
of any of ST's agreements with professional or collegiate associates or
leagues require such discontinuance, or in the judgement of ST it finds a
breach by Subscriber of any of the provisions of this Agreement. Upon such
termination, Subscriber shall promptly return to ST all Equipment,
programs, software and related materials belonging to ST.
8. ST and its sources of data including all individual teams, leagues and
administrative bodies involved with the professional and collegiate
sporting events covered on the Service shall not be liable for any errors,
omissions, delays or inaccuracies in the information provided, nor for any
interruption of the Service arising out of the installation, relocation,
use, or maintenance of any Equipment, systems, or connection facilities or
due to events beyond the reasonable control of ST or its sources of data.
ST and its sources of data shall not be liable to Subscriber for
consequential, special or indirect damages arising out of the receipt
and/or use of the Service.
9. If the Service is expressly provided by ST for operation on Subscriber's
own equipment, it shall be furnished without warranty as to compatibility,
fitness or performance with such equipment, and Subscriber shall bear all
costs and responsibility for such equipment.
10. Subscriber agrees to pay all personal property taxes and any other taxes,
assessment fees or penalties in respect of the Service which may be the
Subscriber's legal responsibility to pay. Subscriber shall [*] as a result
of the transactions contemplated by this Agreement.
11. In the event Subscriber provides information for dissemination by ST,
Subscriber agrees to take all reasonable actions necessary to keep such
information current, accurate, true and complete, to notify ST promptly of
any errors or omissions; and Subscriber warrants that it has full power to
obtain, transmit and distribute such information. ST shall have the right,
without any obligation to Subscriber, to utilize in any products marketed
by ST, its parent companies and/or its affiliates the information so
provided to ST by Subscriber.
12. The Service applied for in this Agreement shall continue in force for a
minimum subscription period as indicated on the front of this Agreement.
The Service and the terms of this Agreement shall continue in force on a
revolving 12 month renewal basis following the minimum period until the
effective date of cancellation. Except as provided in Paragraph 7 above,
cancellation of the Service following the initial or any renewal
subscription period will become effective at the end of the term of this
Agreement or any renewal with not less than 30 days prior written notice
from either party to the other of its intention to so cancel this
Agreement.
13. Subscriber agrees to pay ST fees as billed, for any and all of the
following:
[*]
14. Subscriber will have not right in or to any Equipment or to information
received except that right of use in the ordinary course of Subscriber's
business consistent with the provisions herein. Subscriber will not move
any of the Equipment without prior written permission by ST. Subscriber
will pay for [*] Extraordinary installation includes, but is not limited
to, special cable requirements such as teflon, cabling in excess of 100
feet, installation work performed at any time other than 9.a.m. to 5 a.m.,
Monday through Friday, electrical work done external to the Equipment, and
expedited order handling and shipping. Extraordinary maintenance includes
electrical work external to the Equipment, maintenance of accessories or
attachments, and includes repair of damage to the equipment, earth station,
personal computer, antenna, printer or modem resulting from accident,
neglect, misuse, failure of electrical power or causes other than ordinary
use. Subscriber will return the Equipment in good condition, ordinary wear
and tear expected, when the Service is terminated. If the Equipment is
returned in a damaged condition, Subscriber shall reimburse ST for the
repair or replacement of the Equipment. Subscriber shall be responsible for
any or all theft of the Equipment used to deliver the Service to Subscriber
and shall pay ST the full replacement cost of the Equipment damage arising
out of the maintenance, use or existence of any Equipment, unless solely
due to negligent installation by ST.
15. The signatory on the front of this Agreement is authorized to act on behalf
of the Subscriber and this is the entire Agreement between the parties.
Nothing stated heretofore or hereafter will be considered part of this
Agreement without a mutually agreeable amendment hereto. This Agreement
shall be governed by the laws of the State of New York without regard to
the choice of law principles thereof.
16. In the event any action is taken by ST to enforce this Agreement or to
protect the rights of ST with respect to the Service of Equipment,
Subscriber [*].
17. This Agreement may not be assigned by Subscriber without the prior written
consent of ST.
Subscriber has indicated its preference of Service and minimum subscription
period, in accordance with the fees indicated, as shown on the front of this
Agreement.
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 10.25a
ADDENDUM TO THE SPORTSTICKER SUBSCRIPTION AGREEMENT
THIS ADDENDUM TO THE SPORTSTICKER SUBSCRIPTION AGREEMENT, dated as of
January 1, 1998 (the "Agreement"), by and between Sportsticker Enterprises L.P.
("ST") and Intelligent Information, Inc. ("").
The Agreement shall be amended as follows:
1. ST grants to III the non-exclusive right to redistribute ST information
through wireless devices offered directly by III to individuals solely
for their personal, private, non-commercial use.
2. III shall pay to ST the greater of the monthly fee noted in the Agreement
or [*] of gross revenues generated from the sale of ST information to the
end user.
For the purposes of this Agreement, the term Subscriber shall mean
any end user who receives, through any III products, any portion
of the ST information for any period during the month. The gross
revenues shall be based on the number of subscriptions at the end
of each month.
3. The term of this Agreement shall be for an initial term of two (2) years
commencing on the first day of service operation, and shall continue
thereafter for twelve (12) months unless terminated by either party upon
thirty (30) days prior written notice.
4. Each month during the term of the Agreement, III shall pay ST those
charges noted in the Agreement by the first of the month, and shall pay
the royalty within thirty (30) days of the end of the month. Should III
become delinquent with these payments, ST may discontinue service on ten
(10) days written notice.
5. III shall provide to ST complete and accurate monthly usage subscriber
reports for each month, and upon reasonable advance notice, III will
permit ST to audit III's records relating only to those subscribers
accessing the ST information. ST agrees that all of III's records will be
treated as confidential and will not be used for any purpose other than
the audit as described herein.
6. The terms and conditions of this Agreement and this Addendum shall be
kept confidential by III and not disclosed to any third party.
7. III shall provide to ST, [*], two (2) III pagers for the purpose of ST
monitoring the use of the ST information on the DS service.
8. III shall not use the ST names, trademarks, or other corporate
identification for promotional or any advertising purposes without the
express written consent of ST, except for copyright purposes.
----------------------------------- ----------------------------------
For: Intelligent Information, Inc. For: SportsTicker Enterprises L.P.
Date: 2/11/97 Date: 6/29/98
<PAGE> 1
EXHIBIT 10.26
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is entered into by and between LA
Times ("Provider"), a division of The Times Mirror Company, a Delaware
Corporation with its principle offices at Times Mirror Square, Los Angeles, CA
90053 and Intelligent Information Incorporated (the Distributor"), a Delaware
corporation with its principle offices at One Dock Street, Suite 500, Stamford,
CT 06902.
1. Definitions
a. Information Providers. The term "Information Providers" means third
parties from whom the Distributor acquires the right to distribute Content
provided or made available as part of the Service for use solely in connection
with the Product as described below.
b. Service. The term "Service" refers to the act of parsing, formatting
and delivering the Content, as defined below and other information provided by
approved third party content providers, to Users.
c. Content. The term "Content" means all material, whether or not
protected by copyright, including but not limited to text, images, and other
multimedia data, delivered by Provider as part of the Service and as further
defined in Exhibit A.
d. Business Partners. The term "Business Partners" means third parties
through which Distributor distributes the Services to Users, subject to the
terms of this Agreement.
e. Users. The term "Users" sometimes referred to as subscribers, means
those consumers who purchase the Service or use the Product.
f. Product. The term "Product" means the Service as packaged with and
delivered to a device distributed by the Distributor and its' Business Partners.
g. Trademark. The term "Trademark" means the LA Times name and logo as
such logo appears on its Web site, marketing materials and in advertising by the
Provider.
h. Wireless. The term "Wireless" means public networks including paging,
narrowband PCS, broadband PCS, specialized mobile radio, cellular.
2. DISTRIBUTION
a. Grant of Rights. Subject to the terms and conditions of this
Agreement, Provider grants Distributor a nonexclusive license, except as
provided for in this Agreement, and right to, (i) distribute the Content in
connection with the Service for use with the Product; and (ii) license the use
of the Trademark solely for marketing the Service as part of the Product,
subject to Providers' review and approval of each such marketing use as set
forth in Section 3.c. below Business Partners shall have the right to market the
Service and distribute the Service to Users and to use the Service for their
internal use subject to the terms of this Agreement.
b. User Agreements. Distributor shall require that each Business Partner
enter into an agreement prior to utilizing content or Trademarks.
(LATIMES797)
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
c. Reservation. Provider reserves the right to add or withdraw portions
of Content with ten (10) days notice to Distributor or immediately if Provider
has good cause.
3. MARKETING
a. Expenses. Distributor shall be responsible for all expenses incurred
by Distributor in promoting and marketing the Service, unless such expenses have
been agreed to be paid by the Provider or a third party advertiser in advance.
b. Use of Trademark. Distributor acknowledges that Provider trademarks
are claimed to be the sole and exclusive property of Provider. Distributor shall
use Provider's name as one of its information services in its formal promotional
and marketing materials relating to the Service. Provider agrees that
Distributor and its Business Partners have the right to use the Trademark as set
forth in Section 2a above and subject to the terms of this Agreement, provided
Distributor and its Business Partners include notice that the Trademark are
registered trademarks of Provider.
c. Prior Approval. Distributor agrees to submit to Provider for prior
written approval all press releases, advertising or other promotional materials
that use Service names or a party's company name not less than fifteen (15) days
before the proposed use. Provider shall not unreasonably withhold its approval.
Unless notice of approval or disapproval is received within (10) days of receipt
of promotional materials, approval shall be deemed granted. Distributor shall be
solely responsible for insuring that Business Partner use the Trademark solely
in such form as has been previously approved by Provider.
d. Referral. Distributor agrees to provide Users with periodic references
back to specific publications or websites for additional information on a
subject delivered to a User based upon Content from the Provider.
e. Cross Promotion. Distributor will use reasonable efforts to "push"
Users to the Provider's publications for more information or the "rest of the
story".
4. DELIVERY OF THE CONTENT AND DISTRIBUTION OF SERVICE
a. Provision of the Content. Subject to the terms and conditions of this
Agreement, Provider shall provide the Content to Distributor and Distributor
shall receive the Content from Provider in conformance with the Technical
Specifications set forth in Exhibit C.
b. Timeliness. Provider shall use commercially reasonable efforts to
maintain the timeliness of the Content. Distributor acknowledges that, in part.
Provider relies on the performance of Information Providers outside the control
of Provider in order to provide the Content.
c. Modifications. Distributor shall not rewrite or alter the Content of
the Service or create any work derived from the Content of the Service, without
the prior written approval of Provider. Provider agrees that Distributor may
make changes to the format of the Content in order to comply with wireless
display equipment formats.
d. Review by Provider. Throughout the term of this Agreement. Distributor
shall provide Provider reasonable access, during normal business hours, to
Distributor's system of distribution of the Service to Users for the sole
purpose of reviewing Distributor's implementation of the Service.
(LATIMES797)
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
5. REPORTING AND FEES
a. Reporting. Distributor shall provide to Provider by the 15th of each
month a report indicating the number of Users of the Service for the prior
calendar month and any such additional information as may and reasonably be
requested by Provider, including the defined Service packages purchased and the
number of impressions generated.
b. Monthly Fees. Provider shall pay Distributor the Monthly Fees set
forth in the Fee Schedule in Exhibit B.
6. TERM AND TERMINATION
a. Term. This Agreement shall commence on the date last signed by the
Parties (the "Effective Date"), and shall remain in effect for an Initial term
of one (1) year.
b. Termination. Provider may terminate this Agreement at any time
upon ninety (90) days prior written notice to Distributor. Either party may
terminate this Agreement at any time if the other party materially breaches any
provision of this Agreement. Such termination shall take effect (i) if the
breach is incapable of cure, then immediately upon the breaching party's receipt
of a written notice of termination which identifies the breach, or (ii) if the
breach is capable of being cured buthas not been cured within thirty (30) days
after receipt of written notice form the non-breaching party identifying the
breach, then immediately upon receipt of a written notice of termination
received within ten (10) days of the end or such thirty (30) day period.
c. Insolvency. The solvent 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.
7. CONTENT
a. Ownership. Distributor acknowledges that Provider claims to be
the sole copyright owner of the Content and that this Agreement does not
transfer to Distributor, Business Partners or Users any or is clearly authorized
to relicense the Content right, title or interest, including copyright, in the
Content made available as part of the terms of this Agreement..
8. LIMITED WARRANTIES OF PROVIDER AND DISTRIBUTOR
a. Distributor acknowledges that Provider trademarks are claimed to be
the sole and exclusive property of Provider. Pursuant to Paragraph 3.d.,
Provider shall have the right to approve in writing in advance the use of its
trademarks by Distributor to identify and promote use of the Service. Upon
compliance with this provision and Paragraph 3d. use of such marks by
Distributor for such purposes shall be deemed approved during the term of this
Agreement unless Provider specifically notifies Distributor to the contrary.
b. Agreement. Both the Provider and Distributor warrants that its entry
into this Agreement does not violate any agreement between it and any third
party.
c. Laws and Regulations. Provider warrants that its performance under
this Agreement and the use of the Content conforms to all applicable laws and
government rules and regulations, subject to the
(LATIMES797)
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
terms of this Agreement.
d. The Content. Distributor agrees that the Content is provided by
Provider "AS IS". Provider does not warrant the accuracy, completeness or
timeliness of the Content. Provider warrants that it has the right to provide
the Content to Distributor.
9. LIMITATION OF LIABILITY
IN NO EVENT SHALL ONE PARTY BE LIABLE THE OTHER FOR ANY, INDIRECT,
INCIDENTAL SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS
OR LOST SAVINGS, WHETHER OR NOT FORESEEABLE.
10. INDEMNIFICATION
Distributor shall indemnify, defend and hold harmless Provider and its
i.e. third party Information providers from and against any claims, losses,
expenses, liabilities, and damages, including reasonable legal fees and
expenses, arising out of Distributor's, Business Partners' or Users' breach of
any provision of this Agreement. Provider agrees to notify Distributor of any
such claim promptly in writing. The parties agree to cooperate fully during such
proceedings. Distributor shall defend and settle at its sole expense all
proceedings arising out of the foregoing.
11. 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 Provider of its obligations to make payment
to Distributor 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 Provider 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.
12. 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 of confirmation.
If to Provider: If to Distributor:
LA Times Intelligent Information Incorporated
Times Mirror Plaza One Dock Street, Suite 500
Los Angeles, CA 90053 Stamford, CT 06902
Attn: Harry Chandler Attn: Robert Coletti, Controller
(LATIMES797)
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
13. GENERAL TERMS AND CONDITIONS
a. Not Agent. Neither party shall be considered an agent of the other
party not shall either party have the authority to bind the other party.
b. No Assignment. Neither party may assign this Agreement without the
prior 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 of such party 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.
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 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. Headings. The headings used in this Agreement are for convenience only
and are not to be construed to have a legal significance.
(LATIMES797)
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
i. Read and Understood. Each party acknowledges that it has read and
understands this Agreement and agrees to be bound by its terms.
AGREED:
- ---------------------- ----------------------
Distributor, by: Provider, by:
/s/ R. M. Unnold /s/ Harry Chandler
- ---------------------- ----------------------
Signature Signature
R. M. Unnold Harry Chandler
- ---------------------- ----------------------
Printed Name Printed Name
CEO Dir. New Bus. Devel.
- ---------------------- ----------------------
Title Title
Date: 8/12/97 Date: 7/29/97
---------------- ----------------
(LATIMES797)
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
EXHIBIT A
Description of Content, Brand and Distributor use of Service
a. Content shall be determined by mutual agreement of Provider and Distributor.
It will be comprised of electronic information from various news categories such
as business, general local, entertainment etc. from Provider's Internet Site.
b. The purpose of the Service will be to bundle the Content (if and when
provided) with information provided by Distributor from third parties so as to
provide, to the User a Product containing condensed or summarized information
from Provider and other third party Information Providers (e.g., weather,
traffic and sports).
c. Distributor will include the Provider on all Product sold with its brand and
will include the Provider's world wide web address (URL) or specific publication
as depicted by the Provider.
d. Provider acknowledges that the Distributor will be entitled to use the
Trademark and associated brands to market and differentiate the Service in the
wireless market.
EXHIBIT B
Fee Schedule
a. Fees. Distributor shall pay Provider according to the following fee schedule:
- - Use of the Trademark and Brand only, will be at [*] to the Distributor.
- - Use of the Trademark, Brand and Provider Content consisting of headlines
(approximately 120 characters), will be at a [*] on monthly gross
revenues received by the Distributor from any Service using Content from
the Provider; or [*] if, the Content is bundled with content from other
Information Providers.
- - Use of the Trademark, Brand and Provider Content consisting of summaries
or briefs (approximately 240 characters), will be at a [*] on monthly
gross revenues received by the Distributor from the sales of any Service
that Includes Content from the Provider; or [*] if, the Content is
bundled with content from other Information Providers
- - Use of full text article, will be at a [*] on gross revenues received by
the Distributor from any Service using such articles.
- - Proportional Use example: User purchase service that contains sports
information from an Information Provider via the Distributor as well as
Content from the Provider. The Distributor receives [*] for that User
from a Business Partner. The proportion of content used is equal between
the Information Provider (sports) and the Provider (news); the
Distributor would pay Provider fees of [*], in the case of summaries
being used, of [*]
b. Demo Units. Distributor may set up [*] demonstration accounts for sales and
marketing purposes, but will use its best efforts to minimize the number and
duration of such accounts.
c. Payment. Provider will receive applicable payment, by check monthly, by the
15th day of the following month.
(LATIMES797)
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 10.26a
ADDENDUM TO DISTRIBUTION AGREEMENT
BETWEEN
LA TIMES, A DIVISION OF TIMES MIRROR COMPANY
AND
INTELLIGENT INFORMATION INCORPORATED
DATED JULY 19, 1997
This Addendum to the Distribution Agreement between LA Times, a division of
Times Mirror Company ("Provider") and Intelligent Information Incorporated
("Distributor") dated July 29, 1997 (the "Agreement") is made and entered into
as of the 23rd day of August, 1999.
The Agreement is amended as follows:
Paragraph 6.a. of the Agreement is amended by adding the following sentence:
"Thereafter, the Agreement shall automatically renew for successive one (1)
year Renewal Terms unless either party notifies the other party in writing of
its election not to renew, at least ninety (90) days before the end of the
Initial Term or any Renewal Term."
IN WITNESS WHEREOF, the parties have hereto hereby execute this Addendum as of
the date set forth above.
LA TIMES INTELLIGENT INFORMATION INCORPORATED
- ---------------------------- --------------------------------
Authorized Signature Authorized III Signature
- ---------------------------- --------------------------------
Name Name
- ---------------------------- --------------------------------
Title Title
- ---------------------------- --------------------------------
Date Date
<PAGE> 1
EXHIBIT 10.27
DATABASE LICENSE AGREEMENT - WIRELESS INTERNET
SECTION I - LICENSED USE
A. PARTIES ("PARTIES")
infoUSA: InfoUSA Inc., a Delaware corporation
5711 S. 86th Circle, Omaha, NE 68127
LICENSEE: Intelligent Information, Inc., a Delaware corporation
181 Harbor Drive, Third Floor, Stamford, CT 06902
EFFECTIVE DATE: December 28, 1999
The following is the Agreement of the Parties concerning the use of the infoUSA
Database and the infoUSA Content (defined below) by Licensee.
B. TERM ("TERM")
The term of this Agreement will be for three (3) years commencing from the
Effective Date, unless earlier terminated pursuant to Paragraph 5 of Section
III.
C. DATA TO BE DELIVERED BY infoUSA ("infoUSA DATABASE, infoUSA CONTENT")
infoUSA has created, and exclusively owns, a database of information on
approximately 11 million businesses in the United States and Canada, and
approximately 96 million individuals in the United States (the "infoUSA
Database").
APPROXIMATELY 11 MILLION BUSINESSES IN THE UNITED STATES AND CANADA (THE "US
BUSINESS FILE" AND THE "CANADIAN BUSINESS FILE") AND 96 MILLION INDIVIDUALS IN
THE UNITED STATES (THE "WHITE PAGE FILE") contained within the infoUSA Database
and that include the data elements described in Section IV (the "infoUSA
Content") are being licensed by infoUSA to Licensee pursuant to this Agreement.
D. LICENSED USE OF THE infoUSA DATABASE AND THE infoUSA CONTENT (THE
"SERVICE") AND THE infoUSA BRAND FEATURES
1) Subject to the terms and conditions of this Agreement, infoUSA
hereby grants Licensee a limited, non-exclusive,
non-transferable license for the Term to use the infoUSA
Database and the Codemaster (defined in Section III, paragraph
1) and to use, reproduce, distribute, display and transmit the
infoUSA Content.
Licensee may reproduce, distribute, display and transmit
(collectively, "Display") the infoUSA Content in electronic
form as a part of the Service (defined below) and may permit
Users (defined in Section III, paragraph 1) to search for,
locate and subsequently view (collectively "Access") such
infoUSA Content.
The method of delivery of the infoUSA Database and infoUSA
Content to Licensee by infoUSA is described in Section IV.
2) THE SERVICE: The Service is a wireless directory assistance
and call completion service Licensee provides to Co-Branders
(defined in (b) below) so that such Co-Branders can make
certain services available to Users via wireless devices and
to the extent that Users are required to implement certain
features of the Service, through Co-Branders web-sites on the
Internet, and which will use the infoUSA Content as follows:
a) WIRELESS TELEPHONE DIRECTORY ASSISTANCE AND CALL COMPLETION
SERVICE. Licensee will maintain and operate the Service during
the Term in order to enable Users to search for and locate the
infoUSA Content in the following manner and to subsequently
Access the infoUSA Content:
Intelligent Information, Incorporated. Page 1 03/06/00
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
- The Service shall permit Users to search by one
business category, a business name or a person's
name in a User-defined geography.
- In response to such search, the Service will
display a Page of listings of businesses or
persons which show business (person) name, street
address and telephone number (no zip code)(a
"Listing").
- No page shall show more than 3 Listings at one
time
- Except as may be required in connection with the
permitted uses hereunder, there shall be no
downloading, electronically capturing or copying
of infoUSA data.
- Except as may be required in connection with the
permitted uses hereunder, the directory
assistance and call completion features will not
be made available to Users via the Internet.
From time to time, infoUSA may provide written notice to
Licensee regarding a change to the search and display
provisions described herein, and, upon mutual agreement by
both parties Licensee agrees to make such changes within
thirty (30) days of receipt of infoUSA's notice.
b) CO-BRANDING
Licensee shall be entitled to enable the Service through
either its own or any of its distributors' wireless services
("Co-Branding"), and as required to implement certain features
of the Service through Co-Branders web-sites . Co-Branding
shall mean that any such Licensee distributor (hereinafter
"Co-Brander") may offer directory assistance with infoUSA
Content, a hyperlinked logo (as described in section F1) on
such Co-Branded Site.
Licensee shall provide infoUSA with quarterly reports
identifying by name all Co-Branded sites which have access to
the infoUSA Database through the Service.
3) Subject to the terms and conditions of this Agreement, infoUSA
hereby grants Licensee a limited, non-exclusive,
non-transferable, worldwide, fully-paid license for the Term
to use, reproduce and display infoUSA's trademarks, service
marks, logos and other distinctive brand features that are
used in the infoUSA Content, and infoUSA's products to be
promoted by Licensee pursuant to Section F below (collectively
"infoUSA Brand Features"). The infoUSA Brand Features are set
forth on Appendix A, which is attached hereto and incorporated
herein by this reference.
Licensee may only use, reproduce and display the infoUSA Brand
Features as reasonably necessary in order to perform its
obligations under this Agreement. Licensee acknowledges that
infoUSA is the owner of the infoUSA Brand Features, and any
trademark applications and/or registrations thereto, and
agrees that it will do nothing inconsistent with such
ownership. Licensee may however distribute its Service
containing infoUSA brand features & infoUSA data via
web-Portals, Mobile Phone carriers (as described in Section
ID2)
4) Licensee will not pursue any infoUSA customers or licensees
for purposes of providing the Service incorporating the
infoUSA Content to such customers or licensees without the
prior written approval by infoUSA. However, distribution as
described in this Section ID2 and ID3 above will be permitted.
Intelligent Information, Incorporated. Page 2 03/06/00
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
E. LEGAL, COPYRIGHT AND OTHER NOTICES
To the extent technically feasible, Licensee shall continuously display
the infoUSA logo and copyright notice ("Display Items") on all screens
where InfoUSA Content is displayed. Where applicable, the Display Items
will at all times conform to the specifications set forth in Appendix
A.
At such time as it becomes technically and economically feasible to do
so, License shall hyperlink the Display Items to infoUSA 's website to
permit Users to purchase infoUSA products such as sales leads and
mailing labels and business credit reports, and infoUSA will pay
Licensee a Revenue Share for sales of the products as described in
Section II, F5.
F. PROMOTION OF infoUSA PRODUCTS
In partial consideration of the licenses granted to Licensee in this
Agreement, Licensee shall make, to the extent it is both technically and
economically feasible to do so, commercially reasonable efforts to promote
infoUSA's products as follows:
1) BUTTONS: The Licensee will post on the screens of its Service the
following advertisements in the form of buttons ("Buttons"). Such Buttons will
provide a hyperlink to the infoUSA web site that will allow Users to link to the
infoUSA.com web site to purchase the following services:
a) SALES LEADS AND MAILING LABELS: Allows Users to purchase infoUSA
Content in a mailing list format through the Service. Licensee will
feature Button on the search results screen for every Category search
on the Service. The Button will be prominently placed on the search
results screen so those Users do not have to scroll to view on a
640x480 screen.
b) BUSINESS CREDIT REPORTS: Allows Users to purchase infoUSA Content in
a print report format through the Service. Licensee will feature a
Button on the search results screen beside every business Listing.
InfoUSA acknowledges that due to the constraints inherent in the design of
wireless small screen devices, it may not be possible for Licensee to promote
infoUSA's products in this manner.
SECTION II -- LICENSE FEES & ROYALTIES
G. LICENSE FEES & ROYALTIES
In partial consideration for the licenses granted pursuant to Section
1D above, Licensee shall pay infoUSA as follows:
1) MINIMUM CPM FEES:
Licensee shall pay infoUSA [*]:
a) CPM Royalties as described in paragraph 2 below; or
b) An [*] as follows:
[*]
[*]
Licensee [*] as follows:
[*]
2) CPM ROYALTIES: [*]. "Page" is defined as any display of either a
Listing or a Record (as defined in
Intelligent Information, Incorporated. Page 3 03/06/00
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
Section ID2). For [*].
3) REPORTING: Within thirty (30) days following the close of each month
during the term of this Agreement, Licensee will supply infoUSA with a
CPM Report and once the [*].
4) UPDATE FEE: There will be [*] for each infoUSA Update (defined in
Section IV).
5) [*]: infoUSA will [*] the Buttons (described in Section II F1 above),
and which orders have been electronically fulfilled from infoUSA's
web-site.
6) [*]
The provisions of [*] will be described in greater detail in a [*],
which will be mutually agreed to by infoUSA and Licensee and attached
to this Agreement through an amendment at a later date.
SECTION III - TERMS & CONDITIONS
1. DEFINITIONS.
1.1 User refers to any company, organization or individual, which has
access to the infoUSA Content for personal, noncommercial use through the
Service.
1.2 CODEMASTER refers to the Codemaster Data Table and Abbreviation Table.
The CODEMASTER is to be used by Licensee for internal purposes only, and is
provided by infoUSA so that Licensee is able to interpret the infoUSA Database
raw data.
1.3 "Direct Competitor(s)" shall mean Acxiom, Experian, The Polk Company,
Dun & Bradstreet, International Business Lists, Harte-Hanks and TransUnion, and
any other parties which directly compete, as a primary part of their business,
with infoUSA in the data compilation or direct marketing industry. From
time-to-time during the Term the infoUSA may revise the list of Direct
Competitors with Licensee's written consent, which consent shall not be
unreasonably withheld.
2. UNAUTHORIZED USE.
2.1 Any use by Licensee or any User of the infoUSA Database, the infoUSA
Content, the infoUSA Brand Features or any other item of infoUSA's proprietary
or intellectual property (together with the infoUSA Brand Features, collectively
the "infoUSA Intellectual Property") which is not expressly authorized in this
Agreement or reasonably contemplated thereby is strictly prohibited. Without
limiting the generality of the foregoing, unless specifically permitted by this
Agreement or unless authorized in writing by infoUSA (which authorization may be
withheld unreasonably), Licensee and the Users are expressly prohibited from (i)
Co-branding the Service with, or otherwise providing the Service on behalf of,
any third-party, (ii) sublicensing or reselling the infoUSA Database or any
infoUSA Content; (iii) using or allowing third parties to use any infoUSA
Content for the purpose of compiling, enhancing, verifying, supplementing,
adding to or deleting from any mailing list, geographic or trade directories,
business directories, classified directories, classified advertising, or other
compilation of information which is sold, rented, published, furnished or in any
manner provided to a third party; (iv) using the infoUSA Database, any infoUSA
Content or any infoUSA Intellectual Property in any service or product not
specifically authorized in this Agreement, offering it through any third party
or disclosing it to anyone other than a User; or (v) disassembling, decompiling,
reverse engineering, modifying or otherwise altering the infoUSA Database or any
infoUSA Content. Licensee agrees that it will notify infoUSA promptly in the
event it becomes aware of any use or disclosure of the infoUSA Database or any
infoUSA Content which is not permitted by this Agreement.
2.2 Licensee shall use reasonable efforts to notify Users that they are not
permitted to create mailing or telemarketing lists. Licensee will house the
infoUSA Content on the Internet behind firewalls and will use reasonable efforts
to prevent unauthorized usage or copying of the infoUSA Database or the infoUSA
Content. Without limiting the foregoing Licensee will take reasonable
precautions to: a) Protect the integrity of the infoUSA Database and the
Intelligent Information, Incorporated. Page 4 03/06/00
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
infoUSA Content; b) Control access to the infoUSA Content; and, if applicable c)
Reasonably ensure that the amount of usage of the infoUSA Content is accurately
recorded.
2.3 Licensee acknowledges that any unauthorized use of the infoUSA
Database, any infoUSA Content or any infoUSA Intellectual Property will cause
irreparable harm and injury to infoUSA for which there is no adequate remedy at
law. In addition to all other remedies available under this Agreement, at law or
in equity, Licensee further agrees that infoUSA shall be entitled to injunctive
relief in the event Licensee uses the infoUSA Database, any infoUSA Content or
any infoUSA Intellectual Property in violation of the limited license granted
hereunder.
3. LICENSE FEES AND ROYALTIES.
3.1 Any royalties or fees payable under this Agreement by Licensee, which
are not paid when due, shall accrue interest at the [*], or the highest
percentage permitted by applicable state law, from the due date until paid.
3.2 No more frequently than once in any twelve month period, Licensee shall
permit infoUSA to audit its accounts, books and records, as they relate to
Licensee's rights or obligations hereunder, at infoUSA's expense and at a
mutually agreed upon time upon reasonable notice. The right granted under this
Section 3.2 shall exist during the term of this Agreement and for one year
thereafter. Upon concluding any audit, infoUSA shall notify Licensee of the
results thereof. In the event that infoUSA notifies Licensee that an adjustment
must be made to the royalties and/or fees previously paid by Licensee hereunder,
the parties shall use their best efforts in good faith to agree upon the amount
of any such adjustment. Any such adjustment shall be paid within 5 business days
after such agreement is reached. In the event the parties agree that the total
amount of royalties and/or fees previously paid was less than the amount
required to be paid under this Agreement and such deficiency is [*] or more of
the amount previously paid, [*].
3.3 Unless otherwise specified in this Agreement, Licensee acknowledges
that termination of this Agreement shall not terminate, diminish or otherwise
affect Licensee's obligation to pay license fees or any fees or costs which have
accrued under this Agreement.
4. DELIVERY.
4.1 If Licensee should be in material default of the Agreement infoUSA may,
in its sole discretion, withhold infoUSA Updates.
4.2 Licensee shall make available to infoUSA access to the Service [*], so
that infoUSA can understand and monitor the use of the infoUSA Content as
incorporated into the Service, and to approve such use prior to its release.
5 TERMINATION.
5.1 Either party may terminate this Agreement as follows: (a) if the other
party materially breaches any term or condition of this Agreement (except as
otherwise provided in paragraphs 5.2 or 5.3 of this Agreement) and fails to
remedy such breach within thirty (30) days after written notice of such breach;
or (b) if the other party becomes subject to any receivership, insolvency,
bankruptcy, moratorium or similar proceeding for more than thirty (30) days
5.2 infoUSA may terminate this Agreement immediately if (a) Licensee
participates in any unauthorized use of the infoUSA Database, the infoUSA
Content or the infoUSA Brand Features (including, without limitation,
participating in or allowing a third partie's unauthorized use thereof or
failing to maintain controls as outlined in paragraph 2.2 above; (b) Licensee
fails to pay any amount due hereunder within 10 days after receiving notice from
infoUSA that such payment is past due; (c) all or substantially all of the
assets of Licensee are sold, assigned or otherwise transferred to any Direct
Competitor; (d) 50% or more of the equity securities or voting interests of
Licensee or the ultimate parent of Licensee is sold, assigned or otherwise
transferred in a single transaction or a series of related transactions to a
Direct Competitor; (e) Licensee or its ultimate parent is a party to a merger,
consolidation or other similar transaction with a Direct Competitor; or (e)
Licensee has materially breached any term or condition of this Agreement on 3 or
more occasions, even if previous breaches were cured in accordance with the
provisions of Paragraph 5.1(a).
5.3 Upon termination of this Agreement for any reason, Licensee shall (i)
ensure that all copies of the infoUSA Database, the infoUSA Content and any
related data and information is deleted from its computers and, if applicable
Intelligent Information, Incorporated. Page 5 03/06/00
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
the computers of a third-party Processor; (ii) cease any and all use of the
infoUSA Database, infoUSA Content and infoUSA Brand Features; (iii) return or
destroy all copies, whether in print, tape or other media, of any of the infoUSA
Database, infoUSA Content or infoUSA Brand Features in its possession to infoUSA
no later than five (5) days after termination of this Agreement; and, (iv)
certify in writing within ten (10) days after termination of this Agreement that
Licensee has deleted or returned to infoUSA all copies of the infoUSA Database,
infoUSA Content and infoUSA Brand Features.
6. PROPRIETARY RIGHTS. Licensee acknowledges that all rights, title and
interest to the infoUSA Database, the infoUSA Content and the infoUSA Brand
Features, regardless of the forms of media in which such may be contained, shall
be and are retained by infoUSA, subject to the license granted to Licensee under
this Agreement.
7. CONFIDENTIALITY. The Confidentiality, Non-Disclosure and
Non-Solicitation Agreement previously executed by the Parties is expressly
incorporated herein by this reference, and the terms thereof shall survive the
termination of this Agreement.
8. DISCLAIMER OF WARRANTY, LICENSEE'S WARRANTIES; LIMITATION OF REMEDY, AND
LIMITATION OF LIABILITY.
8.1 Except for its obligation to update the Database for the Term of the
Agreement, the infoUSA Content is licensed on an "AS IS" basis without
guarantee. infoUSA does not guarantee that the infoUSA Database or the infoUSA
Content will meet the Licensee's or any User's requirements; that it will
operate in the combinations, or in the equipment, selected by the Licensee or
any User; or that its operation will be error-free or without interruption.
infoUSA MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND WITH RESPECT TO THE
infoUSA DATABASE OR THE infoUSA CONTENT, INCLUDING, WITHOUT LIMITATION, ANY
EXPRESS OR IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF
MERCHANTABILITY.
InfoUSA warrants and represents that it (a) it has the necessary power and
authority to enter into and perform its obligations under this Agreement and has
properly authorized the same by all requisite action; (b) it has all necessary
rights to grant the license under this Agreement; and (c) the infoUSA Database
and associated trademarks do not infringe upon any Intellectual Property Rights
of any third party. Notwithstanding any other provision in this Agreement,
infoUSA shall defend or settle at its own expense any claim or suit against
Licensee arising out of or in connection with an assertion that the infoUSA
Database infringes any Intellectual Property Rights, and infoUSA shall indemnify
and hold harmless Licensee from damages, costs, and attorneys' fees, incurred in
such suit or in the defense or the settlement thereof.
Licensee warrants and represents that it (a) it has the necessary power and
authority to enter into and perform its obligations under this Agreement and has
properly authorized the same by all requisite action; (b) it has all necessary
rights to accept the license granted to Licensee under this Agreement; and (c)
the Service, including any other database content and software and associated
trademarks does not knowingly infringe upon any Intellectual Property Rights of
any third party. Notwithstanding any other provision in this Agreement, Licensee
shall defend or settle at its own expense any claim or suit against infoUSA
arising out of or in connection with an assertion that the Service or any
portion thereof infringes any Intellectual Property Rights, and Licensee shall
indemnify and hold harmless infoUSA from damages, costs, and attorneys' fees, if
any, finally awarded in such suit or the amount of the settlement thereof.
8.2 Following the delivery of the infoUSA Database or any infoUSA Update,
infoUSA shall not be liable to Licensee or any third party in any way whatsoever
due to, or as a result of, any modification or alteration of the infoUSA
Database or the infoUSA Content by Licensee or by any other Person.
8.3 EXCEPT FOR ANY LIABILITY ARISING PURSUANT TO 8.1(c) infoUSA'S ENTIRE
LIABILITY FOR DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT WILL IN NO
EVENT EXCEED THE AMOUNT OF FEES PAID BY LICENSEE IN THE YEAR IN WHICH infoUSA IS
FOUND TO BE LIABLE.
8.4 NEITHER PARTY SHALL NOT LIABLE FOR INDIRECT, SPECIAL CONSEQUENTIAL OR
INCIDENTAL DAMAGES OR FOR ANY LOST PROFITS OR ANY CLAIM OR DEMAND OF A SIMILAR
NATURE OR KIND, WHETHER ASSERTED BY A PARTY OR BY ANY OTHER PARTY, EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Intelligent Information, Incorporated. Page 6 03/06/00
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
9. FORCE MAJEURE. Except for the payment of money, neither party shall be
liable for delays or failures in performance resulting from acts beyond the
reasonable control of such party. Such acts shall include but not be limited to
acts of God, riots, acts of war, and other disasters. In the event such an act
occurs, the party whose performance is delayed or affected will give prompt
notice to the other party, stating the period of time the delay or failure is
expected to continue.
10. ASSIGNMENTS. Licensee shall not assign this Agreement, or delegate or
subcontract any of its obligations hereunder.
11. MODIFICATION. No modification of this Agreement shall be binding upon
the Licensee and infoUSA unless made in writing and signed by duly authorized
officers of both parties.
12. WHOLE AGREEMENT. This Agreement does not constitute an offer by infoUSA
and it shall not be effective until signed by both parties. This Agreement
constitutes the entire Agreement between the parties with respect to its subject
matter and supersedes all prior and contemporaneous communications, negotiations
and agreements with respect thereto.
13. WAIVERS. The failure of either party to require the performance of any
term or condition of this Agreement shall not prevent any subsequent
enforcement of this term or condition, nor shall it be deemed a waiver of any
other different or subsequent breach.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nebraska, without regard to Nebraska's
conflicts of laws principles and both parties consent to the exclusive
jurisdiction of the state or federal courts located in Omaha, Douglas County,
Nebraska.
15. SEVERABILITY. A decision by any court of competent jurisdiction
invalidating or holding unenforceable any part of this Agreement will not
affect the validity and enforceability of any other part of this Agreement. If
any part of this Agreement is found to be invalid or unenforceable, that part
will be amended to achieve as nearly as possible the objectives of the original
provision within the limits of applicable law.
16. NO THIRD PARTY BENEFICIARIES. This Agreement is made solely and
specifically between and for the benefit of the parties signatory hereto, and
no other person or entity whatsoever shall have any rights, interests or claims
hereunder or be entitled to any benefits under or on account of this Agreement
as a third party beneficiary or otherwise.
17. RELATIONSHIP OF PARTIES. This Agreement does not create a joint
venture, agency relationship or partnership between infoUSA and Licensee, and
each will act independently of the other. Neither party is empowered to bind or
commit the other to any contract or other obligation.
18. COMPLIANCE. Licensee shall use, and shall ensure that its Users use,
the infoUSA Database and the infoUSA Content in strict compliance with all
applicable federal, state and local laws, rules and regulations, including but
not limited to those concerning fax and/or e-mail transmissions, direct
marketing. Licensee further covenants and agrees that it shall not use the
infoUSA Content in any combination, manner, apparatus, method, system or
process which directly or indirectly infringes or violates the copyright,
patent or other intellectual property rights of any other party.
19. TAXES. Licensee shall be responsible to pay all taxes of any type,
nature or description (including, but not limited to, sale, use, gross
receipts, excise, import or export) imposed on the transactions, products or
services described in this Agreement, except for taxes imposed on or measured
by infoUSA's corporate income.
20. HEADINGS. The title of each Exhibit or Appendix and the headings or
titles preceding the text of the Sections or Paragraphs are inserted solely for
convenience of reference, and shall not constitute a part of this Agreement,
nor shall they affect the meaning, construction or effect of this Agreement.
The parties have each participated in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
Intelligent Information, Incorporated. Page 7 03/06/00
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> 8
21. QUALITY STANDARDS. Each of infoUSA and Licensee shall at all times
conduct all aspects of its business which relate to this transaction in a
professional manner that will reflect favorably upon the other party, so as to
protect the reputation of the other party, its products and services.
22. INCLUSION OF NOTICES. Licensee will not alter or impair any
acknowledgment of copyright or other intellectual property right of infoUSA
that may appear in the infoUSA Database, the infoUSA Content or the infoUSA
Brand Features, and shall include all copyright, trademark and other similar
notices that infoUSA may reasonably request on the screens of the Service and
as a part of the promotional efforts described in Section 1F above.
23. ALTERATION OF BRAND FEATURES. infoUSA shall notify Licensee if it
changes or adds to its Brand Features, and Licensee shall, within 30 days after
receiving such notification, incorporate such changed or added Brand Features
into the Service, the Buttons, the Banner Ads or any other of infoUSA's
products to be promoted by Licensee pursuant to Section1 F above.
24. REMEDIES. Except as otherwise provided in this Agreement, the remedies
contained in this Agreement are cumulative and non-exclusive and may be
utilized in addition to all other remedies available to either party at law or
in equity.
SECTION IV - NOTICES/DATABASE SPECIFICATIONS
1) NOTICES.
Any notice required to be provided under this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery, deposit in
the U.S. post office as certified or registered mail, deposit in a private next
day delivery service with written verification of receipt or when sent by
confirmed telefax to the following individuals:
If to Licensee:
Ms. Joan Dale
Manager, Content, Brands and Commerce
Intelligent Information Incorporated.
181 Harbor Drive
Third Floor
Stamford, CT 06902
Phone: 203-969-0020
Fax: 203-969-0018
E-mail: [email protected]
- - From time to time, infoUSA receives urgent requests to remove or modify
certain listings. In such cases, Licensee can be contacted via e-mail at
the following address:
E-mail: [email protected]
If to infoUSA: infoUSA Inc.
5711 S. 86 Circle
Omaha, NE 68127
Attn: Director, Internet License Division
Fax No.: (402) 331-4950
with a copy to:
infoUSA Inc.
5711 S.86 Circle
Omaha, NE 68127
Attn: Corporate Counsel
Fax No.: (402) 537-6197
Intelligent Information, Incorporated. Page 8 03/06/00
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> 9
2) DELIVERY Within 15 business days after the Effective Date, infoUSA
will deliver the most recent version of the infoUSA Database and the Codemaster
to Licensee at the following address:
Ms. Joan Dale
Manager, Content, Brands and Commerce
Intelligent Information Incorporated
181 Harbor Drive
Third Floor
Stamford, CT 06902
Phone: 203-969-0020
Fax: 203-969-0018
E-mail: [email protected]
3) UPDATES Each month thereafter, infoUSA will deliver to Licensee a
full-file White Page File, a full-file Canadian Business File, and a
transaction-file U.S. Business File updated version of the infoUSA
Content, as well as an updated CodeMaster ("infoUSA Update").
4) DATA ELEMENTS The infoUSA Content will contain data elements, where
available, as follows:
a) US FILE
<TABLE>
<CAPTION>
- ----------------------------------------------
DESCRIPTION LENGTH
- ----------------------------------------------
<S> <C>
- ----------------------------------------------
Business Name 30
- ----------------------------------------------
Address 30
- ----------------------------------------------
City 16
- ----------------------------------------------
State Abbreviation 2
- ----------------------------------------------
Zip Code 5
- ----------------------------------------------
Zip+4 Code 4
- ----------------------------------------------
FILLER 3
- ----------------------------------------------
FILLER 4
- ----------------------------------------------
Area Code & Phone Number 10
- ----------------------------------------------
Last Name 14
- ----------------------------------------------
First Name 11
- ----------------------------------------------
Professional Title 3
- ----------------------------------------------
Primary SIC Code 6
- ----------------------------------------------
Franchise/Specialty 6
- ----------------------------------------------
Industry Specific Code 1
- ----------------------------------------------
Transaction Code 1
- ----------------------------------------------
Yellow Page Code 5
- ----------------------------------------------
Secondary SIC Group #1 19
- ----------------------------------------------
Secondary SIC Group #2 19
- ----------------------------------------------
Secondary SIC Group #3 19
- ----------------------------------------------
Secondary SIC Group #4 19
- ----------------------------------------------
ABI Number 9
- ----------------------------------------------
Latitude 9
- ----------------------------------------------
Longitude 9
- ----------------------------------------------
Census Tract 6
- ----------------------------------------------
Block Group 1
- ----------------------------------------------
Match Level 1
- ----------------------------------------------
</TABLE>
Intelligent Information, Incorporated. Page 9 03/06/00
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> 10
b) US WHITE PAGE FILE
infoUSA WHITE PAGE COMPILATION
Record Layout
<TABLE>
<CAPTION>
POSITION LENGTH NAME DESCRIPTION
<S> <C> <C> <C>
1-20 20 Last Name Last Name of Resident
21-35 15 First Name First Name of Resident
36-50 15 Middle Name Middle Name of Resident
51-65 15 Nickname Nickname of Resident
66-68 3 Generational Generational of Resident
69-72 4 Title Title of Resident
73-76 4 Professional Suffix Professional Suffix of Resident
77-96 20 2nd person Last Name Last Name of 2nd person if Different from Resident
97-111 15 2nd person First Name First Name of 2nd person
112-126 15 2nd person Middle Name Middle Name of 2nd person
127-141 15 2nd person Nickname Nickname of 2nd person
142-144 3 2nd person Generational Generational of 2nd person
145-148 4 Title of 2nd person Title of 2nd person
149-152 4 2nd person Prof. Suffix Professional Suffix of 2nd person
153-162 10 House Number House Number
163-164 2 Pre-Directional Street Pre-directional
165-189 25 Street Name Street Name without Directional or Suffix
190-193 4 Street Suffix Street Name Suffix
194-195 2 Post-Directional Street Post-Directional
196-205 10 Apartment Number Apartment Number, Floor Number, etc.
206-206 1 High Rise High Rise Flag from Code 1
S = Normal Street Address
G = General Delivery
P = PO Box
R = Rural Route or HC Addresses
H = High Rise Apartment
F = Firm Record
Blank = Unable to ZIP+4
207-234 28 Suburban City City Abbreviation from Directory
235-262 28 Postal City Postal City Name
263-264 2 State State Abbreviation
265-269 5 ZIP Code ZIP Code
270-273 4 ZIP+4 ZIP+4
274-277 4 Carrier Route Carrier Route Code
278-279 2 State Code State Code
280-282 3 County Code County Code
283-285 3 Area Code Area Code
286-292 7 Phone Number Phone Number
293-295 3 DPB Delivery Point Bar Code
296-305 10 Record ID # Household ID #
306-309 4 Phone Type Flag Indicates Presence of Teenline, Fax, Modem
1 = Modem Number
2 = "TDD" appears with phone number
</TABLE>
Intelligent Information, Incorporated. Page 10 03/06/00
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> 11
<TABLE>
<S> <C> <C> <C>
4 = "TTY" appears with phone number
8 = Cellular, Mobile or Car Phone
16 = No Solicitation Record
32 = Additional Phone listed
64 = Teenline, Teen Phone or Children's Phone
128 = Fax
512 = Probable Business
1024 = Pager
2048 = Unlisted or Blank Phone Number
310-318 9 Latt Latitude (6 decimal places)
319-327 9 Long Longitude (6decimal places)
328-328 1 Mtchl Match Level
329-334 6 Census Census Tract
335-335 1 Block Group Block Group
</TABLE>
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
*SEE COMMENTS BELOW
336-336 1 No Solicitation* No Solicitation Flag
1 = "No Solicitation" flag in book
2 = Record in DMA Telephone File
3 = Record in DMA Mailing File
4 = Record in DMA Telephone and Mailing File
5 = Record in State Supplied Suppression File
6 = infoUSA suppression file, record must be
suppressed
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
*SEE COMMENTS BELOW
337-337 1 Deceased Flag* Records Flagged as Deceased
0 = Neither Party Deceased
1 = First Person Deceased
2 = Second Person Deceased
3 = Both Persons Deceased
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
338-341 4 MSA Code Metropolitan Statistical Area Code
</TABLE>
Unless noted, all fields will be left justified with trailing blanks.
Carriage return and line feed at the end of each record.
* NOTE: PLEASE REVIEW THE RECORD LAYOUT CAREFULLY.
THE LICENSED DATA PROVIDED UNDER THIS AGREEMENT MAY INCLUDE FIELDS POPULATED
WITH DATA WHOSE USE FOR CERTAIN PURPOSES IS LIMITED UNDER FEDERAL,
STATE OR OTHER APPLICABLE LAWS. UNDER THE TERMS OF THE AGREEMENT IT IS
SOLELY LICENSEE'S RESPONSIBILITY TO COMPLY WITH SUCH LAWS.
c) CANADIAN BUSINESS FILE (GEO-CODES NOT AVAILABLE AT THIS TIME)
Intelligent Information, Incorporated. Page 11 03/06/00
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> 12
<TABLE>
<S> <C>
- -----------------------------------------
COMPANY NAME 30
- -----------------------------------------
ADDRESS 30
- -----------------------------------------
CITY 30
- -----------------------------------------
PROVINCE 2
- -----------------------------------------
POSTAL CODE 7
- -----------------------------------------
SUITE # 6
- -----------------------------------------
PHONE 10
- -----------------------------------------
FIRST NAME 11
- -----------------------------------------
LAST NAME 20
- -----------------------------------------
PROFESSIONAL 3
- -----------------------------------------
PRMSIC 6
- -----------------------------------------
FRNCOD 6
- -----------------------------------------
INDUSTRY SPEC 1
- -----------------------------------------
FILLER 1
- -----------------------------------------
YPCODE 5
- -----------------------------------------
SSIC1 6
- -----------------------------------------
FRNCOD 6
- -----------------------------------------
INDUSTRY SPEC 1
- -----------------------------------------
FILLER 1
- -----------------------------------------
YPCOD1 5
- -----------------------------------------
SSIC2 6
- -----------------------------------------
FRNCOD 6
- -----------------------------------------
INDUSTRY SPEC 1
- -----------------------------------------
FILLER 1
- -----------------------------------------
YPCOD2 5
- -----------------------------------------
SSIC3 6
- -----------------------------------------
FRNCOD 6
- -----------------------------------------
INDUSTRY SPEC 1
- -----------------------------------------
FILLER 1
- -----------------------------------------
YPCOD3 5
- -----------------------------------------
SSIC4 6
- -----------------------------------------
FRNCOD 6
- -----------------------------------------
INDUSTRY SPEC 1
- -----------------------------------------
FILLER 1
- -----------------------------------------
YPCOD4 5
- -----------------------------------------
CBI NUMBER 9
- -----------------------------------------
</TABLE>
In the event that Licensee desires to license data elements which are included
on the infoUSA Database but are not part of the infoUSA Content, Licensee shall
notify infoUSA and the parties shall negotiate in good faith an additional,
commercially reasonable license fee for such additional data elements. Licensee
shall pay said license fee to infoUSA in the manner, and pursuant to terms and
conditions, agreed upon by the parties. Simultaneously with the payment of the
license fee, Section IV of this Agreement shall be amended to include such
additional data elements.
[SIGNATURE PAGE TO FOLLOW]
Intelligent Information, Incorporated. Page 12 03/06/00
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> 13
<TABLE>
<S> <C>
READ AND APPROVED
Intelligent Information, Inc., Licensee infoUSA Inc.
- ------------------------------- -------------------------------
Signature Signature
- ------------------------------- -------------------------------
Name Name
- ------------------------------- -------------------------------
Title Title
- ------------------------------- -------------------------------
Date Date
</TABLE>
APPENDIX A
infoUSA LOGO
COPYRIGHT NOTICES
BRAND FEATURES
DISPLAYING THE infoUSA LOGO ON THE SERVICE
Each Web search results page containing infoUSA Content will continuously
display the following logo and copyright notice:
[infoUSA LOGO]
On delivery to a mobile phone the following will be displayed at the bottom of
the displayed list: "Data by InfoUSA"
The infoUSA logo will provided by infoUSA on the Web, and will be approximately
the same size as Licensee's logo.
Listing: A Listing(s) will appear as follows in any order.:
XYZ Company
123 Main Street
(987)654-3210
Intelligent Information, Incorporated. Page 13 03/06/00
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 10.28
DISTRIBUTOR AGREEMENT
This Distributor Agreement ("Agreement") is entered into by and between
Comtex Scientific Corporation ("COMTEX"), a New York corporation with its
principal offices at 4900 Seminary Road, Suite 800, Alexandria, Virginia 22311,
and Intelligent Information Incorporated (the "Distributor"), a Delaware
corporation with its principal offices at One Dock Street, Suite 500, Stamford,
Connecticut 06902.
1. DEFINITIONS
a. Service. The term "the Service" means the electronic
information services identified in Exhibit A to this Agreement.
b. Content. The term "Content" means all material, whether or not
protected by copyright, including but not limited to text, images, and other
multimedia data, provided or made available as part of the Service.
c. Information Providers. The term "Information Providers" means
third parties from whom COMTEX acquires the right to distribute Content provided
or made available as part of the Service.
d. Users. The term "Users" means all third parties to whom
Distributor, subject to the terms and conditions of this Agreement, may license,
sell, transfer, make available or otherwise distribute the Service.
2. DISTRIBUTION
a. Grant of Rights. Subject to the terms and conditions of this
Agreement, COMTEX grants Distributor a nonexclusive license and right to market
the Service, distribute the Service to Users, and license Users to use the
Service for their internal use.
b. Restrictions on Distribution
i. Unauthorized Entities. Distributor shall not knowingly
license, sell, transmit or otherwise distribute the Service or Content
to print or broadcast news media or any of their parents, subsidiaries,
and affiliates ("Unauthorized Entities"), without obtaining for each
such Unauthorized Entity the prior written consent of COMTEX. In the
event any such unauthorized distribution becomes known to Distributor,
Distributor immediately shall notify COMTEX and use its best efforts to
halt immediately such distribution.
ii. Redistribution. Distributor shall not license, sell,
transfer, make available or otherwise distribute the Service or Content
to any third party who, for the use or benefit of such third party's
Customers, licenses, purchases or otherwise obtains the Service or
Content from Distributor and then relicenses, resells, transfers, makes
available or otherwise redistributes such Service and Content to such
third party's Customers, without obtaining for each such third party
the prior written consent of COMTEX. For purposes of this subparagraph,
the term "Customer" shall include any individual, entity or other party
who licenses, purchases or otherwise obtains such Service or Content
from the third party.
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
c. User Agreements. Distributor shall require that each User
enter into an agreement that contains the provisions set forth in Exhibit D or
provisions substantially equivalent thereto. Such agreement, which may be
obtained in an electronic or hard-copy format, shall be retained by Distributor
for the term of this Agreement and three (3) years thereafter. Upon the request
of COMTEX, Distributor shall provide COMTEX a copy of such user agreement.
d. Reservation. COMTEX reserves the right to add or withdraw
Information Providers, Content and items of coverage from the Service without
notice.
3. MARKETING
a. Promotion. Distributor agrees to use commercially reasonable
efforts to promote and market the Service to prospective Users and to enter into
licenses for use of the Service by Users.
b. Expenses. Distributor shall be responsible for all expenses
incurred by Distributor in promoting and marketing the Service.
c. Use of Name. Distributor shall name COMTEX as one of its
information services in its formal promotional and marketing materials relating
to the Service, including press releases and advertisements.
d. Prior Approval. COMTEX and Distributor each agrees to submit
to the other party for written approval all press releases, advertising or other
promotional materials that use Service names or a party's company name not less
than fifteen (15) days before the proposed use. Each party shall not
unreasonably withhold its approval. Unless notice of approval or disapproval is
received within ten (10) days of receipt of promotional materials, approval
shall be deemed granted. Either party, however, may identify the other in its
published listing of available services or Distributors without such written
approval.
4. DELIVERY OF THE SERVICE
a. Provision of the Service. Subject to the terms and conditions
of this Agreement, COMTEX shall provide the Service to Distributor and
Distributor shall receive the Service from COMTEX in conformance with the
Technical Specifications set forth in Exhibit A.
b. Timeliness. COMTEX shall use commercially reasonable efforts
to maintain the timeliness of the information contained in the Service.
Distributor acknowledges that COMTEX relies on the performance of Information
Providers outside the control of COMTEX in order to provide the Service.
c. Proprietary Notices. Where supplied as part of the Service by
COMTEX or its Information Providers, Distributor will cause to be displayed
appropriate copyright or other proprietary notices relating to the Service.
d. Modifications. Distributor shall not edit, abridge, rewrite or
in any other way alter the Content of the Service or create any work derived
from the Content of the Service; provided, however, that Distributor may choose
not to display every story or article.
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
e. Remedies
i. Corrections. Upon receipt of written notice from
COMTEX of an error in the distribution of the Service and Content to a
User, Distributor shall use commercially reasonable efforts to promptly
correct such error.
ii. Withdrawal of Information Provider. Notwithstanding
Subparagraph 4.e.i., in the event that Distributor violates
Subparagraphs 2.b., 4.c. or 4.d., infringes any copyright of an
Information Provider, or otherwise violates the proprietary rights of
an Information Provider, COMTEX, at its sole discretion, immediately
may cease distribution of such Information Provider's Content to
Distributor until the violation or infringement is remedied by
Distributor, during which period Distributor acknowledges that such
actions by COMTEX shall not result in a breach of Subparagraphs 4.a.
and 4.b.
f. Review by COMTEX
i. Access. Throughout the term of this Agreement,
Distributor shall provide COMTEX reasonable access to Distributor's
system for distribution of the Service to Users for the sole purpose of
reviewing Distributor's implementation of the Service. This access
shall be provided by Distributor at no charge to COMTEX
ii. Opportunity to Review. Distributor shall provide
notice to COMTEX to allow COMTEX a reasonable opportunity to review
Distributor's implementation of the Service before or, if prior review
is impracticable, as soon as possible after Distributor implements the
Service or any substantial changes in its implementation of the
Service.
5. PAYMENT
a. Payment Schedule. Distributor shall pay COMTEX the Monthly
Fees and Royalties set forth in the Payment Schedule in Exhibit B.
b. Invoices and Due Date. Each month, COMTEX shall provide
Distributor an invoice setting forth the following:
(i) the Monthly Fees for the current month;
(ii) the Estimated Royalty for the current month, which
shall be equal to the prior month's actual Royalty; and
(iii) the Royalty Adjustment for the prior month, which
shall be the amount by which the prior month's Royalty, based on actual
usage, exceeds the prior month's Estimated Royalty, or Royalty Credit,
which shall be the amount by which the prior month's Estimated Royalty
exceeds the prior month's Royalty, based on actual usage. COMTEX shall
credit Distributor the amount of any Royalty Credit.
Distributor shall pay COMTEX the net amount shown on each invoice within thirty
(30) days of the date of the invoice (the "Due Date").
c. Fees Subject to Change. COMTEX may adjust the Fees set forth
in Exhibit B upon sixty (60) days prior written notice to Distributor.
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
d. Reports. Within ten (10) days after the end of each month,
Distributor shall provide COMTEX a report, in the format set forth in Exhibit B
to this Agreement or as otherwise agreed to by the parties, setting forth all
information necessary to calculate the Monthly Fees and Royalties for the prior
month.
e. Taxes. Distributor shall be responsible for the payment of
all taxes, including sales, excise, and value-added taxes, which may be levied
upon the provision of the Service or on any payments by Distributor to COMTEX
hereunder, other than franchise and income taxes of COMTEX.
f. Interest. All amounts under Subparagraph a. above owed to
COMTEX by Distributor and not paid by the Due Date shall be deemed delinquent
and [*], shall be paid by Distributor to COMTEX on such amounts. In addition,
COMTEX shall be entitled to [*]. Nothing in this paragraph shall limit COMTEX'
right to terminate this Agreement in accordance with Paragraph 6.b.
g. Audit. COMTEX or its representative may, during business
hours and upon reasonable notice, inspect and audit the relevant books and
records of Distributor for the sole purpose of verifying all information
related to payments under this Agreement. Such inspection and audit shall be at
the expense of COMTEX unless the audit shows an error of ten percent (10%) or
more in the calculation of Monthly Fees and Royalties, in which case
Distributor shall bear the expense of such inspection and audit. Any deficiency
discovered by the audit shall be paid by Distributor to COMTEX within thirty
(30) days of COMTEX notifying Distributor of the deficiency.
6. TERM AND TERMINATION
a. Term. This Agreement commences on the date of the last
signature hereto or the first commercial distribution of the Service, whichever
occurs first (the "Effective Date"), and shall remain in effect for the Initial
Term set forth in Exhibit A. This Agreement shall renew automatically for
successive periods of the duration of the Renewal Term set forth in Exhibit A,
unless either party notifies the other party in writing, at least ninety (90)
days before the end of the Initial Term or any Renewal Term, of its election
not to renew.
b. Termination. Either party may terminate this Agreement at any
time if the other party materially breaches any provision of this Agreement.
Such termination shall take effect (i) if the breach is incapable of cure, then
immediately upon the breaching party's receipt of a written notice of
termination which identifies the breach, or (ii) if the breach, capable of
being cured, has not been cured within sixty (60) days after receipt of written
notice from the non-breaching party identifying the breach, then immediately
upon receipt of a written notice of termination received within thirty (30)
days of the end of such sixty (60) day period. For purposes of this paragraph,
a breach of Subparagraphs 2.b. or 4.e.i. shall be deemed a breach that is
incapable of cure.
c. 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.
d. Obligations upon Termination. Effective upon termination of
the Agreement, Distributor shall not license, sell, transfer, make available or
otherwise distribute the Service or Content nor access, use or retransmit the
Service or Content. Within thirty (30) days of termination, Distributor shall
(i) pay to COMTEX all amounts owed under Paragraph 5 of this Agreement, and
(ii) for all Content, either (A) erase and purge the Content from any on-line
and off-line storage media and certify, in writing, to COMTEX that such erasure
and purge has been completed, or (B) certify, in writing, to COMTEX that
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
certain Content has been retained in creating back-ups during the normal course
of business and that such Content shall not be used in any manner whatsoever
without the prior consent of COMTEX.
e. Remedies upon Breach. Upon termination under Subparagraphs b.
and c. above, COMTEX shall terminate the Service and shall be entitled to
recover from Distributor (i) any payments due hereunder, (ii) the total of
Distributor's Monthly Fee multiplied by the number of months between such
termination and the date of expiration of the then current term, less savings
realized by COMTEX, (iii) all costs and expenses of collection, including
attorneys' fees, and (iv) any and all direct damages under law.
f. Survival. The provisions of Paragraphs 5, 6, 7, 8, 9, 13, 14,
15, 16 and 17 of this Agreement shall survive termination of this Agreement.
7. CONFIDENTIAL INFORMATION
a. Definition. "Confidential Information" shall mean information
which is designated as Confidential Information by the party disclosing such
information (the "Disclosing Party") (i) in Exhibit C to this Agreement, (ii)
with respect to information provided on paper, by facsimile or electronic mail,
on magnetic media, electronically or by any other medium (collectively "in
writing"), by labeling such information as "CONFIDENTIAL INFORMATION" before
the information is provided to the other party (the "Receiving Party"), or
(iii) with respect to information disclosed either verbally or in writing, by
notifying the Receiving Party, in writing within thirty (30) days of the
disclosure, that the information identified in such notice is designated
Confidential Information effective as of the Receiving Party's receipt of such
written notice.
b. Exclusions. "Confidential Information" shall not include
information that (i) is or shall become generally available without fault of
the Receiving Party, (ii) is in the Receiving Party's possession prior to its
disclosure by the Disclosing Party, (iii) is independently developed by the
Receiving Party, or (iv) is rightfully obtained by the Receiving Party from
third parties without similar restrictions.
c. Restrictions. The Receiving Party shall not disclose or
otherwise transfer Confidential Information of the Disclosing Party to any
third party, without first obtaining the Disclosing Party's consent, and shall
take all reasonable precautions to prevent inadvertent disclosure of such
Confidential Information. Except as necessary to perform under this Agreement,
the Receiving Party shall not use or copy Confidential Information of the
Disclosing Party, without first obtaining the Disclosing Party's consent, and
will take all reasonable precautions to prevent inadvertent use and copying of
such Confidential Information.
d. Injunctive Relief Exclusion of Liability Limitation. The
parties agree that damages shall be an inadequate remedy in the event of a
breach by either party of this paragraph and that any such breach by a
Receiving Party will cause the Disclosing Party great and irreparable injury
and damage. Accordingly, a party shall be entitled, without waiving any
additional rights or remedies otherwise available at law or in equity or by
statute, to injunctive and other equitable relief in the event of a breach or
intended or threatened breach of this paragraph. The provisions of Paragraph 13
shall not apply to any breach of this Paragraph 7.
8. CONTENT
a. Ownership. Distributor acknowledges that this Agreement does
not transfer to Distributor
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
or Users any proprietary right, title or interest, including copyright, in the
Content made available as part of the Service.
b. Representation. COMTEX shall use commercially reasonable
efforts to prevent the Service from distributing any Content which would
infringe any copyright or other right of any third party. Distributor
understands that COMTEX is a distributor of information services and material
licensed from Information Providers and agrees that COMTEX does not warrant
that the Content will not infringe any copyright or other right of any third
party.
9. TRADEMARKS
Distributor agrees that COMTEX' trademarks are the sole and exclusive property
of COMTEX. Pursuant to Paragraph 3.d., COMTEX shall have the right to approve
the use of its trademarks by Distributor to identify and promote use of the
Service. Upon compliance with this provision, use of such marks by Distributor
for such purposes shall be deemed approved during the term of this Agreement
unless COMTEX specifically notifies Distributor to the contrary.
10. LIMITED WARRANTIES OF COMTEX
a. Agreement. COMTEX warrants that its entry into this Agreement
does not violate any agreement between COMTEX and any third party.
b. Laws and Regulations. COMTEX warrants that its performance
under this Agreement and the use of the Service conforms to all applicable laws
and government rules and regulations, subject to the terms of this Agreement.
c. The Service and Content. Distributor agrees that the Service
and Content are provided by COMTEX "AS IS". COMTEX does not warrant the
accuracy, completeness or timeliness of the Service and Content.
11. LIMITED WARRANTIES OF DISTRIBUTOR
a. Agreement. Distributor warrants that its entry into this
Agreement does not violate any agreement between Distributor and any third
party.
b. Laws and Regulations. Distributor warrants that its
Performance under this Agreement and the use of the Service shall conform to
all applicable laws and government rules and regulations, subject to the terms
of this Agreement.
12. DISCLAIMER OF ALL OTHER WARRANTIES
THE PARTIES AGREE THAT (a) THE LIMITED WARRANTIES SET FORTH IN
PARAGRAPHS 10 AND 11 OF THIS AGREEMENT ARE THE SOLE AND EXCLUSIVE WARRANTIES
PROVIDED BY EACH PARTY, AND (b) EACH PARTY DISCLAIMS ALL OTHER WARRANTIES
INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE RELATING TO THIS AGREEMENT, PERFORMANCE UNDER
THIS AGREEMENT, THE SERVICE AND CONTENT, AND EACH PARTY'S COMPUTING AND
DISTRIBUTION SYSTEM.
13. LIMITATION OF LIABILITY
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
In no event shall COMTEX or its Information Providers be liable to
Distributor and its Users for any direct, indirect, special, exemplary or
consequential damages, 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.
14. INDEMNIFICATION
Distributor shall indemnify and hold harmless COMTEX and its
Information Providers from and against any claims, losses, expenses,
liabilities, and damages, including reasonable legal fees and expenses, arising
out of Distributor's or its Users' breach of any provision of this Agreement,
including without limitation the restrictions, obligations and warranties set
forth in Paragraphs 2, 3, 4 and 11 of this Agreement. COMTEX agrees to notify
Distributor of any such claim promptly in writing. The parties agree to
cooperate fully during such proceedings. Distributor shall defend and settle at
its sole expense all proceedings arising out of the foregoing.
15. NON-SOLICITATION
Distributor agrees that for the duration of this Agreement and for one
(1) year after expiration or termination of this Agreement, Distributor shall
not, directly or indirectly, solicit or attempt to solicit to obtain a direct
feed from any Information Provider which is providing Content made available to
Distributor as part of the Service provided by COMTEX.
16. 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 Distributor of its obligations to make
payment to COMTEX 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 COMTEX continue for more than six (6) months, then either party
shall have the right to terminate this Agreement without further liability or
obligation on the part of either party.
17. 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 delivery, 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 of confirmation.
If to COMTEX:
Debbie Woolum Ikins, Vice President, Sales
Comtex Scientific Corporation
4900 Seminary Road
Suite 800
Alexandria, Virginia 22311
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> 8
Facsimile transmission: (703) 820-2005
If to Distributor:
Robert Coletti, Controller
Intelligent Information Incorporated
One Dock Street
Suite 500
Stamford, CT 06902
18. 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 COMTEX 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 Commonwealth of Virginia.
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 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. Attorneys' Fees. Should any action be brought by either party
to enforce the provisions of this Agreement, the prevailing party, whether by
settlement, adjudication or arbitration, shall have the right to collect
reasonable attorneys' fees, expenses and costs from the nonprevailing party.
i. No Inference Against Author. No provision of this Agreement
shall be interpreted against any party because such party or its legal
representative drafted such provision.
j. Headings. The headings used in this Agreement are for
convenience only and are not to be construed to have a legal significance.
8
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> 9
k. Read and Understood. Each party acknowledges that it has read
and understands this Agreement and agrees to be bound by its terms.
AGREED:
<TABLE>
<S> <C>
INTELLIGENT INFORMATION INC.
Distributor, by: COMTEX SCIENTIFIC CORPORATION, by:
/s/ Stephen G. Maloney /s/ Charles W. Terry
- -------------------------------------- --------------------
Signature Signature
Stephen G. Maloney Charles W. Terry
- -------------------------------------- --------------------
Printed Name Printed Name
President President
- -------------------------------------- --------------------
Title Title
Date:June 9, 1995 Date:June 13, 1995
--------------------------------- ---------------
</TABLE>
9
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> 10
EXHIBIT A
THE SERVICE; TERM
1. The term "the Service" means five (5) of the following electronic
information services as selected by the Distributor:
Business CustomWire
Newswire that focuses on the activities of organizations involved with
supplying and distributing of goods and services. Features real-time
news coverage specifically in the areas of corporate performance,
executive activities, mergers and acquisitions, and new product
launches.
Community CustomWire
Newswire that focuses on the activities and events that affect people
and the quality of life in the United States. Features real-time news
coverage on safety and social services programs, regional politics,
infrastructure issues, and employment trends. Includes reports on
crime/police activities, children and education, and the effects of
natural and man-made disasters.
Entertainment CustomWire
Newswire that focuses exclusively on the world of entertainment.
Features real-time news coverage on the people and events that
captivate the imagination of the public. Includes reports on upcoming
programs, schedules, previews, and reviews in the performing, visual,
and literary arts including dance, drama, literature, film, music, and
television.
Environment CustomWire
Newswire that focuses on the events that advocate the preservation and
improvement of our natural environment. Features real-time news
coverage on the causes of air, water, and land contamination and the
effects on human health and the environment. Includes reports on
individual and industrial recycling and resource recovery efforts.
Finance CustomWire
Newswire that focuses on the events that advocate the preservation and
improvement of our natural environment. Features real-time news
coverage on the causes of air, water, and land contamination and the
effects on human health and the environment. Includes reports on
individual and industrial recycling and resource recovery efforts.
Government CustomWire
Newswire that focuses on the activities of the U.S. Federal Government.
Features real-time news coverage on our system of creating, enforcing,
and interpreting the laws of our nation. Includes reports from
Congress, the Executive Branch and its agencies, the Supreme Court,
Capitol Hill offices, labor unions, trade and industry associations,
and special-interest groups.
Healthcare CustomWire
10
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> 11
Newswire that focuses on actions taken to improve and maintain the
general health of the public. Features real-time news coverage on
programs supporting the prevention and control of disease, the results
of clinical trials and tests that ensure the safety and effectiveness
of drugs and medical devices, developments in biotechnology, and
activities to improve access to healthcare services.
High Technology CustomWire
Newswire that focuses on the production and use of advanced
technologies, specifically computers and telecommunications. Features
real-time news coverage and market data reports highlighting on-line
services, CD-ROM, electronic publishing, interactive multi-media
services, software and database applications, telecommunications, and
news and information services.
International CustomWire
Newswire that focuses on news about other countries around the world.
Features a global perspective of local and international issues
generated from eight distinct regions of the world -- Africa, Asia,
Central Eurasia, China, Eastern Europe, Latin America, Russia, and
Western Europe. Includes real-time news coverage on the activities of
international organizations, trade, changing political and economic
environments, and rising conflicts and wars in other countries.
Sports CustomWire
Newswire that focuses exclusively on the world of sports competition.
Features real-time news coverage on all professional and collegiate
sporting events in the U.S., international games and events originating
in other countries, and all reported worldwide competition. Includes
score updates, team statistics, and late breaking reports on the
players, owners, and fans.
2. Technical Specifications: Delivery will be via Mainstream FM sideband
or satellite delivery. The data format will be the standard COMTEX
proprietary format.
3. The Initial Term shall be one (1) year beginning July 1, 1995.
4. Each Renewal Term shall be one (1) year.
11
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> 12
EXHIBIT B
Payment Schedule
A. Monthly Fees: Distributor shall pay COMTEX the following monthly
minimum fees:
Months 1-3 [*]
Months 4-6 [*]
Months 7-9 [*]
Months 10-12 [*]
B. Royalties: The following royalties shall be applied against the monthly
minimum fees:
FOR HEADLINES ONLY:
Distributor shall pay COMTEX a minimum of [*] per subscriber per month.
Distributor shall pay COMTEX [*] per headline transmitted to a
subscriber.
Definition: Includes Headlines from five (5) COMTEX Custom Wires.
FOR SUMMARIES/BRIEFS:
Distributor shall pay COMTEX a minimum of [*] per subscriber per month.
Distributor shall pay COMTEX [*] per summary/brief transmitted to a
subscriber.
Definition: A summary/brief is not to exceed two hundred forty (240)
characters, or two sentences, in the event that either of these are not
separately reported in the Comtex feed.
FOR FULL-TEXT ARTICLES:
Distributor shall pay COMTEX [*] of the full-text article charge, as
agreed in writing by both Distributor and COMTEX.
Definition: Full-text article as provided in the COMTEX feed.
C. Royalty Reporting: Monthly reports should include the following
information, in spreadsheet format:
1. Number of paid users/subscribers
2. Total number of headlines transmitted
3. Total number of summaries/briefs transmitted
4. Total number of full-text articles transmitted
5. Minimum fees paid to COMTEX
6. Net royalty due COMTEX
7. Number of trial users
D. Pricing Exceptions: Discounts for large volume accounts may be agreed
to by both parties with an Amendment to the Agreement.
12
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> 13
EXHIBIT C
Confidential Information
1. This Agreement and all Exhibits thereto, except for Exhibit D.
13
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> 14
EXHIBIT D
User Agreement Provisions
1. Ownership. User agrees that Comtex Scientific Corporation
("COMTEX") and its information providers retain all rights, title and
interests, including copyright and other proprietary rights, in the Service and
all material, including but not limited to text, images, and other multimedia
data, provided or made available as part of the Service ("Content").
2. Restrictions on Use. User agrees that it will not copy nor
license, sell, transfer, make available or otherwise distribute the Service or
Content to any entity or person, except that User may (a) make available to its
employees electronic copies of Content, (b) allow its employees to store,
manipulate, and reformat Content, and (c) allow its employees to make paper
copies of Content, provided that such electronic and paper copies are used
solely internally and are not distributed to any third parties. User shall use
its best efforts to stop any unauthorized copying or distribution immediately
after such unauthorized use becomes known. The provisions of this paragraph are
for the benefit of COMTEX and its information providers, each of which shall
have the right to enforce its rights hereunder directly and on its own behalf.
3. No Warranty. The Service is provided on an "AS IS" basis.
COMTEX DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING BUT NOT LIMITED TO THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
RELATING TO THIS AGREEMENT, PERFORMANCE UNDER THIS AGREEMENT, THE SERVICE AND
CONTENT. COMTEX makes no warranties regarding the completeness, accuracy or
availability of the Service or Content.
4. Limitation of Liability. In no event shall COMTEX or its
information providers be liable to User or any other person or entity for any
direct, indirect, special, exemplary or consequential damages, including lost
profits, based on breach of warranty, contract, negligence, strict liability or
otherwise, arising under this Agreement or any performance under this
Agreement, whether or not they or it had any knowledge, actual or constructive,
that such damages might be incurred.
5. Indemnification. User shall indemnify and hold harmless
COMTEX against any claim, damages, loss, liability or expense arising out of
User's use of the Service or Content in any way contrary to this Agreement.
14
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> 15
EXHIBIT E
Information products and services that are individualized and delivered
to and received from wireless devices such as pagers, smr, cellular telephones,
laptop and palmtop personal computers, personal data assistants, PCMCIA
messaging cards, etc. over numerous wireless networks throughout the United
States and abroad.
15
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 10.28a
AMENDMENT I TO AGREEMENT
BETWEEN COMTEX AND INTELLIGENT INFORMATION INC.
Amendment as of July 1, 1995, to Agreement dated July 1, 1995, by
and between COMTEX and Intelligent Information incorporated (Distributor).
WITNESSETH:
WHEREAS, the Distributor and COMTEX wish to modify the Agreement.
NOW THEREFORE, for good and valuable consideration, and in
consideration of the mutual covenants and conditions herein set forth, and with
the intent to be legally bound thereby, COMTEX and the Distributor hereby agree
to further amend the Agreement as follows:
SECTION: 1. DEFINITIONS
Revise as follows:
e. Resellers. The term "Resellers" means third parties to which Distributor
distributes the Service and which distribute the Service to Users using wireless
technology, subject to the terms and conditions of this Agreement.
SECTION: 2.a. GRANT OF RIGHTS
Delete first sentence and insert the following:
Subject to the terms and conditions of this Agreement, COMTEX grants Distributor
a nonexclusive license and right to distribute the Service to Resellers as
described in Exhibit E, each of which shall have the right to market the
Service, distribute the Service to Users, and license Users to use the Service
for their internal use.
SECTION: 2.b. RESTRICTIONS ON DISTRIBUTION
Revise as follows:
b.iii. Special Redistribution. Distributor shall license, sell transfer, make
available or otherwise distribute content to any third party who provides such
content to wireless receiving device customers. Where this subparagraph differs
from the other subparagraphs of this section this subparagraph shall prevail.
SECTION: 2.c. USER AGREEMENT
Revise as follows:
Add: Distributor Subscriber Agreement set forth in Exhibit D is a form that
contains provisions substantially equivalent to COMTEX Agreement in Exhibit D.
19
<PAGE> 2
SECTION: 3. MARKETING
Revise as follows:
e. Promotion. Insert the term "Resellers and" in front of each occurrence of the
word "Users".
SECTION: 4.d. MODIFICATIONS
Revise as follows:
Insert the term "or forward" after the word "display".
SECTION: 5.b.ii., iii. INVOICES AND DUE DATE
Addition:
If Distributor is able to report actual usage within fifteen (15) days of the
close of each month, the billing procedures identified in Section 5. b, ii.,
iii. shall not apply to Distributor.
SECTION: 5.d. REPORTS
Revise as follows:
Change "Ten (10) days" to "Fifteen (15) days".
SECTION: 5.f. INTEREST
Revise as follows:
Insert at the end of the first sentence ", starting ten (10) days after written
notice."
SECTION: 5.g. AUDIT
Revise as follows:
Insert at the end of the last sentence "or any overages discovered shall be
withheld by Distributor from subsequent monthly payments until balance is
achieved."
SECTION: 5.g. OWNERSHIP
Revise as follows:
Insert "Resellers" after the second appearance of the word "Distributor".
SECTION: 13. LIMITATION OF LIABILITY
Revise as follows:
Insert ", Resellers" after the word "Distributor".
20
<PAGE> 3
SECTION: 15. NON-COMPETE
Revise as follows:
Add new sentence "In the event COMTEX fails to provide substantially the same or
more service, and/or if Distributor brought the Information Provider to COMTEX,
and/or COMTEX is unable or unwilling to provide parts or all of an Information
Providers service or feed, then Distributor may contract separately for such
services."
SECTION: 18.b. NO ASSIGNMENT
Revise as follows:
Insert "either" in front of the word "COMTEX" and "or distributor" after the
word "COMTEX".
21
<PAGE> 1
EXHIBIT 10.29
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is entered into by and between Press
News LTD ("Provider"), incorporated under the Canada Business Corporation Act
with its principal offices at 36 King Street East, Toronto, Ontario M5C 2L9, and
Intelligent Information Incorporated ( the Distributor"), a Delaware corporation
with its principle offices at One Dock Street, Suite 500, Stamford, Connecticut
06902.
1. DEFINITIONS
a. Information Providers. The term "Information Providers" means third
parties from whom the Provider acquires the right to distribute Content provided
or made available as part of the Service.
b. Service. The term "Service" means the electronic information
services identified in Exhibit A to this Agreement.
c. Content. The term "Content" means all information and material,
whether or not protected by copyright, including but not limited to text,
images, and other multimedia data, provided or made available as part of the
Service.
d. Resellers. The term "Resellers" means third parties through which
Distributor distributes the Service to Users, subject to the terms of this
Agreement.
e. Users. The term "Users" means all third parties to whom Distributor
may license, sell, transfer, make available or otherwise distribute the Service.
2. DISTRIBUTION
a. Grant of Rights. Subject to the terms and conditions of this
Agreement, Provider grants Distributor a nonexclusive license, except as
provided for in this Agreement, and right to distribute the Service as described
in Exhibit E. Resellers shall have the right to market the Service and
distribute the Service to Users in Canada and British Commonwealth countries
only and to use the Service for their internal use subject to the terms of this
Agreement.
b. User Agreements. Distributor shall require that each User enter into
an agreement that contains the provisions set forth in Exhibit D or provisions
substantially equivalent thereto. Such agreement may be obtained by acquiring a
signature thereon, by providing a electronic acceptance thereto, or by delivery
to the User.
c. Reservation. Provider reserves the right to add or withdraw
Information Providers, Content and items of coverage from the Service with
thirty (30) days written notice to Distributor.
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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. Distributor agrees to use commercially reasonable efforts
to promote and market the Service to prospective Resellers and Users, and to
enter into agreements for the use of the Service by Resellers and Users.
b. Expenses. Distributor shall be responsible for all expenses incurred
by Distributor in promoting and marketing the Service, unless such expenses have
been agreed to be paid by the Provider in advance.
c. Use of Name. Distributor shall use reasonable efforts to name
Provider as one of its information services in its formal promotional and
marketing materials relating to the Service.
d. Prior Approval. Provider and Distributor each agrees to submit to
the other party for written approval all press releases, advertising or other
promotional materials that use Service names or a party's company name not less
than fifteen (15) days before the proposed use. Each party shall not
unreasonably withhold its approval. Unless notice of approval or disapproval is
received within (10) days of receipt of promotional materials, approval shall be
deemed granted. Either party, however, may identify the other in its published
listing of available services or Distributors without such written approval.
4. DELIVERY OF THE SERVICE
a. Provision of the Service. Subject to the terms and conditions of
this Agreement, Provider shall provide the Service to Distributor and
Distributor shall receive the Service from Provider in conformance with the
Technical Specifications set forth in Exhibit F.
b. Timeliness. Provider shall use commercially reasonable efforts to
maintain the timeliness of the content. Distributor acknowledges that, in part,
Provider relies on the performance of Information Providers outside the control
of Provider in order to provide the Service.
c. Proprietary Notices. Where supplied as part of the Service by
Provider or its Information Providers, Distributor will cause to be displayed
appropriate copyright or other propriety notices relating to the Service.
d. Modifications. Distributor shall not edit, abridge, rewrite or in
any way alter the Content of the Service or create any work derived from the
Content of the Service, that changes its meaning or tone. Provider agrees that
Distributor may make changes to the content to meet wireless display equipment
formats.
e. Review by Provider. Throughout the term of this Agreement,
Distributor shall provide Provider reasonable access to Distributor's system for
distribution of the Service to Users for the sole purpose of reviewing
Distributor's implementation of the Service.
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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
f. Audit. Provider or its representative may, during business hours and
upon reasonable notice, inspect and audit the relevant books and records of
Distributor 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 Provider.
5. REPORTING AND PAYMENT
a. Reporting. Distributor shall provide to Provider by the 15th of each
month a report indicating the number of Users of the Service for the prior
calendar month and any such additional information as may reasonably be
requested by Provider.
b. Payment Schedule. Distributor shall pay Provider the Monthly Fees
set forth in the Payment Schedule in Exhibit B.
6. TERM AND TERMINATION
a. Term. This Agreement commences on the date of the last signature
hereto or the first commercial distribution of the Service, whichever occurs
first (the "Effective Date"), and shall remain in effect for an Initial Term of
two (2) years. This Agreement shall renew automatically for successive one year
Renewal Terms unless either party notifies the other party in writing, at least
ninety (90) days before the end of the Initial Term or any Renewal Term, of its
election not to renew. If this contract rolls over the fee per User per month
shall increase as outlined in Exhibit B.
b. Termination. Either party may terminate this Agreement at any time
if the other party materially breaches any provision of this Agreement. Such
termination shall take effect (i) if the breach is incapable of cure, then
immediately upon the breaching party's receipt of a written notice of
termination which identifies the breach, or (ii) if the breach, capable of being
cured, has not been cured within sixty thirty (30) days after receipt of written
notice from the non-breaching party identifying the breach, then immediately
upon receipt of a written notice of termination received within thirty (30) days
of the end or such thirty (30) day period.
c. Insolvency. Either party may terminate this Agreement with thirty
(30) days written notice to the other if either 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.
d. Obligations upon Termination. Effective upon termination of the
Agreement, Distributor shall not license, sell, transfer, make available or
otherwise distribute the Service or Content nor access, use or retransmit the
Service or Content. Within thirty (30) days of termination, Distributor shall
(i) pay to Provider all amounts owed under this Agreement, and (ii) for all
Content, either (A) erase and purge the Content from any on-line and off-line
storage media and certify, in writing to Provider that such eraser and purge has
been completed, or (B) certify, in writing, to Provider that
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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
certain Content has been retained in creating back-ups during the normal course
of business and that such Content shall not be used in any manner whatsoever
without the prior consent of the Provider.
7. CONFIDENTIAL INFORMATION
a. Definition. "Confidential Information" shall mean information which
is designated as Confidential Information by the party disclosing such
information (the "Disclosing Party") (i) in Exhibit C to this Agreement, (ii)
with respect to information provided on paper, by facsimile or electronic mail,
on magnetic media, electronically or by any other medium (collectively "in
writing"), by labeling such information as "CONFIDENTIAL INFORMATION" before the
information is provided to the other party (the "Receiving Party"), or (iii)
with respect to information disclosed either verbally or in writing, by
notifying the Receiving Party, in writing within thirty (30) days of the
disclosure, that the information identified in such notice is designated
Confidential Information effective as of the Receiving Party's receipt of such
written notice.
b. Exclusions. "Confidential Information" shall not include information
that (i) is or shall become generally available without fault of the Receiving
Party, (ii) is in the Receiving Party's possession prior to its disclosure by
the Disclosing Party, (iii) is independently developed by the Receiving Party,
or (iv) is rightfully obtained by the Receiving Party from third parties without
similar restrictions.
c. Restrictions. The Receiving Party shall not disclose or otherwise
transfer Confidential Information of the Disclosing Party to any third party,
without first obtaining the Disclosing Party's consent, and shall take all
reasonable precautions to prevent inadvertent disclosure of such Confidential
Information.
8. CONTENT
a. Ownership. Distributor acknowledges that this Agreement does not
transfer to Distributor, Resellers or Users any proprietary right, title or
interest, including copyright, in the Content made available as part of the
Service.
9. TRADEMARKS
Distributor agrees that Provider's trademarks are the sole and
exclusive property of Provider. Pursuant to Paragraph 3.d., Provider shall have
the right to approve the use of its trademarks by Distributor to identify and
promote use of the Service. Upon compliance with this provision, use of such
marks by Distributor for such purposes shall be deemed approved during the term
of this Agreement unless Provider specifically notifies Distributor to the
contrary.
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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
10. LIMITED WARRANTIES OF PROVIDER
a. Agreement. Provider warrants that its entry into this Agreement
does not violate any agreement between Provider and any third party.
b. Laws and Regulations. Provider warrants that its performance under
this Agreement and the use of the Service conforms to all applicable laws and
government rules and regulations, subject to the terms of this Agreement.
c. The Service and Content. Distributor agrees that the Service and
Content are provided by Provider "AS IS". Provider does not warrant the
accuracy, completeness or timeliness of the Service and Content. Provider
warrants that it has the right to provide the Service to Distributor.
11. LIMITED WARRANTIES OF DISTRIBUTOR
a. Agreement. Distributor warrants that its entry into this Agreement
does not violate any agreement between Distributor and any third party.
b. Laws and Regulations. Distributor warrants that its performance
under this Agreement and the use of the Service shall conform to all applicable
laws and government rules and regulations, subject to the terms of this
Agreement.
12. DISCLAIMER OF ALL OTHER WARRANTIES
THE PARTIES AGREE THAT (a) THE LIMITED WARRANTIES SET FORTH IN
PARAGRAPHS 10 AND 11 OF THIS AGREEMENT ARE THE SOLE AND EXCLUSIVE WARRANTIES
PROVIDED BY EACH PARTY, AND (b) EACH PARTY DISCLAIMS ALL OTHER WARRANTIES,
INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, RELATING TO THIS AGREEMENT, PERFORMANCE UNDER
THIS AGREEMENT, THE SERVICE AND CONTENT, AND EACH PARTY'S COMPUTING AND
DISTRIBUTION SYSTEM.
13. LIMITATION OF LIABILITY
In no event shall Provider or its Information Providers be liable to
Distributor, Resellers and its Users for any direct, indirect, special,
exemplary or consequential damages, 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.
14. INDEMNIFICATION
Distributor shall indemnify and hold harmless Provider and its
Information Providers from and against any claims, losses, expenses,
liabilities, and damages, including reasonable legal fees and
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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
expenses, arising out of Distributor's, Resellers' or Users' breach of any
provision of this Agreement, including without limitation the restrictions,
obligations and warranties set forth in Paragraphs 2,3,4 and 11 of this
Agreement. Provider agrees to notify Distributor of any such claim promptly in
writing. The parties agree to cooperate fully during such proceedings.
Distributor shall defend and settle at its sole expense all proceedings arising
out of the foregoing.
15. 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 Distributor of its obligations to make
payment to Provider 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 Provider 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.
16. NOTICES
All notices and demands hereunder shall be in writing and delivered by
hand delivery, certified or registered mail, return receipt requested, express
delivery service 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 delivery, upon such delivery, (ii) if by mail, express delivery service
upon such delivery, and (iii) if by facsimile transmission, upon receipt of
confirmation.
If to Provider:
Jerry Fairbridge
The Canadian Press
36 King Street East
Toronto, Ontario M5C 2L9
If to Distributor:
Stephen Maloney, President
Intelligent Information Incorporated
One Dock Street, Suite 500
Stamford, CT 06902
Facsimile: 203.969.0018
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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
17. 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 and Forum. This Agreement shall be governed and
construed in accordance with the laws of the state/province chosen by the party
defending any action brought hereunder. The parties hereby elect to institute
any such legal proceedings in the judicial district where the defending party is
domiciled.
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 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. Attorney's Fees. Should any action be brought by either party to
enforce the provision of this Agreement, the prevailing party, whether by
settlement, adjudication or arbitration, shall have the right to collect
reasonable attorneys' fees, expenses and costs form the nonprevailing party.
i. 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.
j. Headings. The headings used in this Agreement are for convenience
only and are not to be construed to have a legal significance.
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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> 8
k. Read and Understood. Each party acknowledges that it has read and
understands this Agreement and agrees to be bound by its terms.
AGREED:
Distributor, by: Provider, by:
/s/ Stephen G. Maloney /s/ David Ross
- --------------------------- ---------------------------
Signature Signature
Stephen G. Maloney David Ross
- --------------------------- ---------------------------
Printed Name, Title Printed Name, Title
Date: 12/2/98 Date: 12/14/98
------------------ ------------------
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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> 9
EXHIBIT A
The Service
CP Online is a product of The Canadian Press, the national news co-operative of
Canada's daily newspapers. CP Online service includes major national stories,
lottery numbers on Wednesday & Saturday nights, calendars of daily events across
Canada, a nightly scorecard with up-to-date scores in pro sports stories from a
variety of sports, all major business stories including a 3-4 times-a-day wrap
up of the world markets, entertainment news from Canada along with world news
headlines. All these topics are updated frequently. Today in History and Thought
for the Day will be delivered on a weekly basis via email. All services are
deliverable in English with a similar product in Canadian French.
EXHIBIT B
Payment Schedule
a. Monthly Fees. Distributor shall pay Provider the [*]. The [*] is as
follows:
The first 30 days of this contract, Provider will make their
feed [*] for development purposes for III. After such time, the [*]. On
April 30, 1999 the [*]; on July 31, 1999 the [*]; and on December 31,
1999 the [*] for the remainder of this contract.
At renewal, the Provider will send the Distributor notification that
the User fee shall [*]. Until such notification is received by
Distributor User fees will remain as is.
b. Distributor shall pay Provider [*], if a full-text article product has been
requested by Reseller and provided Provider and Distributor have signed an
agreement setting out terms and fees for such full-text article products
c. Demo Units. Distributor may set up [*] demonstration accounts for sales and
marketing purposes, but will use its best efforts to minimize the number and
duration of such accounts.
d. Payment. Distributor will pay to Provider the required payment by check, by
the 15th day of the month following the month of Service.
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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> 10
EXHIBIT C
Confidential Information
a. This Agreement and all Exhibits thereto, except for exhibit D.
EXHIBIT D
SUBSCRIBER AGREEMENT (SHORT FORM)
YOUR USE OF THE SERVICE CONSTITUTES YOUR ACCEPTANCE OF THE FOLLOWING TERMS.
1. Information obtainable through the Service has been provided by various
independent sources believed to be reliable. However, the accuracy, completeness
and/or timeliness of the Information is not guaranteed by any Provider selling,
transmitting, processing, consolidating or originating the Information, and the
Providers shall not be liable for any loss or damage arising from any inaccuracy
or error in delivering the Information.
2. EXCEPT AS SPECIFICALLY STATED HEREIN, NO PROVIDER MAKES ANY EXPRESS OR
IMPLIED WARRANTIES REGARDING THE SERVICE OR THE INFORMATION, INCLUDING ANY
EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
3. THE PROVIDERS' ENTIRE LIABILITY FOR DAMAGES IN CONNECTION WITH THE
SERVICE OR THE INFORMATION SHALL NOT EXCEED THE AMOUNTS PAID FOR SUBSCRIBING TO
THE SERVICE. IN NO EVENT WILL ANY PROVIDER BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, SPECIAL, PUNITIVE OR INDIRECT DAMAGES OR FOR ANY LOST PROFITS, EVEN
IF SUCH PROVIDER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES.
4. You acknowledge that the Providers have proprietary interests in the
Information and agree not to reproduce, retransmit, sell, publish or
commercially exploit the Information in any manner.
5. The Providers reserve the right to terminate the Service at any time,
for any or no reason and without notice and shall have no liability to you upon
such termination other than to refund a pro rated portion of the fee for the
Service if such termination is without cause.
6. You represent that you are entering into this Agreement in your
individual capacity and not on behalf of any firm, corporation, partnership,
trust or association.
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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> 11
7. You understand that the Service may include advertising messages and
e-commerce opportunities and agree to receive such messages and opportunities.
8. You acknowledge that no Provider has made any representation to you
regarding the Service or the Information that is not expressly stated in this
Agreement. If any provision of this Agreement is invalid or unenforceable under
applicable law, it shall, to that extent, be deemed omitted, and the remaining
provisions will continue in full force and effect. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
EXHIBIT E
Distribution of Service
Information products and services that are individualized and delivered
to and received by wireless devices such as pagers, smr telephones, cellular
telephones, narrowband and broadband pcs telephones, laptop and palmtop personal
computers, personal data assistants, PCMIA messaging cards, etc. over numerous
wireless networks in Canada and other British Commonwealth countries.
EXHIBIT F
Provision of the Service
Technical Specifications
Delivery of the Service will be accomplished using FTP and the Internet. The
Distributor's site will require an FTP server and a continuous Internet
connection.
<TABLE>
<S> <C>
Intelligent Information Incorporated & Press News LTD - CONFIDENTIAL INFORMATION (cp1198)
</TABLE>
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 10.30
CURRENT NEWS LICENSE AGREEMENT
AGREEMENT dated as of February 1, 1999, and made in New York,
New York, between PRESS ASSOCIATION, INC. ("PA"), a wholly owned subsidiary of
The Associated Press, a New York corporation with offices at 50 Rockefeller
Plaza, New York, New York 10020, and INTELLIGENT INFORMATION INCORPORATED
("SUBSCRIBER"), a Delaware corporation with offices at One Dock Street, Suite
500, Stamford, Connecticut 06902.
I. Grant
PA hereby grants to SUBSCRIBER a non-exclusive license to
electronically market only within North America news distributed by The
Associated Press and its subsidiary, PA, through AP NEWS, as defined in
Attachment A (the "Service"). This grant is to market information supplied on
the Service to "Resellers", as defined in Attachment B, of SUBSCRIBER's
electronic news delivery system called Intelligent Information Systems (the
"System"), as defined in Attachment B, and upon the terms contained in this
Agreement, except that PA reserves to itself the exclusive right to permit such
use by, and SUBSCRIBER shall be prohibited from distributing to, news
organizations. For this purpose, the term, "news organization" shall include The
Associated Press, United Press International, Reuters, Agence France Presse, its
and their employees, subsidiaries and affiliates and any other person or entity
engaged in distribution of news and information principally to subscribers which
are engaged in whole or in part in the business of publication or broadcasting.
II. PA Representations and Warranties
A. The Service to be utilized by SUBSCRIBER shall be
delivered to SUBSCRIBER's computer center at One Dock Street, Suite 500,
Stamford, Connecticut 06902 and to 1237 South Ridge Court, Suite 100, Hurst,
Texas 76053. SUBSCRIBER shall be responsible for obtaining, installing and
maintaining at SUBSCRIBER's expense such equipment as may be required for it to
make use of the Service and distribute that information to Resellers. SUBSCRIBER
may employ contract services to supplement its ability to parse and format
messages for its products provided that PA is notified in advance in writing and
approves of the contract service provider.
B. When supplied to SUBSCRIBER, the information shall be
correct and complete to the best of PA's knowledge and belief;
C. PA has the rights and licenses necessary to transmit
to SUBSCRIBER the information contained in the Service; and
D. PA agrees that all promotion and advertising of its
services in which there is reference to SUBSCRIBER or Subscriber's System shall
be subject to the review and written approval of SUBSCRIBER before release.
III. SUBSCRIBER Representations, Warranties and Covenants for
Resellers
A. SUBSCRIBER acknowledges that The Associated Press or
PA has the proprietary right in all information in the Service and owns the
copyright, trade secret, trade name and all other proprietary rights in and to
the Service. Information provided by PA and used by SUBSCRIBER shall bear the
Associated Press (AP) logotype and a copyright (as provided by PA in Attachment
A-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
2
hereto) when the information is released by SUBSCRIBER which shall be displayed
when Resellers' subscribers access the PA information. SUBSCRIBER shall deliver
the Service to Resellers who have purchased the enabling system from SUBSCRIBER
only according to the terms of this Agreement;
B. Neither SUBSCRIBER nor Resellers shall alter the
editorial content or substance of the PA Service without the specific authority
of PA and all material supplied by PA hereunder shall reside only in computers
owned or leased by SUBSCRIBER and located within the continental United States;
C. SUBSCRIBER shall not furnish the Service to any
Reseller for any purpose without prior written permission from PA. SUBSCRIBER
shall submit to PA Form A (Attachment D) when requesting approval to furnish the
Service to any Reseller;
D. Resellers shall not furnish the Service to any person
or entity which has not agreed in writing to the following limitations and
exclusions of liability:
(i) that such a person or entity shall
not, directly or indirectly, publish, broadcast or distribute PA
information in any medium, except that corporate, governmental and
institutional subscribers may use portions of the Service for internal
printed communications and memoranda;
(ii) that such person or entity shall not
store all or any portion of the Service in any permanent form, whether
archival files, computer-readable files or any other medium;
(iii) that neither The Associated Press
nor PA shall be liable in any way to the SUBSCRIBER or to any Reseller
or any third party or to any other person who may receive information
in the Service, or to any other person whatsoever, for any delays,
inaccuracies, errors or omissions therefrom or in the transmission or
delivery of all or any part thereof or for any damage arising therefrom
or occasioned thereby; and
(iv) that, in no event, shall PA or The
Associated Press be liable for any direct, consequential, punitive,
special or any other damages arising in any way from the availability
of the Service regardless of the form of action, whether contract or
tort;
E. SUBSCRIBER and Resellers agree that all promotion and
advertising of its services in which there is reference to the Service or The
Associated Press or PA shall be subject to the review and written approval of PA
before release, such approval not to be unreasonably withheld. If within ten
(10) business days after delivery of samples of such material, PA has not
notified the sending SUBSCRIBER of its disapproval, such material shall be
deemed approved;
F. No individual portion of the Service, or the entire
Service, shall be held in SUBSCRIBER's or Resellers' computers or stored in
another medium for more than fourteen (14) days, except that SUBSCRIBER may
create archives of the Service for the purpose of data analysis to establish
customer search profiles for internal use only. Archives of the Service shall
not be available to Resellers, and shall be purged immediately from the System
upon termination of this Agreement;
G. SUBSCRIBER shall, upon receipt from PA or The
Associated Press of a "kill" "elimination," "withheld," or "correction"
directive, purge and, if applicable, replace affected material and notify
Resellers of the changed status of the affected material. Any materials subject
to a "corrective"
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
3
from PA or The Associated Press shall be prominently noted as subject to a
corrective (with instructions as to access to the applicable corrective article)
or shall be linked electronically to the corrective article itself when
Resellers' subscribers access material subject to a corrective;
H. Information from the Service shall be used only in
SUBSCRIBER's System and released only to authorized Resellers within North
America and only in accordance with the terms of this Agreement. Should
SUBSCRIBER expand or otherwise modify the System, use of materials in the
Service in such expanded or modified System must have prior written approval
from PA. For the purpose of this paragraph, expansion and modification shall not
include routine bug fixes and enhancements which do not materially affect the
Service or violate provisions of this Agreement;
I. SUBSCRIBER shall offer the Service to all of its
Resellers and shall offer it to its potential Resellers except where prohibited
herein;
IV. Payment
A. SUBSCRIBER shall pay PA the greater of a monthly
Information Availability Fee (the "Fee") as follows:
Month Monthly Minimum Fee
1-2 [*]
3-5 [*]
6-24 [*]
or i) monthly royalties (the "Royalties") per Reseller as defined in Attachment
C, or [*] of SUBSCRIBER's gross monthly charges to Reseller for Group Products
(the "Group Products), as defined in Attachment C or ii) Royalties earned for
Individual Products (the "Individual Products), defined in Attachment C, based
on the Royalty structure specified below:
<TABLE>
<CAPTION>
Number of Subscribers Monthly Royalty Par Handheld Wireless Device
- --------------------- --------------------------------------------
<S> <C>
0-5,000 [*]/month/Handheld Wireless Device
5,001-30,000 [*]/month/Handheld Wireless Device
30,001-50,000 [*]/month/Handheld Wireless Device
50,001-80,000 [*]/month/Handheld Wireless Device
80,001 and beyond [*]/month/Handheld Wireless Device
</TABLE>
Resellers listed in Attachment E, shall be considered already approved and
in-house and not subject to the monthly of [*] as set forth below. However,
beginning with the first newly approved Reseller of Group Products and for each
Reseller of Group Products thereafter, SUBSCRIBER shall pay PA the greater of a
minimum monthly Fee per Reseller of [*] or Royalties for Group Products as
follows:
(a) monthly Royalties of [*] percent of SUBSCRIBER's gross monthly
charges per Reseller licensed by SUBSCRIBER.
In addition, Royalties for Individual Products shall be payable as herein
defined.
All Fee versus Royalty calculations for Group Products shall be figured on a
[*].
A handheld wireless device is a product delivered over public networks including
paging, two-way radio
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
4
and specialized mobile radio, and can be received using an alphanumeric pager,
PC card with a personal digital assistant or a laptop/palmtop personal computer,
specialized two-way devices, narrowband PCS, broadband PCS and Cellular.
B. If, at the end of the first year of this Agreement or
during any subsequent year of this Agreement, SUBSCRIBER's Intelligent
Information Systems ceases to exist as a System, SUBSCRIBER may terminate the
balance of this Agreement by paying PA an amount equal to six (6) months' total
of the monthly Fee as calculated for the six-month period just ended;
C. The Fee shall be due and payable by the fifteenth
(15th) day of the month for which the Fee is charged, and Royalties shall be due
and payable by the fifteenth (15th) day after the close of the month in which
the Royalties are earned. SUBSCRIBER shall deliver to PA with each Royalty
payment a list of Resellers and monthly usage figures for access to the Service.
Any payment which is late shall be subject to [*] of the lower of [*] per month
or the maximum rate permitted by law. All payments shall be exclusive of taxes
required to be charged SUBSCRIBER except taxes based upon PA's net income;
D. The monthly invoiced Fee shall be increased by each
General Assessment Increase ordered by The Associated Press Board of Directors.
Notice of such increases shall be given to SUBSCRIBER no later than 45 days
before such increases are to take effect and will not exceed [*]. A history of
General Assessment Increases is shown in the Appendix of this Agreement for
reference;
E. SUBSCRIBER shall maintain books and records accurately
reflecting all matters affecting Royalties due to PA. PA, by its duly authorized
representative, shall have the right, at reasonable times and upon reasonable
notice to SUBSCRIBER, to inspect and audit such books and records to verify the
accuracy of any statement. If any inspection shall disclose any error of
whatever amount, the parties shall promptly adjust the same.
V. PA Password
SUBSCRIBER shell provide to PA products based on the Service,
at PA's request when such products are technically available in the New York
City area.
VI. Term and Termination
A. Unless earlier terminated as hereinafter provided,
this Agreement shall take effect on February 1, 1998, or the first date upon
which PA provides the Service to SUBSCRIBER under this Agreement, and shall
continue for a period of two (2) years thereafter. It shall automatically
continue thereafter for further terms of one (1) year each, until either party
delivers to the other written notice of termination not less than sixty (60)
days prior to the end of the then-current term.
B. In addition, PA, at its sole discretion, may terminate
this Agreement at any time upon sixty(60) days written termination notice to
SUBSCRIBER;
C. Upon any material breach or material default of this
Agreement by either party, the other party may give notice of such breach or
default and, unless such breach or default shall be cured within thirty (30)
days after delivery of such notice (or ten (10) days in the case of the failure
of SUBSCRIBER to pay Fees and Royalties described in paragraph IV on the dates
set forth therein), then, without limiting any other remedy available at law or
equity to the non-breaching party consistent with
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
5
the terms of the Agreement particularly paragraph VII, that party may terminate
this Agreement by delivery of a notice of termination at any time thereafter
before such breach or default has been cured;
D. If either party hereto files a petition under any
chapter of the Bankruptcy Code, as amended, or for the appointment of a
receiver, or if an involuntary petition in bankruptcy is filed against such
party and said petition is not discharged within thirty (30) days, or if either
party ceases to pay its debts as they fall due or becomes insolvent or makes a
general assignment for the benefit of its creditors, or if the business or
property of either party shall come into the possession of its creditors or of
any governmental agency or of a receiver, then, in any such case and
notwithstanding any other provisions of this Agreement, the other party hereto
may at its option terminate this Agreement upon written notice to the other
party;
E. Upon termination, SUBSCRIBER shall immediately cease
all use of information provided hereunder and shall remove said information
from its computer data base. In addition, SUBSCRIBER shall be responsible for
assuring the use of PA material immediately ceases by any and all Resellers.
F. In the event that SUBSCRIBER issues a purchase order
to PA for purposes related to this Agreement, such purchase order will be
supplementary to this Agreement and in all instances this Agreement shall be
the controlling document in defining the terms and conditions agreed to by the
parties.
VII. Limitation of Liability; Indemnities
A. PA shall use its best efforts to insure the accuracy
of its information. PA does not, however, guarantee the sequence, accuracy or
completeness of any such material and shall not be liable in any way to
SUBSCRIBER, Resellers, or any third parties or to any other person who may use
the information or to whom the information may be furnished, or to any other
person whatsoever, for any delays, inaccuracies, errors or omissions therefrom
or in the transmission or delivery of all or any part thereof or for any damage
arising therefrom or occasioned thereby. EXCEPT AS STATED IN PARAGRAPH VII B
BELOW, IN NO EVENT SHALL PA OR THE ASSOCIATED PRESS BE LIABLE TO SUBSCRIBER FOR
ANY DIRECT, CONSEQUENTIAL, PUNITIVE, SPECIAL, OR ANY OTHER DAMAGES ARISING FROM
THE AVAILABILITY OF THE INFORMATION, REGARDLESS OF THE FORM OF ACTION WHETHER
CONTRACT OR TORT.
B. (I) Either party, at its expense, will defend any
action brought against the other based on a claim that the information or the
software supplied hereunder by the indemnifying party, infringes a United
States patent, trademark or copyright, or constitutes appropriation of a United
States based trade secret, and the indemnifying party will pay costs of the
action (including reasonable attorney's fees) and any damages finally awarded
against the other party or any users in such action; provided, however, that
such defense and payments are conditioned upon the following: (I) the
Indemnifying party shall be notified promptly in writing by the other or any
end user of the existence of any such claim; (ii) the indemnifying party have
sole control of the defense of any action on such claim and all negotiations
for its settlement or compromise; and (iii) no settlement or compromise may be
finally executed without the prior written consent of the indemnifying party.
If in the opinion of the indemnifying party, the material or software described
herein is likely to become the subject of a claim of infringement of a United
States patent, trademark or copyright, or appropriation of a United States
trade secret, the other party or the end user shall permit the indemnifying
party, at its option and expense, either (I) to procure the right to continue
use of the information or software at issue; (ii) replace or modify such
material so
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
6
that it becomes non-infringing; or (iii) if (I) or (ii) cannot reasonably be
accomplished, to terminate this Agreement without further liability.
(ii) In no event shall either party have any
liability to the other or to any end user under any claim described in this
paragraph based upon the sale or use of information or any software supplied
hereunder in combination with any other product, machine, software, device or
equipment which is not approved by the indemnifying party, or results from any
modifications or attempted modifications by the other party or the end user or
failure by the other party or the end user to permit the indemnifying party to
implement modifications, unless the indemnifying party shall have expressly
consented to such action in writing.
C. SUBSCRIBER shall, and hereby does, indemnify and hold
harmless PA and The Associated Press from and against all claims, losses,
liabilities and expenses arising out of or in connection with any acts of
SUBSCRIBER, its agents, contractors or employees.
VIII. Warranty Disclaimer
EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NEITHER PA NOR
THE ASSOCIATED PRESS MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING NO
WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE.
IX. Unauthorized Use
If either party shall learn of an unauthorized transmission or
receipt of items of information included in the Service, it shall by notice
promptly and fully inform the other party of all facts known to it with respect
to such unauthorized transmission or receipt. In any such case, SUBSCRIBER shall
promptly conduct an investigation and shall keep PA fully and timely apprized of
all facts learned by it and of all interim and final findings and conclusions it
makes, as well as all steps SUBSCRIBER proposes to take to prevent recurrence of
such unauthorized transmissions or receipts. Either party may, at its own
expense, institute an action or proceeding to obtain any relief permitted in law
or equity, or both, against any person so transmitting or receiving such
information and, if any such action or proceeding be instituted, the other party
shall cooperate in all respects reasonably requested by the party maintaining
the suit.
X. Confidentiality
A. During the term of this contract and for three years
after termination, PA and SUBSCRIBER shall maintain in confidence and not
disclose to third parties without the other's prior written consent, the
information concerning Royalty Payments and Reports outlined in Paragraph IV of
this Agreement or any other information labeled "Confidential" except for
normal reporting to each party's parent corporation, if any. PA and SUBSCRIBER
shall not disclose to unaffiliated third parties the specific terms of this
Agreement.
B. Notwithstanding the restrictions set forth in this Paragraph
X. neither party hereto shall have any duty of confidentiality with respect to
information or materials disclosed to it by the other party to the extent such
information:
i) is or comes into the public domain through no fault of
the receiving party hereunder;
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
7
ii) is legally obtained from third parties without binder
of secrecy;
iii) was previously known to the party to whom such
information is disclosed without binder of secrecy or is independently developed
by such party; or
iv) is required to be disclosed by valid legal process.
XI. General Provisions
A. Neither party will be liable to the other for any
delay or default in performing its respective obligations under this Agreement
due to causes beyond its reasonable control. So long as any such failure
continues, the party affected by conditions beyond its control will keep the
other party fully informed at all times concerning the matters causing such
delay or default and the prospects for their termination.
B. Nothing in this Agreement shall be construed to
constitute or appoint either party as the agent or representative of the other
party for any purpose whatsoever, or to grant to either party any rights or
authority to assume or create any obligation or responsibility, express or
implied, for or on behalf of or in the name of the other, or to bind the other
in any way or manner whatsoever.
C. All notices required by this Agreement shall be sent
in writing (by certified or registered mail, telex, overnight courier,
facsimile or telegram) to PA and SUBSCRIBER at the following addresses:
If to PA:
Press Association, Inc.
50 Rockefeller Plaza
New York, New York 10020
Attention:
Treasurer
and
Press Association, Inc.
50 Rockefeller Plaza
New York, New York 10020
Attention:
Director,
Information Services
If to SUBSCRIBER:
One Dock Street
Suite 500
Stamford, Connecticut 06902
Attention:
President
All notices shall be effective upon receipt. Either party may from time to time
change its address as set forth above by notifying the other party of its new
address in writing.
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> 8
8
D. No forbearance by either party in enforcing any of
the provisions of this Agreement and no course of dealing between the parties
shall operate to prejudice either party's rights to enforce such provisions or
operate as a waiver of any of either party's rights hereunder.
E. This Agreement shall be subject to all applicable
present and future federal, state and local laws and regulations of the Federal
Communications Commission and any other federal or state agency. Neither party
shall be liable to the other for any failure to perform its obligations
hereunder, except for payment of charges already owing, which results directly
from such laws or regulations.
F. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Each party consents to the
personal jurisdiction and venue of the State and Federal courts sitting in The
City of New York.
G. This Agreement may not be assigned by either party
without the prior written consent of the other but shall, in the case of any
permitted assignment, be binding upon the successors and assigns of both
parties.
H. The provisions hereof, including the attachments, and
any written supplemental agreements hereto signed as of the date hereof
constitute the entire agreement between the parties relating to the
transactions contemplated herein and merge and supersede all prior discussions,
agreements, and understandings of every kind and nature between them. No oral
modifications or additions hereto shall be binding. Neither party shall be
bound by any condition, definition, warranty or representation other than as
expressly provided for in this Agreement or as may be duly set forth in a
writing signed by an authorized officer of the party hereto which is to be
bound thereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
INTELLIGENT INFORMATION, INC. PRESS ASSOCIATION INC.
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
1/26/99 1/29/99
- ---------------------------- ----------------------------
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> 9
9
ATTACHMENT A
(Service Description)
AP ONLINE
AP Online is a news service tailored specifically for use in data base or
similar online or computer-supported environments. The report typically consists
of approximately 500 stories, or 120,000 words total, comprised of the top
national, international, Washington, financial and sports news on a given day.
AP Online is compiled and transmitted 24 hours a day, seven days a week.
LATAM
LATAM or Latin American Service is written in Spanish and covers developments in
Latin America as well as major US and international stories. The news is
provided directly from our Spanish speaking bureaus worldwide and averages 170
stories per day.
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> 10
10
ATTACHMENT A-1
SUBSCRIBER shall attach to the top of each piece of the Service delivered to
Resellers' subscribers the Associated Press (AP) logotype and a copyright and
reservation-of-rights notice. Such notice shall read:
c. AP 1996 All Rights Reserved.
"19XX" shall denote the current year
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> 11
11
ATTACHMENT B
(Description of SUBSCRIBER's service)
Intelligent Information Incorporated offers a range of information products for
personal and business solutions to users of electric handheld devices. Its
product lines include financial, leisure, travel, sports, weather and news
information. The company markets its products to Resellers ("the Reseller"),
defined for purposes of this Agreement as redistributors of wireless information
to business users and consumers who have agreed in writing with SUBSCRIBER to
uphold all terms and conditions of this Agreement on behalf of PA. The products
are delivered over public networks, including paging, wireless email, narrowband
and broadband PCs, specialized mobile radio and two-way radio. A subscriber can
utilize an alphanumeric pager, PC card with a personal digital assistant or
palmtop, and specialized two-way communicators.
Resellers are charged a fixed monthly rate for Group Products and a monthly
Subscriber fee per Subscriber for Individual Products. A Reseller has the option
to buy both types of products. Under no circumstances will SUBSCRIBER offer the
Service to Resellers without charging for the opportunity to distribute the
Service.
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> 12
12
ATTACHMENT C
ROYALTIES
For purposes of this Agreement, a "Reseller" shall be defined as a redistributor
of wireless information to business users and consumers who has agreed in
writing with SUBSCRIBER to uphold all terms and conditions of this Agreement on
behalf of PA.
Royalties shall be payable in each of two ways as follows dependent on the
nature of the Reseller:
GROUP PRODUCTS
A Group Product is sold when SUBSCRIBER provides a limited number of messages
each day to a common address (sometimes referred to as PIN or CAP code or
Sub-address, depending on the network and hardware being employed for the
delivery of the messages) so that each wireless paging device receives the same
information from the Reseller. Typically the Reseller offers this type of
product [*] to its subscribers.
INDIVIDUAL PRODUCTS
An individual product is sold when SUBSCRIBER provides Resellers' subscribers
with profiled messages via the System that the subscriber has pre-established.
Each of these subscribers are registered on SUBSCRIBER's System and tracked
individually. These subscribers typically receive 50 to 100 messages a month.
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> 13
13
ATTACHMENT D
FORM A
Date: _________________
Intelligent Information Inc. hereby requests permission from The Associated
Press to provide Associated Press News Services, according to the Agreement
dated May 29, 1996 to (Reseller Name) _________________________ located In
(City, State)_______________________.
Number of Subscribers on Reseller's Service:______________
Associated Press service(s) to be purchased:_____________________________
Group Product ______ individual Product _______ Both _______
Description of Reseller's Service ______________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Reseller's charging structure___________________________________________________
________________________________________________________________________________
Target audience ________________________________________________________________
Approved:
- ----------------------------
(Date)
- ----------------------------
Associated Press
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> 14
14
APPENDIX
AP RATES
Associated Press is a cooperative, owned by member newspapers and broadcast
stations. The board of directors is elected from newspaper membership ranks or
appointed from broadcast membership. The board is responsible for voting the
yearly general rate increase. The increase is applied unilaterally to all
members and corporate customers of the Associated Press.
Rate increases take effect on February 1 each year. General increase
notification letters are sent to each AP customer in early December, no less
than forty-five days before the increase takes effect.
HISTORY OF GENERAL RATE INCREASES
1978 6.5 percent
1979 7.7
1980 11.4
1981 10.7
1982 10.8*
1983 9.5
1984 5.5
1985 4.7
1986 4.6
1987 2.5
1988 3.5
1989 4.4
1990 4.9
1991 3.9
1992 3.0
1993 2.5
1994 3.2
1995 2.9
1996 2.9
In the early 1980's, AP invested in developing the industry's first
satellite news, photo and graphics delivery systems and has installed 4000
satellite dishes, the news industry's largest network of receivers. In 1984, AP
became the first news organization to own a satellite transponder. These
innovations in news delivery have enabled AP to deliver news more quickly, and
more cost efficiently.
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> 15
15
ATTACHMENT E
(LIST OF EXISTING APPROVED RESELLERS)
- -- AirTouch Paging
- -- American Paging (Group)
- -- Flower City Paging
- -- National Dispatch Center
- -- PageMart (Group)
- -- Telewaves
- -- Electronic Engineering
- -- TelePage Communication
- -- NationPage
- -- US Cellular
- -- Vanguard Cellular
- -- SBC Communications
- -- Pacific Bell Mobile
- -- PrimeCo Personal Comm L.P.
- -- Omnipoint (Group)
- -- U.S. Healthcare
- -- MetroCall
- -- SkyTel
- -- USA Mobile
- -- CompuServe
- -- Ram
- -- Ameritech
Should any of these approved Resellers who sell Individual Service subsequently
opt to sell Group Service, they will then be subject to the [*] monthly fee.
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 10.31
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement"), dated as of March 13,
2000, is entered into by and between CNBC.com LLC ("CNBC.com"), a Delaware
limited liability company with its principal offices at 2200 Fletcher Ave., Fort
Lee, New Jersey 07084, and i3 Mobile, Inc. ("i3"), a Delaware corporation, with
its principal offices at 181 Harbor Drive, 3rd Floor, Stamford, Connecticut
06902.
1. DEFINITIONS.
(a) "Content" means all information and material, whether or not
protected by copyright, including but not limited to text, images, and other
multimedia data, provided or made available to i3 by third parties as part of
the Service.
(b) "Content Provider" means a third party from whom i3 acquires the
right to distribute Content provided or made available as part of the Service.
(c) "Designated Resellers" means AT&T Wireless Services, SBC
Communications and such other third parties approved in writing by CNBC.com
through which i3 distributes the Headlines to Users, subject to the terms of
this Agreement.
(d) "Headlines" means brief text headlines of articles, each of which
may include a synopsis of such article, consisting of no more than 100
characters each, which are selected by CNBC.com from stock and/or market related
articles appearing on the CNBC.com site.
(e) "Service" means i3's delivery of personalized information to
users of wireless devices such as mobile phones, pagers and personal digital
assistants through our distribution relationships with wireless network
operators.
(f) "Users" means all third parties to whom i3 may license, sell,
transfer, make available or otherwise distribute the Service.
2. GRANTS OF LICENSE.
(a) Headlines. Subject to the terms and conditions of this Agreement,
CNBC.com grants i3 a non-exclusive, non-transferable license to distribute the
Headlines to the Designated Resellers and Users in North America solely for the
purpose of being viewed on cellular telephones. Each Designated Reseller shall
have the right to market and distribute the Headlines solely to such Designated
Reseller's subscribers.
(b) Trademarks. Subject to the terms and conditions of this
Agreement, CNBC.com grants i3 a non-exclusive, non-transferable license to use
and display the CNBC.com Marks solely in connection with the marketing and
promotion of the distribution of the Headlines through the Service; provided,
that CNBC.com shall have final right of approval over any use of the CNBC.com
Marks in connection with such marketing and promotion. i3 agrees that the
CNBC.com Marks are and will remain the sole property of CNBC.com and/or its
affiliates and agrees to do nothing inconsistent with such ownership and that
all use of the CNBC.com Marks, including all goodwill generated by i3's use
thereof, shall accrue and inure to the benefit of and be on behalf of CNBC.com,
(ii) not to register or apply for registration of any element of the CNBC.com
Marks, (iii) not to assert any adverse claim against CNBC.com based upon its use
of the CNBC.com Marks, (iv) not to challenge or contest CNBC.com's ownership of
the CNBC.com Marks, the validity of the CNBC.com Marks, or any element of the
CNBC.com Marks, or the validity of the license granted herein; and (v) to assist
CNBC.com in recording this Agreement with appropriate government authorities and
in procuring any desired registration for the CNBC.com Marks as may be requested
by CNBC.com (at CNBC.com's sole expense). CNBC.com reserves all rights to
control the use of the CNBC.com Marks, and i3 shall not use, change, or modify
the CNBC.com Marks in any manner without prior written authorization from
CNBC.com. i3 shall (1) cause the appropriate designation "TM" or the
registration symbol "(R)" to be placed adjacent to CNBC.com Marks in connection
with each use or display thereof and to indicate such additional information as
CNBC.com shall reasonably specify from time to time concerning the use of
CNBC.com Marks, and (2) comply with all applicable laws pertaining to trademarks
in force. Except as expressly granted in this Agreement, i3 shall have no other
rights of any kind in the CNBC.com Marks. Under no circumstances will anything
in this Agreement be construed as granting, by implication, estoppel or
otherwise, a license to any of CNBC.com's intellectual property other than the
use of the CNBC.com Marks and the Headlines in
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
accordance with the terms of this Agreement. i3 acknowledges that the CNBC.com
Marks are the sole property of CNBC.com and/or its affiliates, and this
Agreement only grants i3 a limited right to use the CNBC.com Marks under the
terms and conditions of this Agreement.
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
3. OBLIGATIONS OF i3.
(a) [*]. In consideration of the execution and delivery of this
Agreement, and in advance of a second phase content distribution arrangement
between the parties, simultaneously with the execution and delivery of this
Agreement, and as a condition to CNBC.com's obligations hereunder, i3 is [*].
(b) [*]. Pursuant to Section 4 of the letter agreement, dated
December 29, 1999, between i3 (formerly Intelligent Information Incorporated)
and NBC Interactive Media, Inc. (the "Letter Agreement"), each NBC Entity (as
defined in the Letter Agreement) which enters into a Distribution Agreement (as
defined in the Letter Agreement) with i3 shall [*]. In addition, in the event
the first Distribution Agreement is executed on or before March 31, 2000, such
[*]. In the interest of accelerating the deployment of CNBC.com content on i3's
wireless platform, the parties have agreed that CNBC.com shall provide a more
limited amount of content than originally contemplated, and in return [*]
provided for in the Letter Agreement. Notwithstanding the foregoing, if this
Agreement is the first distribution agreement executed between i3 and an NBC
Entity, and CNBC.com and i3 enter into a second Distribution Agreement on or
before April 30, 2000, then CNBC.com shall [*] on the terms specified in the
Letter Agreement. If this Agreement is not the first distribution agreement
executed between i3 and an NBC Entity, and CNBC.com and i3 enter into a second
Distribution Agreement at any time after the date hereof, then CNBC.com shall
[*] on the terms specified in the Letter Agreement. i3 shall provide written
notification to CNBC.com, immediately after receiving CNBC.com's executed copy
of this Agreement, as to whether this Agreement is the first Distribution
Agreement so as to enable CNBC.com to [*] upon execution and delivery of a
subsequent Distribution Agreement.
(c) Attribution to CNBC.com. i3 shall include attribution to CNBC.com
with respect to each Headline made available to Users hereunder. Such
attribution shall consist of the phrase "CNBC.com Market Update - ", or such
other similar lead-in as may be selected by CNBC.com, if feasible in bold
lettering, at the beginning of each Headline, with such attribution appearing as
text that is of a point size equal to that of the related Headline. I3 shall
require that all Designated Resellers pass through such attribution to Users
without alteration.
(d) Preferred Placement. i3 guarantees that the Headlines provided by
CNBC.com hereunder shall be the exclusive business and finance content appearing
on each Designated Reseller's free tier of wireless data. To the extent
technically feasible within i3's wireless platform, the Headlines shall be
accorded Preferred Placement (as defined below) in the business and finance
categories on all other platforms on which the Headlines are placed; provided,
that such Preferred Placement shall not be subject to any exclusivity or
Preferred Placement for such type of content which has been contracted for prior
to the Effective Date by a third party not affiliated with i3. Preferred
Placement shall mean (i) 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 of 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.
(e) Technology and Back-end Processing. i3 shall be responsible for
all hosting and delivery of the Headlines, technical support, contractual
arrangements with Designated Resellers and other necessary parties, customer
service and all other issues involved in managing the relationship with
Designated Resellers and Users. i3 shall ensure that all Headlines are delivered
to Designated Resellers on a timely basis, but in any event within five (5)
minutes of their receipt by i3. i3 shall use all reasonable efforts to ensure
that all Headlines are then promptly delivered to Users by the Designated
Resellers.
(f) Marketing. i3 will ensure that CNBC.com receives (i) marketing
support equal to that of any other content provider appearing within AT&T
Wireless' and SBC Communications' free tier of wireless data, and (ii) marketing
support equal to that made available to any other similarly situated provider on
each additional platform on which the Headlines appear. At any time during the
Term (as defined below), CNBC.com may request, and i3 shall promptly provide, an
officer's certificate certifying that i3 has been and remains in compliance with
this Section.
(g) Promotion. Subject to the provisions of the Letter Agreement, i3
will make an aggregate of five percent (5%) of its unused inventory of wireless
advertising taglines available to CNBC.com [*]. The value of this inventory for
purposes of calculating the number of taglines allocated to CNBC under this
Section shall be calculated at the i3's rate card for run of service taglines in
effect at the time such taglines are ordered. The taglines shall promote the
products and services of CNBC.com and its affiliates, and may not advertise,
promote or mention any other product, service, web site or third party
whatsoever without the prior written consent of i3. In addition, with respect to
the placement or delivery of such taglines on any particular wireless network,
i3 may reject such taglines if they would
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
compete with or violate the rights of any other advertiser, sponsor or i3
distribution partner, as determined by i3 in its sole discretion and in good
faith.
(h) Review by CNBC.com. i3 shall provide CNBC.com with reasonable
access to i3's technology and systems for distribution of the Headlines to Users
for the purpose of reviewing i3's compliance with the terms and conditions of
this Agreement. In addition, i3 shall provide CNBC.com with up to six (6) full
subscriptions to receive wireless data from the Designated Resellers (as
selected by CNBC.com) [*].
(i) Reporting. i3 shall provide CNBC.com with monthly reports regarding user
data that is collected or otherwise received by i3 in connection with the
delivery of the Headlines to Designated Resellers and Users, including without
limitation the number of Users that elect to receive Headlines, the percentage
of all eligible Users that elect to receive Headlines, the number of Users that
receive Headlines for free versus on a subscription basis, the names and e-mail
addresses of Users who elect to receive Headlines, and any other usable data or
information that is reasonably requested by CNBC.com (the "User Data"). i3 shall
also provide CNBC.com with aggregate data as to the number of click-throughs for
the advertising campaign described in the third sentence of Section 3(i) below
that are converted to receive CNBC.com complimentary services. All User Data
shall be provided on both an aggregate basis and broken down by Designated
Reseller. Such User Data shall be delivered to CNBC.com via e-mail or FTP in a
machine readable format as reasonably specified by CNBC.com. CNBC.com may use
the User Data for its own internal purposes, and may sell, distribute or share
such User Data with its affiliates and partners; provided, that CNBC.com shall
be required to comply with the privacy policy of each applicable Designated
Reseller. Neither i3 nor any Designated Reseller may license, sell, distribute
or share such User Data with third parties unless such User Data is (i)
aggregated with data collected with respect to other Content Providers, it being
understood that the User Data collected hereunder shall never constitute a
majority of any aggregated pool of data licensed, sold, distributed or shared by
i3 or any Designated Reseller, and (ii) in no way traceable to or identifiable
as information of, or directly related to, CNBC.com or its affiliates.
(j) In consideration of both the execution of this Agreement, and in
advance of a second phase content distribution arrangement between the parties,
simultaneously with the execution and delivery of this Agreement, and as a
further condition to CNBC.com's obligations hereunder, i3 is entering
into a CNBC.com Confirmation Contract pursuant to which it shall purchase [*] in
advertising on CNBC.com. CNBC.com, the National Broadcasting Company, Inc.
("NBC") and i3 agree that such purchase shall be [*] in the Total Spot Value (as
defined in the Advertising Letter (as defined below)) to be provided to be
provided to i3 by NBC pursuant to the Letter Agreement Regarding Purchase of
NBC-TV Advertising Inventory (the "Advertising Letter"), dated December 22,
1999, between i3 and NBC. i3 shall use the advertising purchased pursuant to
this Section to promote sign-ups for the CNBC.com complimentary services with
i3's Designated Resellers. i3 shall use its best commercial efforts to design an
advertising campaign and click-through pathway that will enable users to easily
and efficiently sign-up for the CNBC.com complimentary services.
4. OBLIGATIONS OF CNBC.COM. Subject to the terms and conditions of this
Agreement, CNBC.com shall provide i3 with three (3) Headlines on each day that
the New York Stock Exchange is open for trading, with one (1) Headline being
made available by 7:45 a.m. Eastern time, one (1) headline being made available
at 12:45 p.m. Eastern time, and one (1) headline being made available at 4:45
p.m. Eastern time. The Headlines shall be made available to i3 via e-mail or
other mutually agreed upon electronic means. CNBC.com shall use commercially
reasonable efforts to maintain the timeliness of the Content; provided, that i3
acknowledges that, in part, CNBC.com relies on the performance of Content
Providers and technology providers outside the control of CNBC.com in order to
provide the Headlines.
5. EDITORIAL CONTROL. CNBC.com shall retain sole editorial control over the
content and presentation of the Headlines; provided, that i3 may make changes to
the formatting of the Headlines, subject to consultation with CNBC.com, in order
to meet wireless display equipment formats. i3 shall not edit, abridge, rewrite
or in any way alter the Headlines, or create any work derived from the
Headlines, without the prior written consent of CNBC.com.
6. PROPERTY AND PROPRIETARY RIGHTS. All rights in and to any and all
Headlines furnished by CNBC.com in connection with this Agreement, shall remain
in CNBC.com, and no right, title or interest in or to any of the same is
granted, transferred or assigned to i3 by this Agreement.
7. PAYMENT. [*].
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
8. TERM AND TERMINATION.
(a) Term. This term of this Agreement shall commence on the Effective
Date and shall end on March 13, 2002 (the "Term").
(b) Termination.
(i) Breach. Either party may terminate this Agreement at any
time if the other party breaches any material provision of this Agreement. Such
termination shall take effect (i) if the breach is incapable of cure, then
immediately upon the breaching party's receipt of a written notice of
termination which identifies the breach, or (ii) if the breach, capable of being
cured, has not been cured within thirty (30) days after receipt of written
notice from the non-breaching party identifying the breach, then immediately
upon receipt of a written notice of termination received within thirty (30) days
of the end or such thirty (30) day period.
(ii) Termination of AT&T or SBC Contracts. If at any time
i3's principal agreement with either AT&T Wireless Services or SBC
Communications is terminated or expires, then i3 shall promptly notify CNBC.com
of such event, and CNBC.com may terminate this Agreement at any time thereafter
upon written notice to i3.
(iii) 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.
(iv) Obligations Upon Termination. Effective upon
termination of the Agreement, i3 shall immediately cease (A) licensing, selling,
transferring, making available or otherwise distributing the Headlines, and (B)
accessing, using or re-transmitting the Headlines. Within thirty (30) days of
termination, i3 shall either (X) erase and purge the Headlines from any on-line
and off-line storage media and certify in writing to CNBC.com that such erasure
and purge has been completed, or (Y) certify in writing to CNBC.com that certain
Content has been retained in creating back-ups during the normal course of
business and that such Content shall not be used in any manner whatsoever
without the prior consent of CNBC.com.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CNBC.COM. CNBC.com
represents and warrants to i3, and covenants and agrees with i3, that (a) it has
the right and authority to enter into this Agreement, (b) its performance
hereunder it shall obey all applicable laws, regulations and rules of any
government body or agency or other competent authority, (c) it has the right and
authority to grant to i3 the rights in the Headlines granted hereunder, and (d)
it is under no obligation or restriction, nor will it assume any such obligation
or restriction, that does or would interfere or conflict with its obligations
under this Agreement.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF i3. I3 represents and
warrants to CNBC.com, and covenants and agrees with CNBC.com, that (a) it has
the right and authority to enter into this Agreement and to execute, deliver and
issue the Warrant, and to carry out and perform its obligations hereunder and
under the Warrant (b) all corporate action on the part of i3, its directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and the Warrant, the authorization, sale, issuance
(or reservation for issuance) and delivery of the Warrant issued hereunder and
the common stock issuable upon exercise thereof have been taken, (c) its
performance hereunder it shall obey all applicable laws, regulations and rules
of any government body or agency or other competent authority, (d) it is under
no obligation or restriction, nor will it assume any such obligation or
restriction, that does or would interfere or conflict with its obligations under
this Agreement or under the Warrant, (e) it is a party to an agreement with each
of AT&T Wireless and SBC Communications that permits i3 to distribute the
Headlines to users of AT&T Wireless' and SBC Communications' mobile phone
services, and (f) each Designated Reseller shall require each of its Users to
agree to affirmatively agree to terms and conditions embodying the provisions
set forth in Exhibit A attached hereto.
11. DISCLAIMER OF WARRANTIES. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, EACH
PARTY DISCLAIMS ALL OTHER WARRANTIES, INCLUDING BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, RELATING TO
THIS AGREEMENT, PERFORMANCE UNDER THIS AGREEMENT, THE HEADLINES AND CONTENT, AND
EACH PARTY'S COMPUTING AND DISTRIBUTION SYSTEM.
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
12. LIMITATION OF LIABILITY. EXCEPT WITH RESPECT TO EACH PARTY'S
INDEMNIFICATION OBLIGATIONS HEREUNDER, TO THE MAXIMUM EXTENT PERMITTED BY LAW,
NEITHER PARTY, NOR THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS, AFFILIATES,
AGENGS OR SUPPLIERS, SHALL BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL,
OR INDIRECT DAMAGES, OR LOST OR IMPUTED PROFITS OR ROYALTIES, LOST DATA OR COST
OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, WHETHER FOR BREACH OF WARRANTY
OR ANY OBLIGATION ARISING THEREFROM OR OTHERWISE, HOWEVER CAUSED AND ON ANY
THEORY OF LIABILITY (INCLUDING NEGLIGENCE OR STRICT LIABILITY), AND IRRESPECTIVE
OF WHETHER THE PARTY HAS ADVISED OR BEEN ADVISED OF THE POSSIBLITY OF ANY SUCH
LOSS OR DAMAGE. BOTH PARTIES ACKNOWLEDGE AND AGREE THAT THE AMOUNTS PAYABLE
HEREUNDER ARE BASED IN PART UPON THESE LIMITATIONS, AND FURTHER AGREE THAT THESE
LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.
13. INDEMNIFICATION.
(a) Infringement Indemnification. CNBC.com shall indemnify, defend
and hold harmless i3 from and against any and all losses, claims, liabilities,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees) arising out of or incurred by i3 as a result of any actual
claim, action, proceeding or suit (each, a "Claim") alleging that the licensing,
use, reproduction, display, publishing or distribution of the Headlines by i3 in
accordance with the terms and conditions of this Agreement constitutes an
infringement of any patent, copyright, trademark, trade secret, or other
proprietary right of any third party.
(b) Cross Indemnity. Each party (the "Indemnifying Party") shall
indemnify and hold harmless the other party, its affiliates, and their
respective officers, directors, members, employees and agents (the "Indemnified
Party") from and against any and all Claims instituted by third parties, as well
as any and all losses, liabilities, damages, costs and expenses (including
reasonable attorneys fees) arising out of or accruing from (a) any
misrepresentation or breach of the Indemnifying Party's representations and
warranties set forth in this Agreement; and (b) any non-compliance by the
Indemnifying Party with any covenants, agreements or undertakings of such party
contained in or made pursuant to this Agreement.
14. CONFIDENTIALITY.
(a) General. During the Term and for a period of two (2) years
thereafter, each party shall treat as confidential all Confidential Information
of the other party, shall not use such Confidential Information except as set
forth herein, and shall not disclose such Confidential Information to any third
party. Without limiting the foregoing, each of the parties shall use at least
the same degree of care which it uses to prevent the disclosure of its own
confidential information of like importance to prevent the disclosure of
Confidential Information disclosed to it by the other party under this
Agreement, but in no event less than reasonable care. Each party shall promptly
notify the other party of any actual or suspected misuse or unauthorized
disclosure of the other party's Confidential Information. Upon expiration or
termination of this Agreement, each party shall return all Confidential
Information received from the other party. Any breach of the restrictions
contained in this Section is a breach of this Agreement that may cause
irreparable harm to the non-breaching party. Any such breach shall entitle the
non-breaching party to injunctive relief in addition to all legal remedies.
(b) Exclusions. Notwithstanding the above, neither party shall have
liability to the other with regard to any Confidential Information of the other
which (i) was in the public domain at the time it was disclosed or has entered
the public domain through no fault of the receiving party, (ii) was known to the
receiving party, without restriction, at the time of disclosure, (iii) is
disclosed with the prior written approval of the disclosing party, (iv) was
independently developed by the receiving party without any use of the
Confidential Information, as reasonably demonstrated by the receiving party, (v)
becomes known to the receiving party, without restriction, from a source other
than the disclosing party without breach of this Agreement by the receiving
party and otherwise not in violation of the disclosing party's rights, (vi) is
disclosed generally to third parties by the disclosing party without
restrictions similar to those contained in this Agreement, or (vii) is disclosed
pursuant to the order or requirement of a court, administrative agency, or other
governmental body; provided, that the receiving party shall provide prompt
notice thereof to the disclosing party to enable the disclosing party to seek a
protective order or otherwise prevent or restrict such disclosure. Each party
shall be entitled to disclose the existence of this Agreement, but agrees that
the terms and conditions of this Agreement shall be treated as Confidential
Information and shall not be disclosed to any third party; provided, that each
party may disclose the terms and conditions of this Agreement (A) as required by
any court or other governmental body, (B) as otherwise required by law, (C) to
legal counsel of the parties, (D) in confidence, to accountants, banks and
financing
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
sources and their respective advisors, (E) if necessary in connection
with the enforcement of this Agreement or rights under this Agreement, or (F) in
confidence, in connection with an actual or proposed merger, acquisition or
similar transaction.
15. MISCELLANEOUS.
(a) Binding Nature and Assignment. This Agreement shall be binding on
the parties hereto and their respective successors and assigns, but neither
party may assign this Agreement without the prior written consent of the other,
such consent not to be unreasonably withheld; provided, however, that this
Agreement may be assigned by CNBC.com to a direct or indirect parent, subsidiary
or affiliate without consent of i3.
(b) Compliance with Law. Each party shall comply with all applicable
laws, codes, ordinances, rules and regulations of the federal, state and local
governments, and of any and all political subdivisions and regulatory
authorities thereof. Each party shall obtain all necessary permits and licenses
required in connection with the performance of it obligations hereunder.
(c) Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier or overnight delivery service, or forty-eight (48)
hours after being deposited in the regular mail as certified or registered mail
with postage prepaid, if such notice is addressed to the party to be notified at
such party's address as set forth in the preamble of this Agreement. Either
party hereto may from time to time change its address for notification purposes
by giving the other prior written notice of the new address and the date upon
which it will become effective.
(d) Headings. The article and section headings used herein are for
reference and convenience only and shall not enter into the interpretation
hereof.
(e) Relationship of Parties. i3, in furnishing services to CNBC.com
hereunder, is acting only as an independent contractor and assumes full
responsibilities for each of its employees and shall be solely responsible for
the payment of compensation to its personnel. This Agreement does not constitute
either party as the agent or legal representative of the other party and does
not create a partnership or joint venture between them.
(f) Severability. If any provision of this Agreement is declared or
found to be illegal, unenforceable or void, then both parties shall be relieved
of all obligations arising under such provision, but only to the extent that
such provision is illegal, unenforceable or void, it being the intent and
agreement of the parties that this Agreement shall be deemed amended by
modifying such provision to the extent necessary to make it legal and
enforceable while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable and
achieves the same objective. If the remainder of this Agreement shall not be
affected by such declaration or finding and is capable of substantial
performance, then, each provision not so affected shall be enforced to the
extent permitted by law.
(g) Press Releases. Except to the extent required by applicable law
or as otherwise specified herein, any use by one party of the other party's
name, trademarks or service marks in any press releases, customer lists,
marketing materials or other announcements concerning the matters covered by
this Agreement, or for promotional, advertising or other purposes, shall require
the other party's prior written approval; provided, that CNBC.com shall have the
right to approve any description of CNBC.com and the transactions contemplated
by this Agreement which are included in any documents filed by i3 with the
Securities and Exchange Commission, such approval not to be unreasonably
withheld.
(h) Waivers. No delay or omission by either party hereto to exercise
any right or power hereunder shall impair such right or power or be construed to
be a waiver thereof. A waiver by either of the parties hereto of any of the
covenants to be performed by the other or any breach thereof shall not be
construed to be a waiver of any succeeding breach thereof or of any other
covenant herein contained. All remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies available to
either party at law, in equity or otherwise.
(i) Force Majeure. If the performance of this Agreement or any
obligation hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or accident, acts of God, severe weather conditions, war
or other violence, any law, order, proclamation, regulation, ordinance, demand
or requirement of any governmental
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> 8
agency, or any other act or condition beyond the reasonable control of the
parties hereto, the party whose performance is so affected shall be excused from
such performance; provided, that if either party invokes this Section for any
consecutive period of thirty (30) days or longer, then the other party may
immediately terminate this Agreement without penalty, upon written notice to
such invoking party.
(j) Survival of Terms. Termination or expiration of this Agreement
for any reason shall not terminate any rights, liabilities or obligations that
have either accrued prior to the effective date of termination of this Agreement
or which the parties have expressly agreed shall survive any such termination or
expiration.
(k) Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof, and there
are no written or oral representations, understandings or agreements relative
hereto which are not fully expressed herein. This Agreement is intended to be
the sole and exclusive statement of the agreement between the parties hereto
with respect to the subject matter hereof and any other terms or conditions
included in any forms utilized or exchanged by the parties hereto shall be of no
force or effect and shall not be incorporated herein or be binding unless
expressly agreed to in writing by both parties hereto. No change, amendment,
waiver or discharge hereof shall be valid unless in writing and signed by an
authorized representative of the party against which such change, amendment,
waiver or discharge is sought to be enforced.
(l) Governing Law; Jurisdiction. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of New York, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the state and federal courts of New York County, New
York.
(m) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, i3 and CNBC.com have each caused this Distribution
Agreement to be executed and delivered by its duly authorized officer, to be
effective as of the Effective Date.
i3 MOBILE, INC. CNBC.COM LLC
- ------------------------------ -------------------------------
Signature Signature
- ------------------------------ -------------------------------
Printed Name Printed Name
- ------------------------------ -------------------------------
Title Title
Solely with respect to Section 3(j):
NATIONAL BROADCASTING COMPANY, INC.
- ------------------------------
Signature
- ------------------------------
Printed Name
- ------------------------------
Title
8
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 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
March 10, 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
<INCOME-PRETAX> (6,856)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (3,434)
<CHANGES> 0
<NET-INCOME> (10,290)
<EPS-BASIC> (6.43)
<EPS-DILUTED> 0
</TABLE>
