<PAGE>
As filed with the Securities and Exchange Commission on October 29, 1999.
Registration No. 333-87785
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
LIFEMINDERS.COM, INC.
(Exact name of Registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 7311 52-1990403
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
---------------
1110 Herndon Parkway
Herndon, VA 20170
(703) 707-8261
(Address, including zip code, and telephone number, including area code,of
registrant's principal executive offices)
---------------
Stephen R. Chapin, Jr.
President and Chief Executive Officer
LifeMinders.com, Inc.
1110 Herndon Parkway
Herndon, VA 20170
(703) 707-8261
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
John L. Sullivan, III Stephen A. Riddick
Donald P. Creston Stephen J. Bolin
James P. Dvorak, Jr. Stephanie Miranda Pries
Venable, Baetjer and Howard, LLP Brobeck, Phleger & Harrison LLP
2010 Corporate Ridge 701 Pennsylvania Avenue
Suite 400 Suite 220
McLean, VA 22102 Washington, DC 20004
(703) 760-1600 (202) 220-6000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, 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, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum
Title of Each Class of Proposed Maximum Aggregate Amount of
Securities to be Amount to be Offering Price Offering Registration
Registered Registered(1) Per Share Price(2) Fee(3)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value
$0.01 per share........ 4,830,000 $ 14.00 $67,620,000 $18,799
- -------------------------------------------------------------------------------------
</TABLE>
(1) Includes 630,000 shares of common stock which may be purchased by the
underwriters to cover over-allotments, if any.
(2) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
(3) Includes $15,985 previously paid by the registrant.
---------------
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 that specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to such Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. +
+Underwriters may not confirm sales of these securities until the registration +
+statement filed with the Securities and Exchange Commission is effective. +
+This prospectus is not an offer to sell these securities and it is not +
+soliciting offers to buy these securities in any jurisdiction where the offer +
+or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1999
PROSPECTUS
4,200,000 Shares
[LifeMinders Logo Appears Here]
Common Stock
This is an initial public offering of common stock by LifeMinders.com, Inc.
The estimated initial public offering price will be between $12.00 and $14.00
per share.
------------
Prior to this offering, there has been no public market for the common stock.
LifeMinders.com has applied to have the common stock approved for quotation on
the Nasdaq National Market under the symbol "LFMN."
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price................................ $ $
Underwriting discounts and commissions....................... $ $
Proceeds to LifeMinders.com, Inc., before expenses........... $ $
</TABLE>
LifeMinders.com has granted the underwriters an option for a period of 30
days to purchase up to 630,000 additional shares of common stock. The
underwriters are severally underwriting the shares being offered on a firm
commitment basis. At our request, the underwriters have reserved for sale, at
the initial public offering price, up to 5% of the shares being offered to our
directors, officers, employees, business associates and related persons.
Investing in the common stock involves a high degree of risk.
See "Risk Factors" beginning on page 5.
------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
HAMBRECHT & QUIST
THOMAS WEISEL PARTNERS LLC
PAINEWEBBER INCORPORATED
WIT CAPITAL CORPORATION
, 1999
<PAGE>
Edgar Colorwork Descriptions:
Inside Front Cover of Prospectus
Black background. On top of the black background are various Post It notes in 3
rows with 2 at each of the top and bottom and 3 in the middle row. A typical
sampling of notes includes "Info on Hawaii." "Return Joey's recalled Sippy Cup,"
"Change Oil in Nissan," The "Mom's Birthday," "Mulch Perennials," "Dr. Elias
Tues 10 am Buy Vitamin B," and "Rex to Vets."
Inside Gatefold
Description of Left Side of Gatefold
Black Background. One Post-It note in the middle which says "Sign Up for
Lifeminders.com Today!"
-----
Description of Right Side of Gatefold
A picture of a computer screen appears with a typical Lifeminders.com personal
finance email. It includes links to information about Career, Maintaining Good
Credit, Online Banking and Small Business. At the bottom of the page, after
brief descriptions of the stories, are targeted advertisements based on member
preferences. Along the side of the page is a sidebar with links to more
advertisements as well as personal choice links such as changing the member's
profile of email address.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 5
Forward-Looking Statements............................................... 14
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Financial Information........................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 30
Management............................................................... 43
Certain Transactions..................................................... 50
Principal Stockholders................................................... 52
Description of Capital Stock............................................. 54
Shares Eligible for Future Sale.......................................... 56
Underwriting............................................................. 58
Legal Matters............................................................ 61
Experts.................................................................. 61
Additional Information................................................... 61
Index to Financial Statements............................................ F-1
</TABLE>
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights material information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including "Risk Factors" and our financial statements and
the notes to those statements, before making an investment decision. Unless
otherwise indicated, all information in this prospectus gives effect to a 5 for
4 stock split to be completed prior to the offering.
LifeMinders.com
We are a leading online direct marketing company that provides personalized
information, or content, and advertisements via e-mail to a community of
members. Our e-mail messages contain helpful reminders and tips that enable our
members to better organize and manage their busy lives. Our proprietary
information about our members and highly-precise targeting capabilities provide
our advertising partners the opportunity to more effectively reach their target
markets.
Members can create profiles in one or more of our 10 e-mail categories
including family, entertainment, home, personal events, pet, automotive,
health, personal finance, travel and shopping. On average, each member creates
profiles in four e-mail categories and receives an average of eight e-mails per
month. We gather member profile data from several sources, including
information provided by our members during the sign up process and through
member preferences and buying habits automatically collected through
interaction with our e-mail messages. We also supplement our profile data with
information obtained from third party sources. Our proprietary matching process
correlates member profile data to uniquely identified messages that we
personalize and deliver to each member via e-mail. Using our direct marketing
expertise and our proprietary member database we create highly-targeted e-mail
messages that enable our advertising partners to reach a receptive audience. We
generate revenue primarily through advertising and opt-in services.
As of September 30, 1999, we had approximately 4.0 million members, creating
more than 16.2 million profiles. As of the same date, we had 62 advertising
partners. The value of our service to our members is also evidenced by our
growth from 311,000 members and 1.3 million profiles at March 31, 1999, which
represents a compounded quarterly growth rate for both members and profiles of
over 250%.
The Online Direct Marketing Opportunity
According to the Direct Marketing Association, advertising expenditures in
the United States totaled approximately $285.2 billion in 1998, of which
approximately $162.7 billion or 57% was spent on direct marketing and 43% on
brand advertising. Traditional advertisers and direct marketers face numerous
challenges, primarily the inability to accurately target consumers resulting in
low return on advertising investments. While the Internet offers advertisers a
number of advantages over traditional media, there remain significant
challenges to realizing the full potential of online advertising. Response
rates, or click through rates, for the top banner advertisements averaged just
under 0.6% during the month of September 1999, as reported by The
Nielsen//NetRatings Reporter. Furthermore, large, unsolicited e-mail message
campaigns or "spamming," have met with considerable negative consumer reaction
and low response rates. As a result of the limitations in both online
advertising and direct marketing, businesses continue to seek more effective
approaches to deliver highly-targeted advertisements in a more personalized and
content-rich editorial environment from which advertisers receive real-time
feedback.
At the same time, many Internet users seeking greater personalized content
have increasingly migrated from broadbased, untargeted portals and search sites
to portals organized around specific interests, or vertically-oriented portals,
and Web sites aggregating groups of Internet users with common interests, or
online communities, which were designed to provide an improved platform for
Internet users with similar interests to obtain relevant information. We
believe that these sites continue to provide a poor context for
1
<PAGE>
users to discover customized and individual content because users lack the
affinity and opportunity to relate personally to their online experiences.
Accordingly, we believe that Internet users have a significant and growing need
for a trusted online service that can automatically provide relevant,
personalized and timely information.
Our Solution
Our solution offers the following benefits to both our members and our
advertising partners:
Benefits to Members
. Highly targeted and relevant content that becomes more personalized and
useful as our members continue to interact with our e-mail messages
. Enhanced personalization and user efficiency that enables our members to
avoid the mass of extraneous information received through untargeted e-
mails and obtained from most portals and search engines
. Access to e-commerce opportunities that are delivered within our relevant
and timely e-mail messages and highlight useful and appropriate products
and services based on each member's profile
. Member trust and confidence developed by providing content that we
believe our members consider valuable without compromising their privacy
Benefits to Advertising Partners
. Large and targeted member base of approximately 4.0 million members who
have created more than 16.2 million profiles and have generated extensive
demographic, behavioral and performance information
. Detailed real-time reporting and proprietary data mining technology that
provides our advertising partners the ability to immediately determine
the effectiveness of a given advertising campaign and to precisely target
their marketing messages
. Enhanced targeting capability and increased return on advertising
investment based on our ability to target members on numerous variables
resulting in high click through rates and low delivery costs
Our Strategy
Our objective is to be the leading online direct marketing company that
provides personalized content and advertisements via e-mail to a loyal
community of users. The key elements of this strategy include:
. Aggressively and cost-effectively expanding our member base
. Improving member experience and retention
. Expanding and pursuing multiple revenue streams
. Enhancing advertiser effectiveness
. Increasing awareness and understanding of the LifeMinders.com brand
. Pursuing strategic acquisitions and alliances
We were incorporated in Maryland on August 9, 1996 and reincorporated in
Delaware on July 2, 1999. Our principal executive offices are located at 1110
Herndon Parkway, Herndon, Virginia 20170 and our telephone number is (703) 707-
8261.
We maintain a Web site on the World Wide Web at www.lifeminders.com. The
information on our Web site is not part of this prospectus. We have filed
trademark applications for "LifeMinders.com," "LifeMinders," "backslashSanity"
and the LifeMinders.com logo. All brand names and trademarks appearing in this
prospectus are the property of their respective holders.
2
<PAGE>
THE OFFERING
Common stock offered by
LifeMinders.com........................ 4,200,000 shares
Common stock to be outstanding after
this offering.......................... 19,630,914 shares
Underwriters' over-allotment option.....
630,000 shares
Use of proceeds.........................
Primarily for general corporate
purposes, including working
capital, marketing, member
acquisition activities, capital
expenditures, and potential
strategic acquisitions or
investments. See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol................................. LFMN
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Period from
August 9,
1996 (date of Year Ended Nine Months Ended
inception) to December 31, September 30,
December 31, ----------------------- -------------------------
1996 1997 1998 1998 1999(1)
------------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ -- $ 67,126 $ 56,750 $ 26,750 $ 5,979,493
Gross margin (loss)..... -- 29,877 (2,722) (3,750) 5,507,586
Loss from operations.... (35,073) (485,078) (1,971,721) (1,366,527) (14,577,478)
Net loss................ (35,073) (479,100) (1,947,206) (1,343,977) (14,453,241)
Net loss available to
common stockholders.... (35,073) (479,100) (2,104,243) (1,452,477) (15,117,618)
Basic and diluted net
loss per common share.. $ (0.04) $ (0.19) $ (0.64) $ (0.44) $ (4.59)
======== ========== =========== =========== ============
Weighted average common
shares outstanding
(basic and diluted).... 798,220 2,530,228 3,275,000 3,275,000 3,296,181
======== ========== =========== =========== ============
Pro forma basic and
diluted net loss per
common share........... $ (0.40) $ (1.50)
=========== ============
Pro forma weighted
average common shares
and common share
equivalents (basic and
diluted)............... 5,202,083 10,082,775
=========== ============
</TABLE>
<TABLE>
<CAPTION>
As of September 30, 1999
----------------------------------------------
Actual Pro Forma Pro Forma As Adjusted
----------- ----------- ---------------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents...... $11,279,137 $11,279,137 $60,882,137
Working capital................ 17,940,409 17,940,409 67,543,409
Total assets................... 25,348,586 25,348,586 74,951,586
Long term debt, including
current maturities............ 161,986 161,986 161,986
Mandatorily redeemable
convertible preferred stock... 37,720,790 -- --
Stockholders' equity
(deficit)..................... (17,002,861) 20,717,929 70,320,929
</TABLE>
3
<PAGE>
(1) Summary Statement of Operations Data for the Three Month Periods Ended
March 31, June 30, and September 30, 1999 and for the Nine Months Ended
September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------------- -----------------
March 31, June 30, September 30, September 30,
1999 1999 1999 1999
----------- ----------- ------------- -----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue................. $ 23,322 $1,418,899 $4,537,272 $ 5,979,493
Gross margin (loss)..... (75,192) 1,271,500 4,311,278 5,507,586
Loss from operations.... (1,647,525) (5,028,707) (7,901,246) (14,577,478)
Net loss................ (1,624,745) (4,983,264) (7,845,232) (14,453,241)
Net loss available to
common stockholders.... (1,724,791) (5,114,840) (8,277,987) (15,117,618)
</TABLE>
The "pro forma" basic and diluted net loss per common share is computed
using the weighted average number of common shares outstanding giving effect to
the automatic conversion of all series of mandatorily redeemable convertible
preferred stock into shares of our common stock upon the consummation of this
offering. The "pro forma" summary balance sheet data as of September 30, 1999
reflects the events described above as if the events had occurred as of
September 30, 1999. The "pro forma as adjusted" summary balance sheet as of
September 30, 1999 reflects the sale of 4,200,000 shares of our common stock at
an assumed initial public offering price of $13.00 per share and our receipt of
the estimated net proceeds of the offering.
4
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. You should also refer to the other information in this
prospectus, including our financial statements and the related notes. The risks
and uncertainties described below are not the only ones potentially affecting
our company. Additional risks and uncertainties that we are unaware of or that
we currently deem immaterial also may become important factors that affect our
company. If any of the following risks occur, our business, results of
operations or financial condition could be materially harmed. As a result, the
trading price of our common stock could decline, and you may lose all or part
of your investment.
Risks Related to Our Business
We have a history of losses and expect continued losses for the foreseeable
future.
We have not achieved profitability in any previous quarter, and given our
planned level of operating expenses, we expect to continue to incur operating
losses for the foreseeable future. Our accumulated deficit as of September 30,
1999 was approximately $16.9 million. We incurred net losses of $1.9 million
for the year ended December 31, 1998 and $14.5 million for the nine months
ended September 30, 1999. We plan to increase our operating expenses as we
continue to acquire new members, build infrastructure and create brand
awareness. If our revenue growth is slower than we anticipate or our operating
expenses exceed our expectations, our losses will significantly increase. Even
if we were to achieve profitability, we may not be able to sustain or increase
our profitability on a quarterly or annual basis.
Failure to manage our expansion and expected growth effectively will strain our
resources and could impair the expansion of our business.
We continue to increase the scope of our operations and have increased the
number of our employees substantially. In addition, we have only recently
engaged several key members of our executive management team. We plan to expand
our technology, sales, administrative and marketing organizations. These
factors have placed and will continue to place a significant strain on our
management systems and resources. We will need to continue to improve our
operational, financial and managerial controls and reporting systems and
procedures to expand, train and manage our workforce in order to manage our
expected growth. Failure to manage our growth effectively could adversely
affect our ability to attract and retain our members and advertising partners.
We cannot predict our success or potential profitability because we have
operated our business only for a short period of time and our online direct
marketing business model is unproven.
We have only a limited operating history upon which to evaluate our business
and prospects and the online direct marketing industry is relatively new and
rapidly evolving. This presents many risks and uncertainties that could require
us to further refine or change our business model. These risks and
uncertainties include any:
. inability to add new members or retain existing members;
. failure by advertisers, marketers or consumers to adopt and accept online
direct marketing;
. failure to maintain, expand and develop relationships with advertisers,
marketers, partners, third-party Web sites and merchants;
. inability to increase awareness of the LifeMinders.com brand;
. inability to expand the breadth and depth of services we offer;
. inability to develop and upgrade our technology to keep pace with the
demands of the e-commerce and direct marketing industries;
. failure to enforce and protect our intellectual property rights;
5
<PAGE>
. inability to hire or retain key employees;
. inability to adapt to the changing advertising, marketing and Internet
markets; and
. inability to predict accurately future results of operations.
If we are unsuccessful in addressing these risks and uncertainties, we may
not be able to sustain revenue growth or achieve or sustain profitability.
Our quarterly results of operations may fluctuate in future periods and we may
be subject to seasonal and cyclical patterns that may negatively impact our
stock price.
We believe that our revenue will be subject to seasonal fluctuations as a
result of general patterns of retail advertising and marketing, and consumer
purchasing, which are typically higher during the fourth calendar quarter and
lower in the following quarter. In addition, expenditures by advertisers and
marketers tend to be cyclical, reflecting overall economic conditions and
consumer buying patterns. Due to these and other factors, our revenues and
operating results may vary significantly from quarter-to-quarter. If we do not
successfully anticipate or adjust to quarterly fluctuations in revenue, our
operating results could fall below the expectations of public market analysts
and investors, which could negatively impact our stock price.
We may not be able to generate sufficient revenue if the acceptance of online
advertising and direct marketing does not continue.
We expect to derive a substantial portion of our revenue from online
advertising and direct marketing, including both e-mail and Web-based programs.
If these services do not continue to achieve market acceptance, we may not
generate sufficient revenue to support our continued operations. The Internet
has not existed long enough as an advertising medium to demonstrate its
effectiveness relative to traditional advertising. Advertisers and advertising
agencies that have historically relied on traditional advertising may be
reluctant or slow to adopt online advertising. Many potential advertisers have
limited or no experience using e-mail or the Web as an advertising medium. They
may have allocated only a limited portion of their advertising budgets to
online advertising, or may find online advertising to be less effective for
promoting their products and services than traditional advertising media. If
the market for online advertising fails to develop or develops more slowly than
we expect, we may not sustain revenue growth or achieve or sustain
profitability.
The market for e-mail advertising in general is vulnerable to the negative
public perception associated with unsolicited e-mail, known as "spam." Public
perception, press reports or governmental action related to spam could reduce
the overall demand for e-mail advertising in general, which could reduce our
revenue and prevent us from achieving or sustaining profitability.
If we do not maintain and expand our member base we may not be able to compete
effectively for advertisers.
Our revenue is primarily derived from advertisers seeking targeted member
groups in order to increase their return on advertising investments. If we are
unable to maintain and expand our member base, advertisers could find our
audience less attractive and effective for promoting their products and
services and we could experience difficulty retaining our existing advertisers
and attracting additional advertisers. To date, we have relied on referral-
based marketing activities to attract a portion of our members and will
continue to do so for the foreseeable future. This type of marketing is largely
outside of our control and there can be no assurance that it will generate
rates of growth in our member base comparable to what we have experienced to
date.
We would also be unable to grow our member base if a significant number of
our current members stopped using our service. Members may discontinue using
our service if they object to having their online activities tracked or they do
not find our content useful. In addition, our service allows our members to
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<PAGE>
easily unsubscribe at any time by clicking through a link appearing at the
bottom of our e-mail messages and selecting the particular categories from
which they want to unsubscribe.
If we do not continue to develop and maintain relevant and appealing content in
our e-mail messages, we may not be able to maintain and expand our member base.
Relevant content is critical to attracting and maintaining our member base.
Our editorial staff identifies and develops substantially all of our content
utilizing content from third parties. If our editorial staff is unable to
accurately and effectively identify and develop content that is relevant and
appealing to our members, we may have difficulty maintaining and expanding our
member base. Additionally, we license a small percentage of our content from
third parties. The loss of or increase in cost of our licensed content may
impair our ability to assimilate and maintain consistent, appealing content in
our e-mail messages or maintain and improve the services we offer to consumers.
We intend to continue to strategically license a portion of our content for our
e-mails from third parties, including content that is integrated with
internally developed content. These third party content licenses may be
unavailable to us on commercially reasonable terms, and we may be unable to
integrate third party content successfully. The inability to obtain any of
these licenses could result in delays in product development or services until
equivalent content can be identified, licensed and integrated. Any delays in
product development or services could negatively impact our ability to maintain
and expand our member base.
If we are unable to establish the LifeMinders.com brand, we may not be able to
maintain and expand our member base and attract advertisers.
We believe that developing a strong brand identity is critical to our
ability to maintain and expand our member base and retain and attract
advertisers. The reputation of the LifeMinders.com brand will largely depend on
our ability to promote and provide a high-quality experience for our members
and advertisers. Any advertising partner, member or merchant dissatisfaction
with our online direct marketing program for reasons within or outside of our
control could damage our reputation. In addition, we intend to build our brand
through expanded consumer and trade advertising, including national print,
outdoor and broadcast placements, continued public relations campaigns, direct
mail, participation in strategic industry events and sustained consumer
communications campaigns. We have minimal practical experience with building
our brand through these channels and if the additional resources we expend to
build our brand through these channels do not generate a corresponding increase
in revenue, our financial results could be harmed. If we do not successfully
develop the LifeMinders.com brand we may not be able to retain and expand our
number of members and advertisers, which would adversely affect our ability to
sustain revenue growth or achieve or sustain profitability.
We may not be able to compete effectively for advertisers.
We face intense competition from both traditional and online advertising and
direct marketing businesses. Currently, several companies offer competitive e-
mail direct marketing services, including coolsavings.com, MyPoints.com,
PostMasterDirect.com and YesMail.com. We also expect to face competition from
online content providers, list aggregators as well as established online
portals and community Web sites that engage in direct marketing programs.
Additionally, we may face competition from traditional advertising agencies and
direct marketing companies that may seek to offer online products or services.
If we are not able to compete effectively for advertising revenue, our
financial results will be harmed.
Many of our current competitors and potential new competitors have longer
operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
These advantages may allow them to respond more quickly to new or emerging
technologies and changes in customer requirements. It may also allow them to
engage in more extensive research and development, undertake more far-reaching
marketing campaigns, adopt more aggressive pricing
7
<PAGE>
policies, and make more attractive offers to potential employees, strategic
partners and advertisers. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products or services to address
the needs of our current and prospective advertisers and advertising agency
customers. As a result, we may not be able to retain current advertisers or
attract new advertisers, which would reduce our revenue and harm our financial
results.
If we fail to adapt to rapid change in the online direct marketing industry or
our internally developed systems cannot be modified properly for increased
traffic or volume, our services may become obsolete and unmarketable.
The online direct marketing industry is characterized by rapid change. The
introduction of products and services embodying new technologies, the emergence
of new industry standards and changing consumer needs and preferences could
render our existing services obsolete and unmarketable. If we do not respond
effectively to rapidly changing technologies, industry standards and customer
requirements, the quality and reliability of the services we provide to our
members and advertisers may suffer. We may experience technical difficulties
that could delay or prevent the successful development, introduction or
marketing of new products and services. In addition, any new enhancements to
our products and services must meet the requirements of our current and
prospective users. As a result, we could incur substantial costs to modify our
services or infrastructure to adapt to rapid change in our industry, which
could harm our financial results.
We may be unable to protect our intellectual property rights and other
proprietary information upon which we substantially rely to compete
effectively.
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we seek to protect
through a combination of patent, copyright, trade secret and trademark law. In
addition, we have entered into confidentiality or license agreements with our
employees and consultants, and corporate and strategic partners and generally
seek to control access to and distribution of our documentation and other
proprietary information. Despite these precautions, it may be possible for
third parties to copy or otherwise obtain and use our proprietary information
without authorization or to develop similar technology independently. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which our services are distributed or made
available through the Internet, and policing unauthorized use of our
proprietary information is difficult. If we are unable to prevent the
unauthorized use of our proprietary information or if our competitors are able
to develop similar technologies independently, the competitive benefits of our
technologies, intellectual property rights and proprietary information will be
diminished.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving. We may have to litigate in the future to enforce
our intellectual property rights, protect our trade secrets or determine the
validity and scope of the proprietary rights of others. This litigation would
result in substantial costs and diversion of resources and management attention
and, as a result, could harm our financial results and condition.
We have licensed, and may license in the future, elements of our trademarks
and similar proprietary rights to third parties. These partners may take
actions that could reduce the value of our proprietary rights or diminish our
reputation.
We may be subject to infringement claims based on intellectual property rights
of others that may subject us to significant liability and may be time
consuming and expensive to defend.
There is a substantial risk of litigation regarding intellectual property
rights in Internet-related businesses. Our business activities may infringe
upon the proprietary rights of others, and other parties may assert
infringement claims against us. These claims and any resultant litigation may
subject us to significant
8
<PAGE>
liability for damages, result in invalidation of our proprietary rights, be
time-consuming and expensive to defend, even if not meritorious, and result in
the diversion of management time and attention. Any of these factors could
adversely affect our business operations and financial results and condition.
The quality and reliability of our products and services could suffer due to a
failure of our network infrastructure.
Our ability to successfully create and deliver our e-mail messages depends
in large part on the capacity, reliability and security of our networking
hardware, software and telecommunications infrastructure. The hardware
infrastructure on which our system operates is located at PSINet in Reston,
Virginia. We do not currently have fully redundant systems or a formal disaster
recovery plan. Our system is susceptible to natural and man-made disasters,
including earthquakes, fires, floods, power loss and vandalism. Further,
telecommunications failures, computer viruses, electronic break-ins or other
similar disruptive problems could adversely affect the operation of our
systems. Our insurance policies may not adequately compensate us for any losses
that may occur due to any damages or interruptions in our systems. Accordingly,
we could be required to make capital expenditures in the event of unanticipated
damage.
In addition, our members depend on Internet service providers, or ISPs, for
access to our Web site. Due to the rapid growth of the Internet, ISPs and Web
sites have experienced significant system failures and could experience
outages, delays and other difficulties due to system failures unrelated to our
systems. These problems could harm our business by preventing our members from
effectively utilizing our services.
Our management team has only worked together for a short period of time and may
not function effectively.
Many of our executive officers, including our Chief Financial Officer, Chief
Technology Officer, Vice President, Marketing and Communications, and Vice
President, Strategic Planning have joined our company in 1999. We may not
successfully assimilate our recently hired officers and may not be able to
successfully locate, hire, assimilate and retain qualified key management
personnel. Our business is largely dependent on the personal efforts and
abilities of our senior management, including Stephen R. Chapin, Jr., our
President, Chief Executive Officer and Chairman of the Board, and other key
personnel. Many of our officers or employees can terminate his or her
employment relationship at any time. The loss of these key employees or our
inability to attract or retain other qualified employees could seriously harm
our business.
We may not be able to hire or retain skilled employees, which could prevent us
from effectively growing and operating our business.
Our ability to support the growth of our business will depend, in part, on
our ability to attract and retain highly skilled employees, particularly
management, editorial, sales and technical personnel. In particular, we rely on
highly skilled editorial personnel to create our e-mail messages, sales and
marketing personnel to maintain and expand our member base and the number of
advertisers, and technical personnel to maintain and improve our technological
capabilities. Competition for employees with these skills and experience is
intense. As a result, we may be unable to retain our key employees or to
attract other highly qualified employees in the future. We have experienced
difficulty from time to time in attracting the personnel necessary to support
the growth of our business, and we may experience similar difficulty in the
future. If we are unable to hire or retain key employees, our ability to
operate and grow our business will be adversely affected.
Our results of operations and financial condition may be adversely affected if
we do not successfully integrate future acquisitions into our operations.
In order to respond to the competitive pressures of the online direct
marketing industry and support our intended growth, we intend to focus on
acquiring, or making significant investments in, additional companies, products
and technologies that complement our business. We do not have any present
understanding, nor are we having any discussions, relating to any significant
acquisition or investment. Our
9
<PAGE>
ability to compete effectively and support our intended growth may be adversely
affected if we are not able to identify suitable acquisition candidates or
investments or acquire companies or make investments on acceptable terms or at
acceptable times. In addition, acquiring companies, products, services or
technologies involves many potential difficulties and risks, including:
. difficulty in assimilating them into our operations;
.disruption of our ongoing business and distraction of our management and
employees;
. negative effects on reported results of operations due to acquisition-
related charges and amortization of acquired technology and other
intangibles; and
. potential dilutive issuances of equity or equity-linked securities.
These potential difficulties and risks could adversely affect our ability to
realize the intended benefits of an acquisition and could result in
unanticipated expenses and disruptions in our business, which could harm our
financial results and condition.
We may be unable to obtain the additional capital required to grow our
business.
Our ability to maintain and expand our member base and the number of our
advertisers depends significantly on our ability to:
. maintain and continue to improve the content of our e-mail messages;
. expand the products and services we offer our members and advertisers;
. expand our sales and marketing operations;
. continue to improve our technological capabilities; and
. develop the LifeMinders.com brand.
These efforts will require significant cash expenditures. If the proceeds
from this offering, cash on hand, cash generated from operations and existing
loan and credit arrangements are not sufficient to meet our cash requirements,
we will need to seek additional capital. If we raise additional funds through
the issuance of equity or equity-linked securities, the percentage ownership of
our stockholders would be reduced. In addition, these securities may have
rights, preferences or privileges senior to those of our stockholders.
Additional financing may not be available on terms favorable to us, or at all.
If adequate funds are not available or are not available on acceptable terms,
our ability to maintain and expand our member base and number of advertisers,
or otherwise respond to competitive pressures would be significantly limited,
which could adversely affect our ability to sustain revenue growth or achieve
or sustain profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
for a discussion of working capital and capital expenditures.
We may not be able to achieve or sustain our intended growth in international
markets.
An element of our growth strategy is to introduce our services in
international markets. Our participation in international markets will be
subject to a number of risks, including relative low levels of Internet usage
in foreign countries, foreign government regulations, export license
requirements, tariffs and taxes, fluctuations in currency exchange rates,
introduction of the European Union common currency, difficulties in managing
foreign operations and political and economic instability. To the extent our
potential international members are impacted by currency devaluations, general
economic crises or other negative economic events, the ability of our members
to utilize our services could be diminished.
The content contained in our e-mails may subject us to significant liability
for negligence, copyright or trademark infringement or other matters.
If any of the content that we create and deliver to our members or any
content that is accessible from our e-mails through links to other Web sites
contains errors, third parties could make claims against us for losses incurred
in reliance on such information. In addition, the content contained in or
accessible from our e-mails could include material that is defamatory, violates
the copyright or trademark rights of third parties,
10
<PAGE>
or subjects us to liability for other types of claims. Our general liability
insurance may not cover claims of these types or may not be adequate to
indemnify us for all liability that may be imposed. Any imposition of
liability, particularly liability that is not covered by insurance or is in
excess of insurance coverage, could result in significant costs and expenses
and damage our reputation.
We also enter into agreements with certain e-commerce partners under which
we may be entitled to receive a share of certain revenue generated from the
purchase of goods and services through direct links to our e-commerce partners
from our e-mails. These agreements may expose us to additional legal risks and
uncertainties, including potential liabilities to consumers of those products
and services by virtue of our involvement in providing access to those products
or services, even if we do not provide those products or services. Any
indemnification provided to us in our agreements with these parties, if
available, may not adequately protect us.
Risks Related to the Internet Industry
Concerns about, or breaches of, the security of our member database could
adversely affect our ability to attract and retain members and develop our
member profiles.
We maintain a database containing information on our members, including
their account balances. Our database may be accessed by unauthorized users
accessing our systems remotely. If the security of our database is compromised,
current and potential members may be reluctant to use our services or provide
us with the personal data we need to adequately develop and maintain individual
member profiles. As a result of these security and privacy concerns, we may be
unable to attract and retain members and may incur significant costs to protect
against the threat of security breaches or to alleviate problems caused by
security breaches. In addition, if unauthorized third parties gain access to
our system and alter or destroy information in our database, our ability to
target direct marketing offers to members would be harmed and we could be
subject to legal claims from members. Also, any public perception that we
engaged in the unauthorized release of member information, whether or not
correct, would adversely affect our ability to attract and retain members.
Problems with the performance and reliability of the Internet infrastructure
could adversely affect the quality and reliability of the products and services
we offer our members and advertisers.
We depend significantly on the Internet infrastructure to deliver
attractive, reliable and timely e-mail messages to our members. If Internet
usage grows, the Internet infrastructure may not be able to support the demands
placed on it by this growth, and its performance and reliability may decline.
Among other things, continued development of the Internet infrastructure will
require a reliable network backbone with necessary speed, data capacity and
security. Currently, there are regular failures of the Internet network
infrastructure, including outages and delays, and the frequency of these
failures may increase in the future. These failures may reduce the benefits of
our products and services to our members and undermine our advertising
partners' and our members' confidence in the Internet as a viable commercial
medium. In addition, the Internet could lose its viability as a commercial
medium due to delays in the development or adoption of new technology required
to accommodate increased levels of Internet activity or due to government
regulation. These factors could adversely affect our ability to sustain revenue
growth.
We may be vulnerable to unauthorized access, computer viruses and other
disruption problems that could adversely affect the quality of our products and
services and require us to expend significant resources.
Our networks may be vulnerable to unauthorized and illegal access, computer
viruses and other disruptive problems. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to our members, which could reduce the benefits of our
services and products to our members and advertisers. A party who is able to
circumvent security measures could misappropriate proprietary information or
cause interruptions in our Internet operations. ISPs and other
11
<PAGE>
online service providers have in the past experienced, and may in the future
experience, interruptions in service as a result of the accidental or
intentional actions of Internet users, current and former employees or others.
We may be required to expend significant capital or other resources to protect
against accidental interruptions and prevent security breaches or alleviate
problems caused by breaches. Although we intend to continue to implement
security measures, we cannot be certain that measures implemented by us will
not be circumvented in the future.
The unauthorized access of confidential information that we transmit over
public networks could adversely affect our ability to attract and retain
members.
A necessity of online commerce and communications is the secure transmission
of confidential information over public networks. We rely on encryption and
authentication technology licensed from third parties to provide the security
and authentication technology to effect secure transmission of confidential
information, including customer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography or other
developments may result in a compromise or breach of the technology used by us
to protect customer transaction data. Any compromise of our security could harm
our reputation and significantly hinder our efforts to attract and retain
members.
Government regulation and legal uncertainties of doing business on the Internet
could significantly increase our costs and expenses.
Laws and regulations that apply to Internet communications, commerce and
advertising are becoming more prevalent and these laws and regulations could
significantly increase the costs we incur in using the Internet to conduct our
business. Recently, the United States Congress enacted Internet legislation
regarding children's privacy, copyright and taxation. The European Union
recently adopted a directive addressing data privacy that may result in limits
on the collection and use of member information. A number of other laws and
regulations may be adopted that regulate the use of the Internet, including
user privacy, pricing, acceptable content, taxation, use of the
telecommunications infrastructure and quality of products and services. The
laws governing the Internet remain largely unsettled, even in areas where there
has been some legislative action. It may take years to determine whether and
how existing laws, including those governing intellectual property, privacy,
libel and taxation apply to the Internet and Internet advertising. In addition,
the growth and development of the market for Internet commerce may prompt calls
for more stringent consumer protection laws, both in the United States and
abroad, that may impose additional burdens on companies conducting business
over the Internet. As a result of these uncertainties, we may incur
unanticipated, significant costs and expenses that could harm our financial
results and condition. For additional discussion of potential governmental
intervention, please see "Business-Government Regulation."
Sweepstakes regulation may limit our ability to conduct sweepstakes and other
contests, which could negatively impact our business.
The conduct of sweepstakes, lotteries and similar contests, including by
means of the Internet, is subject to extensive federal, state and local
regulation, which may restrict our ability to offer contests and sweepstakes in
some geographic areas or altogether. Any restrictions on these promotions could
adversely affect our ability to attract and retain members.
We face a number of uncertainties and potential disruptions and costs
associated with the Year 2000 problem, any of which may harm our business.
We are in the process of testing our internal information technology, or IT,
and non-IT systems for Year 2000 compliance. Based on the testing we have
performed, we believe that our software is Year 2000 compliant. In addition,
based upon an initial evaluation of our broader list of software, hardware and
third party network providers, we believe that all of these providers are in
the process of reviewing and implementing their own Year 2000 compliance
programs. We cannot be certain that our IT and non-IT systems will perform in
compliance with Year 2000 or that the Year 2000 compliance efforts of third
party
12
<PAGE>
providers of hardware and software and third party network providers will be
successful. If we, our third party providers of hardware and software or our
third party network providers fail to remedy any Year 2000 issues, we could
experience significant costs and disruptions in the operation of our business.
Moreover, the failure to adequately address Year 2000 compliance issues in our
products and systems could result in claims of mismanagement, misrepresentation
or breach of contract and related litigation, which could be costly and time
consuming to defend. These problems could result in increased operating costs,
the loss of members and advertisers and a reduction in the growth of revenue. A
more detailed description of our Year 2000 compliance is contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
Risks Related to the Offering
After the offering, our executive officers and directors will retain
substantial voting control which will allow them to influence the outcome of
matters submitted to stockholders for approval in a manner that may be adverse
to your interests.
We anticipate that our executive officers, our directors and entities
affiliated with them will, in the aggregate, beneficially own approximately
61.0% of our outstanding common stock following the completion of this
offering, or 59.1% assuming exercise of the underwriters option to purchase
additional shares. As a result, these stockholders will retain substantial
control over matters requiring approval by our stockholders, including the
election of directors and approval of significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control, which could have an adverse affect on our stock price. See
"Principal Stockholders" for more information relating to the ownership
positions of our executive officers and directors.
The substantial number of shares that will be eligible for sale in the near
future may cause the market price of our common stock to decline.
A substantial number of shares of common stock will be available for sale in
the public market following this offering, which could adversely affect the
market price for our common stock. See "Shares Eligible for Future Sale" for a
more detailed description of the eligibility of shares of our common stock for
future sale.
A public market for our securities may not develop or be sustained.
There has not been a public market for our common stock. The initial public
offering price for the shares will be determined by negotiations between us and
the representatives of the underwriters and may not be indicative of prices
that will prevail in the trading market. Because we have a limited operating
history under our current business model and the online direct marketing
industry is relatively new and rapidly evolving, it is difficult to predict the
extent to which investor interest in our common stock will lead to the
development of a trading market or how liquid that market might become. You may
not be able to resell your shares at or above the initial public offering
price.
A reduction in our stock price following this offering could lead to class
action litigation, which could result in substantial costs.
The stock market has experienced significant price and volume fluctuations,
and the market prices of technology companies, particularly Internet-related
companies, have been highly volatile. In the past, securities class action
litigation has often been instituted against a company following periods of
volatility in that company's stock price. This type of litigation could result
in substantial costs and could divert our management's attention and resources,
which could harm our financial results and condition.
You will experience an immediate and substantial dilution in the book value of
your investment.
The initial public offering price of our common stock is substantially
higher than what the net tangible book value per share of the common stock will
be immediately after this offering. If you purchase our common stock in this
offering, you will incur immediate dilution of approximately $9.42 in the net
tangible
13
<PAGE>
book value per share of our common stock from the price you pay for our common
stock based upon an assumed initial public offering price of $13.00 per share.
The exercise of outstanding options may result in further dilution.
Our management will have broad discretion in using the proceeds of this
offering and we cannot assure you that we will effectively utilize the
proceeds.
We intend to use the net proceeds from the sale of the common stock for
general corporate purposes, including working capital, marketing, member
acquisition activities, capital expenditures, and for potential acquisitions or
investments. Our management has not determined how it will allocate the
proceeds among the anticipated uses. Accordingly, our management will have
significant flexibility in applying the net proceeds of this offering and you
will not have the opportunity, as part of your investment decision, to assess
whether management is using the proceeds appropriately. Management has
flexibility to use the net proceeds for corporate purposes and cannot assure
that the proceeds will be expended effectively. Until the proceeds are needed,
we plan to invest them in investment-grade, interest-bearing securities. The
failure of management to apply these funds effectively could harm our business.
Anti-takeover provisions in our charter documents and Delaware law could
prevent or delay a change in control of our company, which could adversely
affect our stock price.
Our Restated Certificate of Incorporation and Bylaws may discourage, delay
or prevent a merger or acquisition that a stockholder may consider favorable by
authorizing the issuance of "blank check" preferred stock and providing for a
classified board of directors with staggered, three-year terms. Certain
provisions of Delaware law may also discourage, delay or prevent someone from
acquiring or merging with us. These anti-takeover provisions could adversely
affect our stock price. For a detailed description of the anti-takeover
provisions in our charter documents, see "Description of Capital Stock--Anti-
takeover Effects of Provision of the Restated Certificate of Incorporation,
Bylaws and Delaware Law."
FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our or our industry's actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by these forward-looking statements. These
factors include, among other things, those listed under "Risk Factors" and
elsewhere in this prospectus. In some cases, you can identify forward-looking
statements by terminology, including "may," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue" or
the negative of these terms or other comparable terminology. These statements
are only predictions. Actual events or results may differ materially. In
evaluating these statements, you should specifically consider various factors,
including the risks outlined under "Risk Factors." Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Moreover, neither we nor any other person assumes responsibility
for the accuracy and completeness of these statements. We are under no duty to
update any of the forward-looking statements after the date of this prospectus
to conform these statements to actual results.
14
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of 4,200,000 shares of
common stock we are offering will be approximately $49.6 million ($57.2 million
if the underwriters exercise their over-allotment option in full) at an assumed
initial public offering price of $13.00 and after deducting estimated offering
expenses of $1.2 million and underwriting discounts and commissions payable by
us.
We expect to use the net proceeds for general corporate purposes, including
working capital, marketing, member acquisition activities and capital
expenditures. A portion of the net proceeds may also be used to acquire or
invest in businesses, or technologies, that are complementary to our business.
However, we have not targeted any particular business for acquisition. We have
no current agreements or commitments nor are we negotiating with any other
party with respect to any acquisitions or investments. Our management will have
broad discretion concerning the use of the net proceeds of the offering.
Pending these uses, we intend to invest the net proceeds of this offering in
investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock or
other securities and do not currently anticipate paying cash dividends in the
foreseeable future. Our credit facilities with Imperial Bank prohibit the
payment of dividends until the expiration of the facilities. We are currently
negotiating the renewal of our credit facilities with Imperial Bank, which
expire on November 10, 1999.
15
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999:
. On an actual basis;
. On a "pro forma" basis to reflect the automatic conversion of all
outstanding shares of our mandatorily redeemable convertible preferred
stock into 12,081,541 shares of our common stock upon the consummation of
this offering; and
. On a "pro forma as adjusted" basis to reflect the sale of 4,200,000
shares of our common stock at an assumed initial public offering price of
$13.00 per share and our receipt of the estimated net proceeds of the
offering.
The information below assumes an initial public offering price of $13.00 as
reduced for underwriting discounts, commissions and expenses incurred in
connection with the offering. The following table does not reflect 1,700,374
shares of common stock issuable upon exercise of options outstanding as of
September 30, 1999 at a weighted average exercise price of $2.11 per share.
This information should be read in conjunction with our consolidated
financial statements and the notes appearing at the end of the financial
statements included in this prospectus.
<TABLE>
<CAPTION>
September 30, 1999
--------------------------------------
Pro Pro Forma
Actual Forma As Adjusted
------------ ----------- -----------
<S> <C> <C> <C>
Cash and cash equivalents............. $ 11,279,137 $11,279,137 $60,882,137
============ =========== ===========
Long-term debt, including current
portion.............................. 161,986 161,986 161,986
------------ ----------- -----------
Mandatorily redeemable convertible
preferred stock, $0.01 par value;
1,000,000 Series A shares, 1,000,000
Series B shares, 2,620,373 Series C
shares, 2,252,874 Series D shares,
2,791,993 Series E shares authorized,
issued and outstanding (actual); no
shares authorized, issued and
outstanding (pro forma and pro forma
as adjusted)......................... 37,720,790 -- --
------------ ----------- -----------
Stockholders' equity (deficit):
Common stock, $.01 par value,
25,000,000 shares authorized,
3,349,373 issued and outstanding
(actual); 15,430,914 shares issued
and outstanding on a pro forma
basis; 19,630,914 shares issued and
outstanding on a pro forma as
adjusted basis..................... 33,494 154,309 196,309
Additional paid-in capital.......... 2,027,253 39,627,228 89,188,228
Deferred compensation............... (2,148,988) (2,148,988) (2,148,988)
Accumulated deficit................. (16,914,620) (16,914,620) (16,914,620)
------------ ----------- -----------
Total stockholders' (deficit) equity.. (17,002,861) 20,717,929 70,320,929
------------ ----------- -----------
Total capitalization.................. $ 20,879,915 $20,879,915 $70,482,915
============ =========== ===========
</TABLE>
16
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DILUTION
Our pro forma net tangible book value as of September 30, 1999 was
$20,717,929, or approximately $1.34 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total assets less
total liabilities, divided by the number of shares of common stock outstanding
after giving effect to the conversion of each share of Series mandatorily
redeemable convertible preferred stock into one share of common stock upon
completion of this offering. After giving effect to the sale of the 4,200,000
shares of common stock offered hereby at an assumed initial public offering
price of $13.00 per share and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses, the pro forma net
tangible book value as of September 30, 1999 would have been $70,320,929, or
approximately $3.58 per share. This represents an immediate increase in pro
forma net tangible book value of $2.24 per share to existing stockholders and
an immediate dilution in net tangible book value of $9.42 per share to new
investors of common stock in this offering. The following table illustrates
this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $13.00
Pro forma net tangible book value per share as of September 30,
1999.......................................................... $1.34
Increase per share attributable to new investors............... 2.24
-----
Pro forma net tangible book value per share after the offering.. 3.58
------
Dilution per share to new investors............................. $ 9.42
======
</TABLE>
The following table summarizes as of September 30, 1999, on the pro forma
basis described above, the number of shares of capital stock purchased from us,
the total consideration paid to us and the average price per share paid by
existing stockholders and by investors purchasing shares of common stock in
this offering at an assumed initial public offering price of $13.00, before
deducting the estimated underwriting discount and commissions and estimated
offering expenses:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 15,430,914 78.6% $39,500,000 42.0% $ 2.56
New investors............... 4,200,000 21.4% 54,600,000 58.0% 13.00
----- ----------- -----
Total..................... 19,630,914 100.0% $94,100,000 100.0%
========== ===== =========== =====
</TABLE>
The table above excludes options to purchase 1,700,374 shares of common
stock at a weighted average exercise price of $2.11 per share issued and
outstanding as of September 30, 1999 under our stock option plan. In addition,
as of September 30, 1999, there were 1,145,321 shares available for issuance
under our stock option plan. If the issued options were to be exercised in full
for cash, pro forma net tangible book value per share after the offering would
be $2.59, the increase per share attributable to new investors would be $1.25,
and the dilution per share to new investors would be $10.41.
17
<PAGE>
SELECTED FINANCIAL INFORMATION
We present below selected financial information for our company. The summary
historical balance sheet data as of December 31, 1997, 1998 and September 30,
1999 and the summary historical statement of operations data for the period
from August 9, 1996 (Date of Inception) to December 31, 1996 and for each of
the years ended December 31, 1997, 1998 and for the nine month periods ended
September 30, 1998 and 1999, and have been derived from our audited financial
statements that are included elsewhere in this prospectus. The summary
historical balance sheet data as of December 31, 1996 has been derived from our
audited financial statements that are not included in this prospectus.
PricewaterhouseCoopers LLP has audited the financial statements for the period
from August 9, 1996 (Date of Inception) to December 31, 1996 and for the years
ended December 31, 1997, 1998 and for the nine month periods ended September
30, 1998 and 1999.
<TABLE>
<CAPTION>
Period from
August 9, 1996
(Date of Year Ended Nine Months Ended
Inception) to December 31, September 30,
December 31, ---------------------- -------------------------
1996 1997 1998 1998 1999(1)
-------------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue:
Advertising........... $ -- $ 67,126 $ 56,750 $ 26,750 $ 4,064,962
Opt-in................ -- -- -- -- 1,914,531
-------- --------- ----------- ----------- ------------
Total revenue....... -- 67,126 56,750 26,750 5,979,493
Cost of revenue......... -- 37,249 59,472 30,500 471,907
-------- --------- ----------- ----------- ------------
Gross margin (loss)..... -- 29,877 (2,722) (3,750) 5,507,586
-------- --------- ----------- ----------- ------------
Operating expenses:
Sales and marketing... 15,965 147,325 868,706 591,359 16,465,006
Research and
development.......... 9,800 240,498 373,788 285,784 1,012,603
General and
administrative....... 9,308 127,132 726,505 485,634 2,338,784
Stock-based
compensation......... -- -- -- -- 268,671
-------- --------- ----------- ----------- ------------
Total operating
expenses........... 35,073 514,955 1,968,999 1,362,777 20,085,064
-------- --------- ----------- ----------- ------------
Loss from operations.... (35,073) (485,078) (1,971,721) (1,366,527) (14,577,478)
Interest income, net.... -- 5,978 24,515 22,550 124,237
-------- --------- ----------- ----------- ------------
Net loss................ (35,073) (479,100) (1,947,206) (1,343,977) (14,453,241)
Accretion on mandatorily
redeemable convertible
preferred stock........ -- -- (157,037) (108,500) (664,377)
-------- --------- ----------- ----------- ------------
Net loss available to
common stockholders.... $(35,073) $(479,100) $(2,104,243) $(1,452,477) $(15,117,618)
======== ========= =========== =========== ============
Basic and diluted net
loss per common share.. $ (0.04) $ (0.19) $ (0.64) $ (0.44) $ (4.59)
======== ========= =========== =========== ============
Weighted average common
shares outstanding
(basic and diluted).... 798,220 2,530,228 3,275,000 3,275,000 3,296,181
======== ========= =========== =========== ============
Pro forma basic and
diluted net loss per
common share(2)....... $ (0.40) $ (1.50)
=========== ============
Pro forma weighted
average common shares
and common share
equivalents (basic and
diluted)(2)........... 5,202,083 10,082,775
=========== ============
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
December 31, September 30, 1999
-------------------------------- -------------------------------------
Pro Forma
Pro As
1996 1997 1998 Actual Forma(3) Adjusted(4)
-------- --------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 163 $ 792,553 $ 232,073 $ 11,279,137 $11,279,137 $60,882,137
Working capital
(deficit).............. (25,073) 744,067 (245,267) 17,940,409 17,940,409 67,543,409
Total assets............ 163 797,152 278,301 25,348,586 25,348,586 74,951,586
Mandatorily redeemable
convertible preferred
stock.................. -- 866,338 2,023,375 37,720,790 -- --
Stockholders' equity
(deficit).............. (25,073) (117,672) (2,222,414) (17,002,861) 20,717,929 70,320,929
</TABLE>
(1) Results of Operations for the Three Month Periods Ended March 31, June 30
and September 30, 1999 (unaudited) and the Nine Month Period Ended
September 30, 1999:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------
Nine Months Ended
March 31, June 30, September 30, September 30,
1999 1999 1999 1999
----------- ----------- ------------- -----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue:
Advertising........... $ 10,024 $ 886,065 $ 3,168,873 $ 4,064,962
Opt-in................ 13,298 532,834 1,368,399 1,914,531
----------- ----------- ----------- ------------
Total revenue....... 23,322 1,418,899 4,537,272 5,979,493
Cost of revenue......... 98,514 147,399 225,994 471,907
----------- ----------- ----------- ------------
Gross margin (loss)..... (75,192) 1,271,500 4,311,278 5,507,586
----------- ----------- ----------- ------------
Operating expenses:
Sales and marketing... 1,081,501 5,158,985 10,224,520 16,465,006
Research and
development.......... 220,075 305,357 487,171 1,012,603
General
administrative....... 259,702 747,572 1,331,510 2,338,784
Stock based
compensation......... 11,055 88,293 169,323 268,671
----------- ----------- ----------- ------------
Total operating
expenses........... 1,572,333 6,300,207 12,212,524 20,085,064
----------- ----------- ----------- ------------
Loss from operations.... (1,647,525) (5,028,707) (7,901,246) (14,577,478)
Interest income, net.... 22,780 45,443 56,014 124,237
----------- ----------- ----------- ------------
Net loss................ (1,624,745) (4,983,264) (7,845,232) (14,453,241)
Accretion on mandatorily
redeemable
convertible preferred
stock.................. (100,046) (131,576) (432,755) (664,377)
----------- ----------- ----------- ------------
Net loss available to
common stockholders.... $(1,724,791) $(5,114,840) $(8,277,987) $(15,117,618)
=========== =========== =========== ============
</TABLE>
(2) The calculation of pro forma basic and diluted loss per share includes the
weighted average number of common shares outstanding and the conversion of
our mandatorily redeemable convertible preferred stock into our common
stock upon the consummation of our offering.
(3) The "pro forma" summary balance sheet data as of September 30, 1999
reflects the automatic conversion of all outstanding shares of our
mandatorily redeemable convertible preferred stock into 12,081,541 shares
of our common stock upon the consummation of this offering.
(4) The "pro forma as adjusted" summary balance sheet as of September 30, 1999
reflects the sale of shares of our common stock at an assumed initial
offering price of $13.00 per share and our receipt of the estimated net
proceeds of the offering.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with the financial statements and
the related notes. This discussion contains forward-looking statements based
upon current expectations that involve risks and uncertainties, including our
plans, objectives, expectations and intentions. Our actual results and the
timing of certain events could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors," "Business" and elsewhere in this
prospectus. See "Forward-Looking Statements."
Overview
We provide online direct marketing opportunities to our advertising partners
by delivering personalized e-mail messages to our members. Our e-mail messages
contain helpful reminders and tips that enable our members to better organize
and manage their busy lives. Our proprietary information about our members and
highly-precise targeting capabilities provide our advertising partners the
opportunity to more effectively reach their target audiences.
We were incorporated in Maryland on August 9, 1996 ("Date of Inception")
under the name of MinderSoft, Inc. In January 1999, we changed our name to
LifeMinders.com, Inc. We reincorporated in Delaware on July 2, 1999. From 1996
to 1998, we entered into arrangements with national retailers to distribute our
reminder products in software form on disk. In late 1998, we revised our
strategy to become an online direct marketing company that provides
personalized content and advertisements via e-mail to a community of members.
Given this significant shift in strategy in late 1998, the historical financial
condition and results of operations prior to 1999 do not necessarily reflect
our business as it is currently being conducted and are not material. See
"Business" for a more comprehensive discussion.
We had approximately 4.0 million members who created more than 16.2 million
profiles as of September 30, 1999. As of December 31, 1998, we had
approximately 15,800 members representing 41,000 profiles.
Revenue
Since the beginning of calendar year 1999, we have generated revenue
primarily through advertising and opt-in services. Our advertising revenue is
subject to the effects of seasonality. If purchasing patterns or timing of
purchasing by advertisers were to change, our operations and quarter-to-quarter
comparisons could be materially affected.
Advertising
Our advertising arrangements consist primarily of advertisements that are
displayed within our e-mails. Generally, advertisers pay us and we recognize
revenue on a per e-mail basis, based on the number of e-mails delivered to our
members in which the advertisements are displayed. From time to time, we may
guarantee a minimum number of e-mails to be delivered containing an
advertisement directed at a specific group. Under these contracts, we are not
required to forfeit fees received for e-mails previously delivered. We may also
guarantee a minimum number of sales orders for the advertiser based on the e-
mails delivered. Under these contracts we defer all revenue until notification
is received from the advertiser that the minimum number of sales orders have
been achieved by the advertiser. Our advertising contracts generally have
average terms ranging from one to six months. In addition, we may provide
advertisers the opportunity for the exclusive right to sponsor advertisements
within a specific e-mail category for a specified period of time for a fixed
fee. Under these contracts we recognize revenue during the period the
advertisement is displayed in our e-mails since there is no obligation to
provide a minimum number of e-mails for that individual advertiser.
20
<PAGE>
Advertising revenue also includes barter transactions, where we exchange
advertising space on our e-mails for reciprocal advertising space or traffic on
other Web sites. Revenue from these barter transactions is recorded at the
estimated fair value of the advertisements delivered and is recognized when the
advertisements are included in our e-mails. No gain or loss results from these
barter transactions as the revenue recognized equals the advertising costs
incurred. For the nine month period ended September 30, 1999, barter revenue
was less than 5% of net revenues. We did not enter into barter transactions
prior to 1999.
Opt-in Services
Revenue is recognized as affirmative member responses to the advertisers'
newsletters and other promotions offered during our sign up process. We derive
revenue from our opt-in services through fees that our opt-in advertising
partners pay. We record revenue net of estimated duplicate member responses to
our opt-in partners' newsletters and other promotions.
Duplicate member responses are names we provide to opt-in advertising
partners for which our members have previously registered either through our
sign up process or with our opt-in advertising partners directly. For the nine
month period ended September 30, 1999, revenue was recorded net of
approximately $443,000 for estimated duplicate member responses to our opt-in
partners' newsletters and other promotions.
Expenses
Cost of Revenue
Cost of revenue consists of salaries, employee benefits and related expenses
of our Member Experience personnel, fees paid to freelance writers of our
content and depreciation of the computer equipment necessary to run our
service. We believe that a significant increase in these expenses will be
necessary as we expand the number of e-mail categories offered to our members.
Sales and Marketing
Sales and marketing expenses include salaries, sales commissions, employee
benefits, travel and related expenses of our direct sales force, advertising
and promotional expenses, marketing, and sales support functions. In an effort
to increase our revenue, member base and brand awareness, we expect to increase
significantly the amount of spending on sales and marketing over the next year.
Marketing costs associated with increasing our member base, which to date have
been minimal, are expensed in the period incurred.
Research and Development
Research and development costs include expenses for the development of new
or improved technologies designed to enhance the performance of our service,
including the salaries and related expenses for our engineering department, as
well as costs for contracted services, content facilities and equipment. We
believe that a significant level of product development activity is necessary
for our business and intend to increase significantly the amount of spending to
fund this activity.
General and Administrative
General and administrative expenses include salaries, employee benefits and
expenses for our executive, finance, legal and human resources personnel. In
addition, general and administrative expenses include fees for professional
services and occupancy costs. We expect general and administrative expenses to
increase in absolute dollars, in part due to the costs associated with being a
public company.
We do not currently anticipate that inflation will have a material impact on
our cash flows or results of operations.
21
<PAGE>
Stock-Based Compensation
In connection with the grant of stock options to employees during the nine
month period ended September 30, 1999, we recorded total deferred compensation
of approximately $2.4 million as a reduction to stockholders' equity (deficit).
This deferred compensation represented the difference between the estimated
fair value of our common stock and the exercise price of these options at the
date of grant. We are amortizing this amount over the vesting periods of the
applicable options resulting in an expense of approximately $269,000 for the
nine month period ended September 30, 1999. Annual amortization of deferred
stock compensation for stock options granted as of September 30, 1999, is
approximately $420,000, $604,000, $604,000, $604,000 and $185,000 for the years
ending December 31, 1999, 2000, 2001, 2002, and 2003, respectively.
Results of Operations
Results of Operations for the Three Month Periods Ended March 31, June 30 and
September 30, 1999
<TABLE>
<CAPTION>
March 31, June 30, September 30,
1999 1999 1999
----------- ----------- -------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Revenue:
Advertising......................... $ 10,024 $ 886,065 $ 3,168,873
Opt-in.............................. 13,298 532,834 1,368,399
----------- ----------- -----------
Total revenue..................... 23,322 1,418,899 4,537,272
Cost of revenue....................... 98,514 147,399 225,994
----------- ----------- -----------
Gross margin (loss)................... (75,192) 1,271,500 4,311,278
----------- ----------- -----------
Operating expenses:
Sales and marketing................. 1,081,501 5,158,985 10,224,520
Research and development............ 220,075 305,357 487,171
General and administrative.......... 259,702 747,572 1,331,510
Stock based compensation............ 11,055 88,293 169,323
----------- ----------- -----------
Total operating expenses.......... 1,572,333 6,300,207 12,212,524
----------- ----------- -----------
Loss from operations.................. (1,647,525) (5,028,707) (7,901,246)
Interest income, net.................. 22,780 45,443 56,014
----------- ----------- -----------
Net loss.............................. (1,624,745) (4,983,264) (7,845,232)
Accretion on mandatorily redeemable
convertible preferred stock.......... (100,046) (131,576) (432,755)
----------- ----------- -----------
Net loss available to common stock-
holders.............................. $(1,724,791) $(5,114,840) $(8,277,987)
=========== =========== ===========
</TABLE>
Three Months Ended September 30, 1999 Compared to Three Months Ended June 30,
1999
Revenue. Revenue increased 219.8% from approximately $1.4 million for the
three months ended June 30, 1999 to approximately $4.5 million for the three
months ended September 30, 1999. Advertising revenue increased $2.3 million,
which was primarily attributable to an increase in sales of banner
advertisements, and opt-in revenue increased $836,000, primarily due to an
increase in the number of opt-in services.
Cost of revenue. Cost of revenue increased 53.3% from approximately $147,000
for the three months ended June 30, 1999 to approximately $226,000 for the
three months ended September 30, 1999. The increase was primarily attributable
to an increase in depreciation expense of the computer equipment required to
operate our service and an increase in the personnel in our Member Experience
department, which is responsible for identifying, composing and editing the
content delivered in our e-mails.
Sales and marketing. Sales and marketing expenses increased 98.2% from
approximately $5.2 million for the three months ended June 30, 1999 to
approximately $10.2 million for the three months ended
22
<PAGE>
September 30, 1999. This increase was primarily the result of expanded efforts
to acquire new members through the purchase of banner advertisements and
similar services on the Web, an increase in sales and marketing staff, an
increase in sales commissions related to the increase in revenue and an
increase in advertising of our service.
Research and development. Research and development expenses increased 59.5%
from approximately $305,000 for the three months ended June 30, 1999 to
approximately $487,000 for the three months ended September 30, 1999. This
increase was primarily due to hiring of additional technical personnel and
related recruiting fees as well as an increase in professional services to
assist in expanding our computer network to accommodate the rapid increase in
the number of members of our service.
General and administrative. General and administrative expenses increased
78.1% from approximately $748,000 for the three months ended June 30, 1999 to
approximately $1.3 million for the three months ended September 30, 1999. This
increase was primarily the result of our rapid growth and expansion, requiring
additional managerial and other personnel and related fringe benefit expenses,
an increase in occupancy expenses due to the rental of additional office
space, an increase in legal and professional expenses and an increase in
expense for doubtful accounts as a result of an increase in accounts
receivable.
Interest income, net. Interest income consists of earnings on our cash and
cash equivalents. Interest expense consists primarily of interest expense on
capital equipment financing. Interest income, net increased 23.3% from
interest income, net of approximately $45,000 in the three months ended June
30, 1999 to approximately $56,000 for the three months ended September 30,
1999. The increase was primarily attributable to interest income on the $10.5
million in net proceeds from our Series D preferred stock financing in May
1999 and the $20.6 million in net proceeds from our Series E preferred stock
financing in September 1999.
Interest expense for the three month periods ended September 30, and June
30, 1999 was immaterial.
Income taxes. No income tax benefits have been recorded for any of the
periods presented. We have provided a full valuation allowance on our deferred
tax assets, consisting primarily of net operating loss carryforwards, because
of the uncertainty regarding their potential realization.
Accretion on mandatorily redeemable convertible preferred stock. Accretion
on mandatorily redeemable convertible preferred stock was approximately
$433,000 for the three months ended September 30, 1999 and approximately
$132,000 for the three months ended June 30, 1999. The preferred stock
carrying value for cumulative dividends and a portion of direct issuance costs
on Series A, Series B, Series C, Series D and Series E preferred stock
resulted in the increase. During the three months ended June 30, 1999, only
shares of Series A, Series B, Series C and Series D preferred stock were
outstanding. During the three months ended September 30, 1999, shares of
Series A, Series B, Series C, Series D and Series E preferred stock were all
outstanding.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September
30, 1998
Revenue. Revenue increased 22,253.2% from approximately $27,000 in the
first nine months ended September 30, 1998 to approximately $6.0 million for
the nine months ended September 30, 1999. Advertising revenue increased $4.0
million and opt-in revenue increased $1.9 million. The increase in revenue was
the result of our decision to revise our strategy from entering into
arrangements with national retailers as distributors of our software-based
product to an online direct marketing service that provides personalized
content and advertisements via e-mail.
Cost of revenue. Cost of revenue increased 1,447.2%, from approximately
$31,000 in the first nine months ended September 30, 1998 to approximately
$472,000 for the nine months ended September 30, 1999. Our cost of revenue for
the nine months ended September 30, 1999 primarily consisted of expenses
related to the maintenance of existing member profiles, the expansion of e-
mail categories and depreciation of the computer systems necessary to operate
our service. The increase in cost of revenue was the result of
23
<PAGE>
our decision to revise our strategy from entering into arrangements with
national retailers as distributors of our software-based product to an online
direct marketing service that provides personalized content and advertisements
via e-mail.
Sales and marketing. Sales and marketing expenses increased 2,684.3% from
approximately $591,000 for the nine months ended September 30, 1998 to
approximately $16.5 million for the nine months ended September 30, 1999. This
increase was primarily the result of a major expansion in our efforts to
acquire new members of our service through the purchase of banner
advertisements and similar services on the Web, the increase in our sales and
marketing staff and an increase in sales commissions related to the growth in
revenue.
Research and development. Research and development expenses increased 254.3%
from approximately $286,000 for the nine months ended September 30, 1998 to
approximately $1.0 million for the nine months ended September 30, 1999. This
increase was primarily attributable to our continued research and development
of our service and expansion of technical personnel and related recruiting
fees.
General and administrative. General and administrative expenses increased
381.6% from approximately $486,000 for the nine months ended September 30, 1998
to approximately $2.3 million for the nine months ended September 30, 1999.
This increase is primarily the result of our rapid growth and expansion,
requiring additional personnel and related fringe benefit expenses, rent, legal
services, consulting services and other administrative support expenses.
Stock based compensation. In connection with the grant of stock options to
employees during the nine month period ended September 30, 1999, we recorded
total deferred compensation of approximately $2.4 million as a reduction of
stockholders' equity (deficit). This deferred compensation represented the
difference between the estimated fair value of our common stock and the
exercise price of these options at the date of grant. We are amortizing this
amount over the vesting periods of the applicable options resulting in an
expense of approximately $269,000 for the nine month period ended September 30,
1999. Annual amortization of deferred stock compensation for stock options
granted at September 30, 1999, is approximately $420,000, $604,000, $604,000,
$604,000 and $185,000, for the years ending December 31, 1999, 2000, 2001, 2002
and 2003, respectively.
Interest income, net. Interest income, net increased 450.9% from
approximately $23,000 for the nine months ended September 30, 1998 to
approximately $124,000 for the nine months ended September 30, 1999. This
increase was due primarily to an increase in available funds for investment in
short term investments during the first nine months of 1999 as compared to the
first nine months of 1998. The amount of interest income fluctuates based upon
the amount of funds available for investment and prevailing interest rates.
Interest expense for the nine month periods ended September 30, 1998 and
1999 was immaterial.
Income taxes. No income tax benefits have been recorded for any of the
periods presented. We have provided a full valuation allowance on our deferred
tax assets, consisting primarily of net operating loss carryforwards, because
of our ability to realize these benefits.
Accretion on mandatorily redeemable convertible preferred stock. Accretion
on mandatorily redeemable convertible preferred stock was approximately
$109,000 for the nine months ended September 30, 1998 and approximately
$664,000 for the nine months ended September 30, 1999. The preferred stock
carrying value for cumulative dividends and a portion of direct issuance costs
on Series A, Series B, Series C, Series D and Series E preferred stock resulted
in the increase. During the first nine months of 1998, only shares of Series A
and Series B preferred stock were outstanding. During the nine months ended
September 30, 1999, shares of Series A, Series B, Series C, Series D and Series
E preferred stock were all outstanding.
24
<PAGE>
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenue. Our revenue decreased 15.5% from approximately $67,000 for the year
ended December 31, 1997 to approximately $57,000 for the year ended December
31, 1998. Revenues for this period were all from advertising. No opt-in
revenues were recorded during these periods. Revenue during these periods was
generated from our software-based products. The decrease in revenue was also
the result of our decision to revise our strategy from entering into
arrangements with national retailers as distributors of our software based
product to an online direct marketing service that provides personalized
content and advertisements via e-mail.
Cost of revenue. Cost of revenue increased 59.7%, from approximately $37,000
for the year ended December 31, 1997 to approximately $59,000 for the year
ended December 31, 1998. This increase was primarily the result of expenses
incurred to continue to develop the content of our software-based product.
Sales and marketing. Sales and marketing expenses increased 489.7% from
approximately $147,000 for the year ended December 31, 1997 to approximately
$869,000 for the year ended December 31, 1998. This increase was primarily the
result of our expansion of sales and marketing personnel and related travel,
commission and contractor expenses.
Research and development. Research and development expenses increased 55.4%
from approximately $240,000 for the year ended December 31, 1997 to
approximately $374,000 for the year ended December 31, 1998. This increase was
primarily attributable to growth in the number of research and development
personnel and the use of an outside vendor to house and maintain the host
servers that support our Web site.
General and administrative. General and administrative expenses increased
471.5% from approximately $127,000 for the year ended December 31, 1997 to
approximately $727,000 for the year ended December 31, 1998. Representative of
our growth and expansion, this increase resulted from increases in rent,
utilities, employee fringe benefit expenses and office supplies and the
establishment of an administrative support and finance function in the company.
Interest income, net. Interest income, net increased 310.1% from
approximately $6,000 for the year ended December 31, 1997 to approximately
$25,000 for the year ended December 31, 1998. This increase was due primarily
to an increase in available funds for investment in short term investments
during 1998 as compared to 1997. As discussed in the notes to the financial
statements, we raised $1 million in preferred stock private financing during
November 1997 and an additional $1 million in June 1998 from the exercise of
preferred stock warrants. The amount of interest income fluctuates based upon
the amount of funds available for investment and prevailing interest rates.
Accretion on mandatorily redeemable convertible preferred stock. Accretion
on mandatorily redeemable convertible preferred stock increased approximately
$157,000, or 100% from the year ended December 31, 1997 as a result of the
increase in the preferred stock carrying value for cumulative dividends and a
portion of direct issuance costs on Series A and Series B preferred stock.
25
<PAGE>
Quarterly Results of Operations
The following table sets forth unaudited quarterly statement of operations
data for the last quarter of 1997, the four quarters of 1998 and the first
three quarters of 1999. We derived this data from unaudited financial
statements, and, in the opinion of our management, they include all
adjustments, which consist only of normal recurring adjustments, necessary to
present fairly the financial results for the periods. The results of operations
for any quarter are not necessarily indicative of the results of operations for
any future period.
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------------------------------------------
Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30,
1997 1998 1998 1998 1998 1999 1999 1999
--------- --------- --------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Advertising............ $ 10,000 $ -- $ -- $ 26,750 $ 30,000 $ 10,024 $886,065 $ 3,168,873
Opt-in................. -- -- -- -- -- 13,298 532,834 1,368,399
--------- --------- --------- --------- --------- ----------- ----------- -----------
Total Revenue.......... 10,000 -- -- 26,750 30,000 23,322 1,418,899 4,537,272
Cost of revenue......... 28,678 1,847 9,927 18,726 28,972 98,514 147,399 225,994
--------- --------- --------- --------- --------- ----------- ----------- -----------
Gross margin (loss)..... (18,678) (1,847) (9,927) 8,024 1,028 (75,192) 1,271,500 4,311,278
--------- --------- --------- --------- --------- ----------- ----------- -----------
Operating expenses:
Sales and marketing.... 121,627 82,242 248,700 260,417 277,347 1,081,501 5,158,985 10,224,520
Research and
development........... 147,397 77,208 114,856 93,720 88,004 220,075 305,357 487,171
General and
administrative........ 110,252 121,101 146,427 218,106 240,871 259,702 747,572 1,331,510
Stock based
compensation.......... -- -- -- -- -- 11,055 88,293 169,323
--------- --------- --------- --------- --------- ----------- ----------- -----------
Total operating
expenses.............. 379,276 280,551 509,983 572,243 606,222 1,572,333 6,300,207 12,212,524
--------- --------- --------- --------- --------- ----------- ----------- -----------
Loss from operations.... (397,954) (282,398) (519,910) (564,219) (605,194) (1,647,525) (5,028,707) (7,901,246)
Interest income, net.... 5,978 8,043 5,530 8,977 1,965 22,780 45,443 56,014
--------- --------- --------- --------- --------- ----------- ----------- -----------
Net loss................ (391,976) (274,355) (514,380) (555,242) (603,229) (1,624,745) (4,983,264) (7,845,232)
Accretion on mandatorily
redeemable convertible
preferred stock........ -- (28,537) (31,426) (48,537) (48,537) (100,046) (131,576) (432,755)
--------- --------- --------- --------- --------- ----------- ----------- -----------
Net loss available to
common stockholders.... $(391,976) $(302,892) $(545,806) $(603,779) $(651,766) $(1,724,791) $(5,114,840) $(8,277,987)
========= ========= ========= ========= ========= =========== =========== ===========
</TABLE>
Seasonality and Quarterly Fluctuations in Operating Results
We believe that our revenue will be subject to seasonal fluctuations as a
result of general patterns of retail advertising and marketing and consumer
purchasing, which are typically higher during the fourth calendar quarter and
lower in the following quarter. In addition, expenditures by advertisers and
marketers tend to be cyclical, reflecting overall economic conditions and
consumer buying patterns. Due to these and other factors, we believe that
quarter-to-quarter comparisons of our operating results may not be meaningful
and you should not rely upon them as an indication of our future performance.
Recent Events
On August 25, 1999, we entered into a nine month contract with Lycos under
which we have agreed to launch "co-branded" versions of our Web site and our e-
mail service that combine elements of the LifeMinders.com brand and the Lycos
brand. Under the terms of the contract, Lycos has agreed to link to the co-
branded Web site throughout the Lycos network of Web sites. In addition, the
contract will create co-branding opportunities within selected Lycos'
properties and Lycos has agreed to provide us with banner advertisements across
the Lycos network.
On September 23, 1999, we issued 2,791,993 shares of Series E mandatorily
redeemable convertible preferred stock at $8.09 per share for cash proceeds of
approximately $22.6 million.
On October 21, 1999, we approved a 5 for 4 common stock split, to be
effective immediately prior to the consummation of this offering. The
conversion ratio of the mandatorily redeemable convertible preferred stock will
be adjusted from a 1 for 1 conversion ratio to a 5 for 4 conversion ratio in
connection with the stock split.
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Liquidity and Capital Resources
We have funded our operations since the Date of Inception primarily through
the private placement of preferred equity securities, through which we have
raised net proceeds of $36.9 million through September 30, 1999. As discussed
in the Notes to the financial statements, we raised $866,000 in a preferred
stock private financing during November 1997 and an additional $1.0 million in
June 1998 from the exercise of preferred stock warrants. We raised an
additional $3.9 million in a preferred stock private financing in January 1999,
$10.5 million in a preferred stock private financing in May 1999 and $20.6
million in a preferred stock private financing in September 1999. We have also
financed our operations through equipment financing through Imperial Bank. As
of September 30, 1999, we had approximately $11.3 million of cash and cash
equivalents and had outstanding equipment financing totaling approximately
$162,000. The outstanding principal balance of the equipment financing must be
repaid in 24 equal payments commencing on December 10, 1999.
Net cash used in operating activities was approximately $35,000 for the
period from the Date of Inception to December 31, 1996, approximately $428,000
for the year ended December 31, 1997, approximately $1.5 million for the year
ended December 31, 1998 and approximately $21.3 million for the nine months
ended September 30, 1999. Cash used in operating activities for the years ended
December 31, 1996 and 1997 were primarily the result of net losses in those
years. Cash used in operating activities for the year ended December 31, 1998
was primarily the result of net losses, which were partially offset by
increases in deferred revenue. Cash used in operating activities for the nine
months ended September 30, 1999 resulted from net losses and increases in
accounts receivable and prepaid expenses, which were partially offset by
increases in accounts payable and accrued expenses.
There was no net cash used in investing activities for the period from the
Date of Inception to December 31, 1996, approximately $5,000 for the year ended
December 31, 1997, approximately $50,000 for the year ended December 31, 1998
and approximately $2.9 million for the nine months ended September 30, 1999.
Cash used in investing activities was related to purchases of property and
equipment for all periods. The increase in the nine months ended September 30,
1999 is attributable to the purchase of substantial computer equipment needed
to maintain our database and deliver targeted e-mails to our rapidly growing
member base.
Net cash provided by financing activities was approximately $35,000 for the
period from the Date of Inception to December 31, 1996, approximately $1.2
million for the year ended December 31, 1997, approximately $1.0 million for
the year ended December 31, 1998 and approximately $35.3 million for the nine
months ended September 30, 1999. Cash provided by financing activities for the
period from the Date of Inception to December 31, 1996 resulted from the
purchase of common stock by the founders of the company at the Date of
Inception. Cash provided by financing activities for the years ended December
31, 1997 and 1998 and the nine months ended September 30, 1999 resulted almost
entirely from sales of preferred stock.
While we do not have any commitments for capital expenditures, we anticipate
that we will continue to experience significant capital expenditures consistent
with our anticipated growth in our member base. We anticipate that we will
continue to experience significant growth in our operating expenses for the
foreseeable future and that our operating expenses will be a material use of
our cash resources. Also, we anticipate substantial expenditures and use of
cash resources in our efforts to acquire new members of our service. We believe
that the net proceeds of this offering, together with our existing cash, cash
equivalents and available credit facilities, will be sufficient to meet our
anticipated cash needs for working capital, member acquisition expenses and
capital expenditures for the foreseeable future.
Recent Accounting Pronouncements
In June 1998, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The statement requires the recognition of
all derivatives as either assets or liabilities in the balance sheet and the
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measurement of those instruments at fair value. The accounting for changes in
the fair value of a derivative depends on the planned use of the derivative and
the resulting designation. In July 1999, SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of Financial Accounting Standards No. 133" was issued. SFAS 137 deferred the
effective date of SFAS 133 from fiscal years beginning after June 15, 1999 to
all fiscal years beginning after June 15, 2000. Because we do not currently
hold any derivative instruments and do not engage in hedging activities, we
believe the impact of the adoption of SFAS No. 133 will not have a material
impact on our financial position, results of operations or cash flows.
Quantitative and Qualitative Disclosures About Market Risk
We do not currently hold any derivative instruments and do not engage in
hedging activities and currently do not enter into any transactions denominated
in a foreign currency. Thus, our exposure to foreign exchange fluctuations is
minimal.
Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. This could result in
system failures or miscalculations causing disruption of operations for any
company using computer programs or hardware, including, among other things, a
temporary inability to process transactions, send or receive e-mail messages,
send invoices or engage in normal business activities. As a result, many
companies' computer systems may need to be upgraded or replaced in order to
avoid "Year 2000" issues.
We are a comparatively new enterprise, and, accordingly, the majority of
software and hardware we use to manage our business has all been purchased or
developed by us within the last 24 months. While this does not uniformly
protect us against Year 2000 exposure, we believe our exposure is limited
because the information technology we use to manage our business is not based
upon legacy hardware and software systems. Generally, hardware and software
designed within the current decade and the past several years in particular has
given greater consideration to Year 2000 issues. All of the software code we
have internally developed to manage our network and infrastructure is written
with four digits to define the applicable year.
We are in the process of testing our internal systems, including our
membership and tracking system, content explorer and targeting system, data
explorer and mapping system, content matching and selection system, e-mail
delivery system and member behavior tracking system. These applications are
built and operate on software components that are certified as Year 2000
compliant. The testing we have completed has primarily been performed
internally and, to date, we have not retained any outside service or
consultants to test or review our systems for Year 2000 compliance. Our testing
process provides a complete end-to-end functional exercise of all system
components. This process starts with member sign-up and continues through
profile creation and customization, content and advertisement entry and
targeting, advertisement and content fulfillment. Any issues with regard to
date handling, and any other exception conditions found during testing, result
in error correction and system modifications and a further round of testing.
Based on the testing we have performed, we believe that our software is Year
2000 compliant. We are testing our systems for Year 2000 compliance and will
continue to test these systems as development of these systems progress.
In addition, we rely on software and hardware developed by third parties
both for our network and internal information systems and third party network
infrastructure providers to gain access to the Internet. To date, we have not
done any testing of third-party software or hardware to determine Year 2000
compliance. We have, however, reviewed certifications from our key suppliers of
hardware and networking equipment for our data centers that this hardware and
networking equipment are Year 2000 compliant.
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Additionally, we have reviewed certifications from the providers of key
software applications for our internal operations that their software is Year
2000 compliant. Based upon an initial evaluation of our broader list of
software and hardware providers, we believe that all of these providers are in
the process of reviewing and implementing their own Year 2000 compliance
programs. We intend to work with these providers to address the Year 2000 issue
and continue to seek assurances from them that their products are Year 2000
compliant.
As of August 31, 1999, we had incurred approximately $5,000 in expenses
related to the Year 2000 problem, and we anticipate that future costs
associated with our Year 2000 remediation efforts will not exceed $100,000.
These costs will be accounted for as operating expenses and will be paid for
out of working capital.
If we, our third party providers of hardware and software or our third party
network providers fail to remedy any Year 2000 issues, the result could be lost
revenue, increased operating costs, the loss of customers and other business
interruptions, any of which could harm our business. Moreover, the failure to
adequately address Year 2000 compliance issues in our products and systems
could result in claims of mismanagement, misrepresentation or breach of
contract and related litigation, which could be costly and time consuming to
defend.
The most reasonably likely worst case scenario for us involving Year 2000
issues would include disruptions to Internet communications and connectivity
for a period of time due to failures in hardware and software components that
operate in a degraded state or not at all at or near the Year 2000 transition.
We have chosen our Internet connectivity partners, equipment and co-location
service providers to insure that we have at all times multiple connection
points to the Internet. In the event of failure of all connectivity paths, or
all equipment connectivity, sign-up processing will be temporarily unavailable
and end user behaviors will not be recorded during such an interval. Extended
outages will be addressed by repositioning our system on new, readily available
off-the-shelf computer systems and components at an alternative location. We
can install, configure and establish such a reconstructed site, including
restoration of off-site data backups and e-mail capacity, in less than 48
hours.
We have engaged in an ongoing Year 2000 assessment, but have not yet
developed any specific contingency plans. The results of our testing and the
responses received from third party vendors and service providers will be taken
into account in determining the nature and extent of any contingency plans.
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BUSINESS
Overview
We are a leading online direct marketing company that provides personalized
content and advertisements via e-mail to a community of members. Our e-mail
messages contain helpful reminders and tips that enable our members to better
organize and manage their busy lives. Our proprietary information about our
members and highly-precise targeting capabilities provide our advertising
partners the opportunity to more effectively reach their target markets.
Members can create profiles in one or more of our ten e-mail categories
including family, entertainment, home, personal events, pet, automotive,
health, personal finance, travel and shopping. On average each member creates
profiles in four e-mail categories and receives an average of eight e-mails per
month. We gather member profile data from several sources, including
information provided by our members during the sign up process and through
member preferences and buying habits automatically collected through
interaction with our e-mail messages. We also supplement our profile data with
information obtained from third party sources. Our proprietary matching process
correlates member profile data to uniquely identified messages that we
personalize and deliver to each member via e-mail. Using our direct marketing
expertise and our proprietary member database, we create highly-targeted e-mail
messages that enable our advertising partners to reach a receptive audience.
As of September 30, 1999, we had approximately 4.0 million members, creating
more than 16.2 million profiles. As of the same date, we had 62 advertising
partners. The value of our service to our members is also evidenced by our
growth from 311,000 members and 1.3 million profiles at March 31, 1999, which
represents a compound quarterly growth rate for both members and profiles of
over 250%.
We were incorporated in Maryland on August 9, 1996 under the name of
MinderSoft, Inc. In January 1999, we changed our name to LifeMinders.com, Inc.
We reincorporated in Delaware on July 2, 1999. From 1996 to 1998, we entered
into arrangements with national retailers to distribute our reminder products
in software form on disk. In late 1998, we revised our strategy to become an
online direct marketing company that provides personalized content and
advertisements via e-mail to a community of members.
Industry Background
Traditional Direct Marketing and Advertising
The traditional advertising industry relies on two primary activities: brand
advertising and direct marketing. The Direct Marketing Association, or DMA,
estimates that, of the total of approximately $285.2 billion spent on
advertising in the United States in 1998, approximately $162.7 billion or 57%
was spent on direct marketing compared to 43% invested in brand advertising.
The focus of advertising is typically to build brand awareness by repeating
messages with high frequency through traditional media as radio, television and
print. The purpose of direct marketing is to generate a specific consumer
response or action--generally the trial and purchase of a product or service.
Direct marketers typically use direct mail pieces, catalogs, magazine inserts
and telemarketing, aimed at specific and select consumers in an attempt to
maximize the number of desired responses per marketing dollar invested.
However, in order to do so, direct marketers must be able to accurately
identify and reach specific consumers and showcase products and services that
are relevant to those consumers. Direct marketers invest significant resources
in obtaining and analyzing critical data about consumers in order to assess and
understand their specific needs. Despite these efforts, average response rates
for untargeted, traditional direct marketing campaigns range between 1% to 2%
according to information gathered by the American Association of Advertising
Agencies in 1999.
Direct marketers continue to experience major challenges and inefficiencies.
A significant challenge is the inability to target consumers with relevant
advertisements and products, resulting in low response rates, negative consumer
perceptions and low returns on investments. In addition, traditional direct
marketers are constrained by inherent response and analysis delays due to
extended production lead times and lengthy consumer and intermediary response
times.
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Advent of the Internet and E-mail
The Internet has emerged as a global medium, enabling millions of people
worldwide to share information, communicate and conduct business
electronically. International Data Corporation, or IDC, estimates that the
number of Web users will grow from approximately 142.2 million worldwide in
1998 to approximately 502.4 million worldwide by the end of 2003. E-mail, one
of the most popular and widely used Internet applications, has broadened from a
simple messaging tool to a widely accepted form of communication for both
personal and business use. According to Electronic Mail & Messaging Systems,
there were approximately 382.0 million electronic mailboxes worldwide as of
March 31, 1999. IDC expects the number of Web sites, as indicated by total
number of Uniform Resource Locators, or URLs, to grow from 925.0 million in
1998 to 13.1 billion by 2003. We believe this increase represents a growing
amount of unique content on the Internet that can be targeted at a growing
number of specific user and interest groups.
Growth of Internet-Based Direct Marketing and Advertising
The Internet has emerged as an attractive new medium for advertisers due to
unique features that are unavailable in traditional media. The interactive
nature of the Internet combined with its global reach and rapidly growing
audience enables advertisers to target specific types of users, receive direct
feedback on their advertisements and capture valuable data on user preferences.
Forrester Research estimates that total spending on Internet advertising in the
United States will grow from $2.8 billion in 1999 to $22.2 billion in 2004.
The Internet represents an even more attractive medium for direct marketers.
Online direct marketing has the potential to increase user response rates and
decrease costs per transaction by targeting campaigns to particular users based
on their demographic profile, interests and online behavior. In addition, the
Internet permits advertisers to receive immediate responses, effectively test
campaigns and direct consumers to a precise point-of-sale. Online direct
marketing is generally conducted through Web-based promotional offers or e-
mail, which has expanded from a simple personal messaging service to a powerful
and cost-effective business tool. The DMA estimates that Internet direct
marketing expenditures will rise from $603.2 million in 1998 to $5.3 billion by
2003.
Current Limitations of Internet-Based Direct Marketing and Advertising
While the Internet offers advertisers a number of advantages over
traditional media, there remain significant challenges to realizing the full
potential of online advertising. To date, advertisers have primarily employed
banner advertisements on heavily trafficked and broadbased portals and other
Web content sites, most of which do not have close and trusted relationships
with their users. These portals and content sites often have the ability to
reach wide audiences but are generally unable to offer advertisers an effective
means to identify their target audience largely because they lack precise
demographic, psychographic and navigational data. During the month of September
1999, click rates for the top banner advertisements averaged just under 0.6% as
reported by The Nielsen//NetRatings Reporter. In response to the poor
advertising performance on broadbased portals, we believe advertisers are
increasingly turning to vertically-oriented portals, organized around specific
interests including finance, sports or women's issues, in search of more
targeted audiences and higher click through rates.
In addition, advertisers have expanded their efforts to reach consumers
using online direct marketing. These campaigns have focused primarily on the
mass mailing of unsolicited e-mail messages referred to as "spam." Spam
campaigns have met with considerable negative consumer reaction and low
response rates primarily because the offerings are unsolicited and are often
not relevant to consumers' lives. As a result of the limitations in both online
advertising and direct marketing, advertisers continue to seek more effective
approaches to deliver highly-targeted advertisements in a more personalized and
content-rich editorial environment from which they receive real-time feedback.
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Challenges to the Internet User
Generally, Internet users have relied on broadbased portals or search
engines to navigate through the mass of information available on the Internet.
Although these portals and search sites have been useful for individuals
seeking to find aggregated Web content, Internet users attempting to locate
detailed, personalized information must navigate through a vast and often
irrelevant array of Web pages and sites. These portals and search sites have
not provided a platform for aggregating and disseminating the rapidly
increasing volume of personalized content on the Web or enabling users to
interact with content and service providers--unique characteristics that
distinguish the Internet from traditional print, radio and television media.
Many Internet users seeking greater personalized content have increasingly
migrated to vertically-oriented portals and online communities. These online
portals and communities were designed to provide a platform for Internet users
with similar interests to more easily obtain relevant content and to share
experiences and ideas. However, we believe these sites provide a poor context
for Internet users to discover customized and individual content because
Internet users lack the affinity and opportunity to relate personally to their
online experiences. Accordingly, we believe that Internet users have a
significant and growing need for a trusted online service that can
automatically provide relevant, personalized and timely information.
The LifeMinders.com Solution
Our e-mail messages contain helpful reminders and tips that enable our
members to better organize and manage their busy lives. Our proprietary
information about our members and highly-precise targeting capabilities provide
our advertising partners the opportunity to more effectively reach their target
audiences.
Our solution offers the following benefits to both our members and our
advertising partners:
Benefits to Members
. Highly targeted and relevant content. We deliver highly personalized e-
mail messages containing useful and relevant information across ten e-
mail categories. Our proprietary content matching process correlates
uniquely identified messages with individual member profiles in an
automated manner. The more our members interact with us through our e-
mail service, the more targeted and personalized our e-mails become,
thereby enhancing the value of our service to our members. We gather
profile data about each member from several sources including
information provided by the members during the sign up process and
through member preferences and buying habits collected through
interaction with our e-mail messages. We also supplement the data with
information obtained from third party sources.
. Enhanced personalization and user efficiency. We compose, edit and
customize each targeted message we send with specific member profile
data. Our automated and timely messages provide reminders of important
personal information and events, including birthdays, a child's
developmental milestones and car maintenance. Our personalized, content-
rich e-mails on specific interests enable our members to avoid the mass
of extraneous information received through untargeted e-mails and
obtained from most search engines and portals. We deliver each message
in a brief, user-friendly e-mail format, either text or HTML, that we
determine is most appropriate for each member. Our targeted messages
contain imbedded URLs that link directly to full-text articles and
helpful information. These links supplement the content within the
messages and provide easily accessible information to our members
without requiring lengthy and potentially unproductive Web searches.
. Access to e-commerce opportunities. Our proprietary database management
capabilities and timely, targeted content allow us to deliver highly
relevant e-commerce opportunities to our members. For example, if a
member has a child nearing his or her second birthday, then shortly
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before that birthday we might deliver an e-mail that outlines a two-year
old child's developmental milestones. In addition, we might include an
offer to purchase an age and developmentally appropriate learning tool
and display advertisements for other relevant products. Members have
also benefitted from the availability of high-quality offers from our
leading brand advertising partners including The Home Depot,
PETsMART.com, PC Flowers & Gifts and SmarterKids.com.
. Member trust and confidence. By developing close relationships with our
members and providing content they consider valuable, we become a
trusted ally. As a matter of corporate policy, we do not sell members'
personal information to third parties without permission. We are
certified by TRUSTe, a leading, independent, non-profit organization
whose mission is to build Internet users' trust and confidence in the
Internet by promoting the principles of disclosure and informed consent.
Our policy is not to disseminate personal information and our members
choose the level of data that they feel comfortable inputting into our
database. As a result, our members are able to exercise a significant
amount of control over their experience and tend to provide us with more
information over time. Our service also allows members to easily
unsubscribe at any time by clicking through a link appearing at the
bottom of our e-mail messages and selecting the particular category in
which they want to unsubscribe.
Benefits to Advertising Partners
. Large and targeted member base. As of September 30, 1999, we had
approximately 4.0 million members who have created more than 16.2
million profiles. Using our direct marketing expertise and our
proprietary member database, which contains extensive demographic,
behavioral and performance information, we create highly-targeted e-mail
messages that enable our advertising partners to reach a large receptive
audience.
. Detailed real-time reporting and proprietary data mining technology. Our
capabilities include sophisticated data mining techniques and real-time
reporting technology to evaluate and assess the results of our
advertising partners' marketing campaigns as they occur. We also
actively engage in testing on subsets of our member base to determine
which members are not likely to respond based on shared profile
characteristics. Based on our capabilities, we offer our advertising
partners the ability to immediately determine the effectiveness of a
given advertising campaign and the opportunity to refine their marketing
messages.
. Enhanced targeting capability and increased return on advertising
investment. We offer our advertising partners a cost-effective means to
deliver targeted online advertisements to consumers. We provide the
ability to target members on numerous variables that are typically
unavailable through other direct marketing means. Because of our
continually improving testing, targeting and profiling capabilities, our
members typically open their e-mail approximately 25% of the time, and
members that open our e-mails click through one or more of the four or
five content or advertising links contained in each e-mail at rates of
approximately 20%. This highly targeted advertising opportunity results
in low delivery costs and high response rates, generating a return on
advertising investment that is higher than that achieved by traditional
direct response media and offline advertising and compares favorably to
other online alternatives.
The LifeMinders.com Strategy
Our objective is to be the leading online direct marketing company that
provides personalized content and advertisements via e-mail to a community of
members. The key elements of this strategy include:
Aggressively and Cost-Effectively Expanding Our Member Base
We intend to continue to rapidly increase our member base. By aggregating a
large audience, we plan to take advantage of economies of scale, increase our
attractiveness to advertisers and enhance our ability to enter into strategic
marketing arrangements. We intend to achieve this objective by:
. continuing to establish distribution partnerships with leading online
sites, including Lycos, whereby we become an automated component of the
sign up process within these sites;
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. continuing to invest in large scale, online member acquisition
activities, including purchasing highly targeted banner advertisements
and opt-in lists from selected vertically-oriented portals that
correspond to our members' interests;
. expanding our offline advertising and promotional activities, including
national print, outdoor and broadcast placements;
. expanding our success in viral marketing, whereby existing members refer
new members through increasing incentives, including cash and
merchandise rewards; and
. introducing new e-mail categories and services on a regular basis that
will appeal to our existing and potential members.
We will also continue to reduce new member acquisition costs by developing
financial models at the individual level and analyzing behavior to determine
the exact characteristics of a valuable member. In doing this, we will be able
to target the most cost-effective channels to acquire active and valuable
members.
Improving Member Experience and Retention
We will continue our efforts to enhance our member experience by constantly
monitoring member interaction, thereby improving the quality of our content.
Our marketing analysis and data mining team will continue to enhance our
service to our members by evaluating behavior related to consumer preferences
and buying habits in support of our efforts to personalize future content
offerings. Our category managers will continually track and analyze member data
in order to better identify and develop relevant and compelling content. We
believe these efforts will continue to result in increased click through rates
and higher customer satisfaction as we enhance our relationships. Information
that has received positive responses from existing members will be distributed
to new members as they join.
We will further differentiate ourselves with the introduction of each new e-
mail category. As a result, we will not only improve existing member experience
and retention, but will also enhance the LifeMinders.com brand and attract
additional members. We will continue to monitor and survey our members for new
areas of interest and prioritize our new categories based on their direct and
indirect input. We introduced LifeMinders Health in August 1999 and LifeMinders
Travel and LifeMinders Shopping in September 1999, and we intend to roll out a
number of new categories each quarter covering a variety of areas, including
sports and recreation, cooking and crafts and hobbies.
Expanding and Pursuing Multiple Revenue Streams
Our business model allows us the opportunity to pursue revenue from diverse
sources. Advertisers and businesses currently pay us for placement of
advertisements within our e-mail messages, as well as for advertising messages
placed on our sign up pages. We also intend to pursue other revenue sources,
including various e-commerce and content licensing opportunities, which
leverage our unique technology infrastructure, our extensive database of
personalized member information, and our expertise in data analysis and direct
marketing. In addition, we will expand our existing revenue streams by
continuing to develop new and creative advertising opportunities within our e-
mail messages.
Enhancing Advertiser Effectiveness by Expanding our Marketing Analysis and
Data Mining Capabilities
We will continue to use sophisticated tools and our proprietary technologies
to:
. increase the efficacy of our advertising partners' marketing campaigns
by refining the precision of our targeting capabilities and testing new
concepts on subsets of our member base prior to implementation across
our entire user community;
. develop and acquire content that increasingly reflects member
preferences and lifestyles by collecting data on a variety of detailed
consumer behavior, such as opening of e-mail messages, click through
behavior on content, and advertisement responsiveness, including click
through and follow up purchase activity;
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. enhance our member profiles through interactive quizzes and surveys,
purchasing additional demographic data and offering cash and prize
incentives for members to provide more extensive demographic and
preference information; and
. maximize reliability and scalability, allowing for the creation and
distribution of millions of personalized e-mails per week.
Increasing Awareness and Understanding of the LifeMinders.com Brand
We believe that establishing and leveraging the LifeMinders.com brand is
critical to our ultimate success. We have already benefitted from viral
marketing and word-of-mouth publicity of our brand through interactions between
existing and prospective members. We intend to increase brand equity through
extensive consumer and trade advertising, including national print, outdoor and
broadcast placements, continued public relations campaigns, direct mail,
participation in strategic industry events and sustained consumer
communications campaigns. We also believe that the introduction of new e-mail
categories will increase our brand awareness.
Pursuing Strategic Acquisitions and Alliances
We plan to pursue acquisitions and alliances, both domestically and
internationally, to further penetrate and expand our e-mail categories,
leverage the strong relationship we have established with our members, broaden
our member base, capture new distribution channels and establish new revenue
streams. While we do not have any definitive agreements currently in place, we
believe that there exist many opportunities to acquire or develop strong
relationships with complementary businesses.
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Services
Personalized E-mail Messages
We deliver e-mail messages to our members that contain highly personalized,
timely and relevant content along with related advertisements. Our editorial
staff of eleven searches multiple online and offline sources to identify
content that is relevant to our members' needs. Our staff develops and composes
most all of our e-mail content based on third-party sources. The e-mail
messages are delivered in an attractive, easy-to-read format and contain
imbedded URLs that link directly to relevant information. Our average member
has signed up for four e-mail categories and receives an average of eight e-
mails per month. We also assist our members in organizing and managing their
lives by automatically delivering e-mail reminders that contain important
dates, including birthdays, holidays and car maintenance dates. An example of
an e-mail message that we deliver to our members is as follows:
[GRAPHIC OF LIFEMINDERS.COM WEBPAGE APPEARS HERE]
Advertising and Direct Marketing Opportunities
We derive revenue from advertising and opt-in arrangements with our
advertising partners. Our advertising arrangements consist primarily of banner
advertisements that we display prominently within the e-mail messages we
provide to members who have indicated an interest in the product or service
being advertised. From each banner advertisement, viewers can hyperlink
directly to our advertising partner's own Web site, thus providing our partner
an opportunity to interact directly with interested members.
Our opt-in arrangements allow our members to select targeted newsletters and
advertisements during our sign up process, and in return, our opt-in partners
who are promoting these newsletters and advertisements pay us a fee based on
affirmative member response. Representatives of recent opt-in advertisers
include Click Rewards, CyberGold and Virtual Vineyards.
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The following is a description of each e-mail category and a representative
sample of our current advertisers for each e-mail category:
<TABLE>
<CAPTION>
Representative
Category Description Advertisers
------------------------------ ------------------------------------------- --------------
<C> <S> <C>
LifeMinders Family............ Parenting recommendations, toy tips, Kimberly-Clark
product recalls and development milestones (Huggies Brand)
customized by the age of a member's child
LifeMinders Entertainment..... Reviews and notifications of the latest Universal Studios
videos, books, music, games and more based
on the member's unique entertainment
interest
LifeMinders Home.............. Seasonal how-to tips and climate-specific The Home Depot
advice so member's can get the most out of
their home, lawn and garden
LifeMinders Personal Events.. Reminders to help a member keep track of Miadora.com
important dates and inspired gift
suggestions for birthdays, anniversaries
and holidays
LifeMinders Pet............... Pet care, health and training tips PETsMART.com
customized for all of our member's pets
LifeMinders Automotive........ Maintenance reminders, recall notices, InsWeb
driving tips and Blue Book values based on
make, model year and mileage of a member's
car
LifeMinders Health............ Health, nutrition and well-being tips Drugstore.com
customized for each member based on
personal profile
LifeMinders Personal Finance.. Advice about banking, family finances, NextCard
investing and saving based on our member's
personal and financial goals
LifeMinders Travel............ Getaways, destinations and travel planning Starwood Hotels
tips tailored to our member's interests
LifeMinders Shopping.......... Coupons, deals and shopping tips specific Mercata.com
to each member's profile
</TABLE>
Most of our agreements with advertisers are short term agreements averaging
one to six months in duration. We do not believe any of the agreements with any
of the advertisers listed above are material.
Sales and Marketing
Member Acquisition
We market LifeMinders.com to prospective members primarily through online
media. These marketing efforts consist of developing large-scale, vertically-
targeted advertising campaigns and strategic partnerships with large online
sites such as Lycos. Viral marketing is also a significant component of our
member acquisition strategy, as we have acquired approximately one-third of our
member base through referrals from existing members.
Advertising Sales
We sell our advertisements through a direct sales organization dedicated to
developing and maintaining close relationships with top advertisers and leading
advertising agencies nationwide. As of September 30,
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<PAGE>
1999, we had 13 full-time employees engaged in direct sales activities based in
our Herndon, Virginia headquarters. We plan to significantly increase the size
of our sales force and open a sales office in San Francisco, California by
December 31, 1999. Our sales department is organized around and focuses on
selling advertising within designated e-mail categories. The sales force works
regularly with our advertising partners on the design and placement of their
advertisements, provides advertising partners with advertising measurement
analyses and focuses on providing a high level of client service and
satisfaction.
Advertisers and advertising agencies typically enter into short-term
agreements--on average one to six months--in which they receive a guaranteed
number of e-mails delivered containing an advertisement based on a per e-mail
basis. Our standard advertising rate currently ranges from $30 to $200 per
thousand per e-mail delivered, depending upon location of the advertisement
within our e-mail message and the extent to which it is targeted for a
particular audience.
Technology and Infrastructure
Our service offering is supported by our two key proprietary technology
components:
. Content Creation and Management Software
. Member Targeting and Behavior Tracking System
Content Creation and Management Software
Our content creation and management software has four components: content
entry, targeting, personalization and formatting.
The content entry component allows our editorial staff to easily input,
revise and test e-mail content items. The content entry software runs on the
Windows platform using an interface similar to the Windows Explorer program.
The targeting component allows e-mail content items to be sent to members
based on explicit data that members have provided including important dates and
special interests as well as implicit data based on demographic and
psychographic groups defined by our editorial staff. These groups are defined
based on analyses of member behavior and preferences.
The personalization component allows our editorial staff to enhance content
by personalizing it for each individual member. For example, the e-mail content
items could contain the name of the child or use gender specific pronouns. The
software will automatically insert the proper pronoun or name based on the
gender or name provided by the member.
The formatting component allows our editorial staff to compose each e-mail
content item in a single, rich text format which will automatically adjust to
one of three formats (rich text, HTML or America Online) in order to provide
optimum presentation of the content. Members with HTML e-mail, supported by
most current e-mail services and e-mail clients, will receive the highest
quality presentation of our content because it includes images as well as text.
Members using America Online or plain text e-mail receive a version of our
content that is more textual in presentation, but is attractive and easy to
read.
Member Targeting and Behavior Tracking System
This system allows category managers to improve and adjust our e-mail
content over time to reflect the needs and interests of our members. Category
managers can personalize the subject line of an e-mail, content titles and the
physical display of the e-mail.
Our content targeting and behavior tracking system uses standard Internet
data transmission protocols, combined with proprietary application software, to
measure a wide range of possible member behaviors.
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<PAGE>
These behaviors may include: opening the e-mail message, clicking through to
links, forwarding an e-mail message, or clicking through to advertisements and
select e-commerce opportunities. This system has been built to be scalable
allowing new categories to be brought online without additional programming. In
addition, this system is based on member profile data that allows categories
and subcategories to be changed to reflect member preferences and lifestyles.
Tracking individual member activity allows our category managers to measure
the effectiveness and interest level of members in our editorial content. At
the same time, the tracking systems support the measurement of the
effectiveness and efficiency of our advertising and promotional campaigns on
behalf of our advertising partners.
Scalability
We have designed our technology platform to be user friendly and to
significantly scale with additional members. We typically send e-mails in most
of our categories to our members on a weekly basis. Our current operating plan
ensures that we will have approximately twice the capacity needed to generate
and deliver needed e-mail content during any peak processing load. This assures
capacity for growth and unusual fluctuations in e-mail activity. As our member
base expands, we are increasing our capacity and replicating our infrastructure
to provide increasingly parallel operations. Therefore, we believe there are no
practical technology limits to our growth because our distributed framework
should ensure that failures are isolated to a small portion of our member base.
Security
Our technology incorporates a variety of security techniques to protect
confidential member data. We limit member activity, data transmission, and
Internet access to our information to the individual member and to authorized
company representatives. We monitor and protect all outside access to our
resources and data with state-of-the art-technology, and all suspicious
activity is logged and analyzed by qualified staff. Our data center is co-
hosted at a major third party Internet data center operation, PSINet, that is
constantly monitored and provides both physical and logistical security. This
facility provides redundant network connections and redundant connections to
power grids and diesel generators to ensure continuous operations. In addition,
the facility provides physical security, around-the-clock operations support
and monitoring and network diagnostic support as needed.
Reliability
Our technology platform uses industry standard technologies to maximize
reliability. We ensure hardware reliability by a combination of redundancy at
the component level and hot spares for groups of components. We ensure software
and data reliability through a variety of processes and quality assurance
procedures. We have incorporated standard procedures, including daily database
backups, off site storage of critical archives, and incremental backup of
ongoing database modifications into our standard operating discipline.
Additional reliability is provided by our fault tolerant and redundant platform
architecture, which utilizes clustering technology to ensure that Web access to
our service is not interrupted by any single machine failure.
Competition
We face intense competition from both traditional and online advertising and
direct marketing businesses. We expect that competition will increase due to
the lack of significant barriers to entry in the online advertising market. As
we expand the scope of our services, we may compete with an increasing universe
of media companies across a widening range of advertising and direct marketing
services. Currently, several other companies offer competitive e-mail direct
marketing services, including coolsavings.com, MyPoints.com,
PostMasterDirect.com and YesMail.com. We may also face competition from online
content
39
<PAGE>
providers and list aggregators, as well as established online portals and
community Web sites that engage in direct marketing. Additionally, traditional
advertising agencies and direct marketing companies may seek to offer online
products or services that compete with ours.
Our ability to compete effectively depends upon many factors, including:
. the timing and market acceptance of new e-mail categories;
. the pricing of our services to advertisers;
. our ongoing ability to demonstrate the effectiveness of our service to
advertisers;
. our ability to increase awareness of the LifeMinders.com brand;
. our ability to increase our member database;
. our ability to increase the depth of information in our database by
capturing demographic, behavioral and transactional data about our
members;
. the capacity of our technology infrastructure to meet the needs of
members and advertisers; and
. the extent and effectiveness of our sales and marketing efforts and
those of our competitors.
While we believe that we compare favorably to our competitors based on these
factors, many of our current competitors and potential new competitors have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
These advantages may allow them to respond more quickly to new or emerging
technologies and changes in customer requirements. It may also allow them to
engage in more extensive research and development, undertake more far-reaching
marketing campaigns, adopt more aggressive pricing policies, and make more
attractive offers to potential employees, strategic partners and advertisers.
In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
increase the ability of their products or services to address the needs of our
prospective advertisers and advertising agency customers. As a result, it is
possible that new competitors may emerge and rapidly acquire significant market
share. Increased competition may result in price reductions, reduced gross
margins and loss of our market share.
Intellectual Property and Proprietary Rights
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we seek to protect
through a combination of patents, copyrights, trade secrets and trademarks. We
have one registered patent. We regularly enter into confidentiality or license
agreements with our employees, consultants and corporate and strategic partners
and generally seek to control access to and distribution of our documentation
and other proprietary information. We pursue the registration of our trade and
service marks in the United States and internationally. We have registered
trademarks for "MinderSoft," "HomeMinder," "EntertainmentMinder" and
"GrowthMinder" in the United States and have filed 21 trademark applications in
the United States, including the name and logo for "LifeMinders.com" and
"backslashSanity." Effective trademark, service mark, copyright and trade
secret protection may not be available in every country in which our services
are distributed or made available through the Internet, and policing
unauthorized use of our proprietary information is difficult.
40
<PAGE>
Current and Potential Government Regulation
Privacy Issues
The Federal Trade Commission, or FTC, adopted regulations effective April
21, 1999 regarding the collection and use of personal identifying information
obtained from individuals when accessing Web sites, with particular emphasis on
access by minors. These regulations include requirements that companies
establish certain procedures prior to April 21, 2000 to, among other things:
. give adequate notice to consumers regarding information collection and
disclosure practices;
. provide consumers with the ability to have personal identifying
information deleted from a company's database;
. provide consumers with access to their personal information and with the
ability to rectify inaccurate information;
. clearly identify affiliations or a lack of affiliations with third
parties that may collect information or sponsor activities for a
services membership; and
. obtain express parental consent prior to collecting and using personal
identifying information obtained from children under 13 years of age.
These regulations also include enforcement and redress provisions. We are
currently implementing programs designed to comply with these regulations. We
believe, based upon information provided by 33.5% of our current members, that
less than 5% of our members are under the age of 13. We do not believe that
these regulations will result in significant additional costs or that they will
materially affect our ability to obtain new members.
The FTC has also begun investigations into the privacy practices of
companies that collect information on the Internet. One investigation resulted
in a consent decree pursuant to which an Internet company agreed to establish
programs to implement the principles noted above. We may become subject to a
similar investigation, or the FTC's regulatory and enforcement efforts may
adversely affect our ability to collect demographic and personal information
from members. This, in turn, could have an adverse effect on our ability to
provide highly targeted opportunities for advertisers and electronic commerce
marketers.
The European Union, or EU, has adopted a directive that imposes restrictions
on the collection and use of personal data. Under the directive, EU citizens
are guaranteed rights to access their data, to know where the data originated,
to have inaccurate data corrected, to recourse in the event of unlawful
processing and to withhold permission to use their data for direct marketing.
The directive could, among other things, affect U.S. companies that collect
information over the Internet from individuals in EU member countries, and may
impose restrictions that are more stringent than current Internet privacy
standard in the United States. In particular, companies with offices located in
EU countries will not be allowed to send personal information to countries that
do not maintain adequate standards of privacy. The directive does not, however,
define what standards of privacy are adequate. As a result, the directive may
adversely affect the activities of entities like us that engage in data
collection from users in EU member countries.
Internet Taxation
There are currently pending a number of legislative proposals at the
federal, state and local level, and by certain foreign governments, that would
impose additional taxes on the sale of goods and services over the Internet and
certain states already 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 e-commerce, existing
state or local laws were expressly excepted from this moratorium. Further, once
this moratorium is lifted, one or more federal and/or state taxes may be
imposed upon Internet commerce. This legislation, or other attempts at
regulating commerce over the Internet, may substantially impede the growth of
commerce on the Internet and, therefore, adversely affect our opportunity to
derive financial benefit from those activities.
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<PAGE>
Jurisdictions
Although our e-mail transmissions over the Internet originate primarily in
Virginia, due to the global nature of the Internet, it is possible that the
governments of other states, the federal government and governments of foreign
countries might attempt to regulate our transmissions or prosecute us for
purported violations of their laws. These laws may be modified, or new laws
enacted, in the future. Any of the foregoing developments could harm our
business, results of operations and financial condition. In addition, as our
service is available over the Internet in multiple states and foreign
countries, these jurisdictions may claim that we are required to qualify to do
business as a foreign corporation in each of these states or foreign countries.
We are qualified to do business only in Delaware and Virginia, and our failure
to qualify as a foreign corporation in a jurisdiction where we are required to
do so could subject us to penalties and could result in our inability to
enforce contracts in these jurisdictions.
Employees
As of September 30, 1999, we employed 55 people, including 21 in sales and
marketing, 13 in technology and production, 11 in member experience/marketing
and analysis, and 10 in support, administration, finance, management and human
resources. All employees except 2 are full-time. We believe that we maintain
good relations with our employees.
Facilities
We are currently leasing approximately 17,500 square feet of office space at
two locations in Herndon, Virginia. The lease for 13,000 square feet expires in
2004 while the lease for 4,500 square feet expires in August 2000. We believe
that this existing space will meet our space requirements for the near future
but that we will likely require additional space in late 2000.
Legal Proceedings
From time to time, we may be involved in litigation relating to claims
arising out of our operations in the normal course of business. As of the date
of this prospectus, we are not a party to any legal proceeding.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth, as of October 29, 1999, certain information
concerning our executive officers, directors and key employees:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Stephen R. Chapin, Jr... 36 President, Chief Executive Officer and Chairman of the Board of Directors
John A. Chapin.......... 34 Senior Vice President, Member Experience, Secretary
Joseph S. Grabias....... 50 Vice President and Chief Financial Officer
Harry A. Layman......... 42 Vice President, Engineering and Chief Technology Officer
Mark F. Bryant.......... 35 Vice President, Business Development and Advertising Sales
David C. Meade.......... 26 Vice President, Member Acquisition
Timothy D. Hanlon....... 41 Vice President, Marketing and Communications
E. Rogers Novak, Jr. ... 51 Director
B. Gene Riechers........ 44 Director
Douglas A. Lindgren..... 37 Director
Philip D. Black......... 33 Director
Jonathan B. Bulkeley.... 38 Director
</TABLE>
- --------
Stephen R. Chapin, Jr. co-founded LifeMinders.com in August 1996 and has
served as our President, Chief Executive Officer and Chairman of the Board
since August 1996. Prior to founding LifeMinders.com, from September 1995 to
October 1996, Mr. Chapin served as a Vice President at First USA Bank. From
September 1993 to September 1995, Mr. Chapin was a management consultant at
McKinsey & Company. From 1985 to 1990, Mr. Chapin served in the U.S. Navy, as
the Secretary of the Navy's liaison to Congress and as a naval engineering and
weapons officer.
John A. Chapin co-founded LifeMinders.com in August 1996 and has served as
our Senior Vice President, Member Experience since August 1999. Prior to co-
founding LifeMinders.com, from September 1996 to July 1997, Mr. Chapin worked
in system sales to large corporate clients at Otis Elevator, an elevator
maintenance company. From July 1995 to September 1995, Mr. Chapin served as a
financial analyst at Allied Signal.
Joseph S. Grabias joined LifeMinders.com in August 1999 as Vice President
and Chief Financial Officer. Prior to joining LifeMinders.com, from October
1997 to July 1999, Mr. Grabias was the Vice President and Chief Financial
Officer of Comm Site International, Inc., a provider of tower related services
to the U.S. wireless communications industry. Mr. Grabias was the Chief
Financial Officer and Vice President at KMR Power Corporation from January 1994
to September 1997. Prior to working for KMR Power Corporation, Mr. Grabias was
a self-employed business consultant for seven years.
Harry A. Layman has served as our Vice President, Engineering and Chief
Technology Officer since March 1999. Prior to joining LifeMinders.com, Mr.
Layman was Executive Director of Software Services at The College Board, an
educational association which provides financial aid services and software. Mr.
Layman joined The College Board in January 1996 upon its acquisition of
Virginia Software Inc., a software development firm that Mr. Layman founded in
January 1986. Prior to founding Virginia Software, Inc., Mr. Layman worked in
servicing systems and in strategic planning at Sallie Mae and was a consultant
with Arthur Young & Company.
Mark F. Bryant has served as our Vice President, Business Development and
Advertising Sales, since May 1998. Prior to joining LifeMinders.com, Mr. Bryant
served as Chief Operating Officer and Senior Vice President of Marketing and
Sales of System Dynamics, Inc., a database management and targeted direct
communications company, which he joined in 1988. Prior to working at System
Dynamics, Inc., Mr. Bryant was involved in political fundraising and was active
in national and state politics.
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David C. Meade has served as our Vice President, Member Acquisition, since
June 1999 and served as Product Manager from April 1998 to June 1999.
Previously, from June 1996 to April 1998, Mr. Meade worked as a consultant at
Price Waterhouse LLP (now PricewaterhouseCoopers LLP). He was the Chief
Operating Officer of an independent franchise from May 1995 to September 1995.
Timothy D. Hanlon has served as our Vice President, Marketing and
Communications since July 1999. Prior to joining LifeMinders.com, from July
1997 to May 1999, Mr. Hanlon was the President of Van Bueren International
where he served as the head of marketing and communications at America's
Promise, a national non-profit organization led by retired General Colin
Powell. From September 1995 to July 1997, Mr. Hanlon was an Account Director at
Bozell Worldwide, and from June 1993 to September 1995 he served as President
and CEO of the Buoniconti Fund to Cure Paralysis, Inc., a $38 million campaign
to build a new research facility for the Miami Project. Prior to that, Mr.
Hanlon was an Account Manager at Saatchi & Saatchi Advertising.
E. Rogers Novak, Jr. has been a director of LifeMinders.com since November
1997. Mr. Novak is a General Partner of Novak Biddle Venture Partners, a
venture capital investment firm, which he co-founded in 1996. From 1984 to 1993
he was a managing member of Novak Biddle, LLC, the General Partner of Grotech
Venture Partners, I, II and III. During 1995 and 1996, Mr. Novak was a Managing
Director of Markowitz & McNaughton, a consulting firm. Mr. Novak currently
serves on the boards of directors of Entevo Corporation, Blackboard Inc.,
Engenia Software, Inc., 1010 Web and Spyrus. He serves on the board of advisors
of MMG Ventures, a specialized small business investment company.
B. Gene Riechers has served as a director of LifeMinders.com since November,
1997. Mr. Riechers is a managing director of FBR Technology Venture Partners
L.P., a venture capital investment firm, which he joined in December 1996.
Prior to joining FBR Technology Venture Partners L.P., Mr. Riechers served as
the Chief Financial Officer of CyberCash, a leader in Internet payment systems,
from December 1995 to December 1996. From September 1993 to December 1995, Mr.
Riechers served as the Chief Financial Officer and Vice President of
Development of Online Resources and Communications Corp., a provider of
electronic home banking services. He currently serves on the boards of
directors of webMethods, Inc., WisdomWare, Inc., Entevo Corporation, Call
Technologies, Inc. and Varsitybooks.com.
Douglas A. Lindgren, has served as a director of LifeMinders.com since
February 1999. Mr. Lindgren is a Managing Director of United States Trust
Company of New York and is the Chief Investment Officer of Excelsior Private
Equity Fund II, Inc. Prior to joining U.S. Trust in April 1995, Mr. Lindgren
served in various capacities for Inco Venture Capital Management, Inc. from
January 1988 through March 1995, including the positions of President and
Managing Principal from January 1993 through March 1995. Before joining Inco
Venture Capital Management, Inc., Mr. Lindgren was employed at Salomon Brothers
Inc and Smith Barney, Harris Upham & Co., Inc. He is an Adjunct Professor of
Finance at Columbia University's Graduate School of Business, where he has been
teaching courses on venture capital since 1993. Mr. Lindgren currently serves
on the boards of director of Constellar Corporation, ReleaseNow.com,
PowerSmart, Inc., On the Go Software, Inc. and MarketFirst Software, Inc.
Philip D. Black has served as a director of LifeMinders.com since May 1999.
Since March 1999, Mr. Black has been a Managing Member of Calvert Capital
L.L.C. and Calvert Capital II, L.L.C., which are both venture capital
investment firms and the general partners of the ABS Ventures Entitites. From
March 1995 to March 1999, Mr. Black was a General Partner of Weiss, Peck &
Greer Venture Partners, a venture capital investment firm, and from 1988 to
1995, was a Senior Associate at Summit Partners, also a venture capital firm.
Mr. Black currently serves on the board of directors of Personify Incorporated
and Zilliant.com.
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Jonathan B. Bulkeley has served as a director of LifeMinders.com since
August 1999. Since January 1999, Mr. Bulkeley has served as the Chief Executive
Officer of barnesandnoble.com. From July 1995 to January 1999, he served as
Managing Director of America Online, Inc.'s joint venture with Bertelsmann
Online to provide interactive online services in the United Kingdom. Prior to
July 1995, Mr. Bulkeley was Vice President of Business Development at America
Online in the United States, and prior that, served as General Manager of media
at America Online. Before joining America Online in March 1993, Mr. Bulkeley
worked at Time Inc. in a variety of roles, including Director of Marketing and
Development for Money magazine and sales and marketing positions at Time and
Discover magazines.
Board Composition
Our certificate of incorporation currently authorizes seven directors. Upon
completion of this offering, our Restated Certificate of Incorporation and
Bylaws will provide that our board will be divided into three classes, Class I,
Class II and Class III, with each class serving staggered three-year terms. The
Class I directors, Messrs. Novak and Riechers, will stand for reelection at the
2000 annual meeting of stockholders. The Class II directors, Messrs. Lindgren
and Black, will stand for reelection at the 2001 annual meeting of
stockholders. The Class III directors, Messrs. Stephen Chapin and Bulkeley,
will stand for reelection at the 2002 annual meeting of stockholders. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible,
each class will consist of one-third of the directors. This staggered
classification of the board of directors may have the effect of delaying or
preventing changes in control or management.
We currently expect to add one additional director prior to December 31,
1999.
Executive officers are appointed by and serve at the discretion of the board
of directors. Stephen Chapin is the brother of John Chapin. There are no other
family relationships among any of our directors, officers or key employees.
Board Committees
The board of directors has a compensation committee and an audit committee.
Compensation Committee. Our board's compensation committee reviews and makes
recommendations to the board regarding the compensation and benefits provided
to our key executive officers and directors, including stock compensation and
loans. In addition, the compensation committee reviews policies regarding
compensation arrangements and benefits for all of our employees. As part of the
foregoing, the compensation committee also administers our 1998 Stock Option
Plan. The current members of the compensation committee are Messrs. Bulkeley
and Novak.
Audit Committee. Our board's audit committee reviews and monitors our
internal accounting procedures and reviews the results and scope of the annual
audit and other services provided by our independent accountants. The audit
committee also consults with our management and our independent auditors prior
to the presentation of financial statements to stockholders and, as
appropriate, initiates inquiries into aspects of our financial affairs. In
addition, the audit committee is responsible for considering and recommending
the appointment of, and reviewing fee arrangements with, our independent
auditors. The current members of the audit committee are Messrs. Riechers and
Novak.
Director Compensation
Our directors do not receive compensation for attendance at board meetings
or board committee meetings. However, our directors are reimbursed for all
reasonable out-of-pocket expenses incurred in connection with their attendance
at board and board committee meetings. From time to time, certain directors who
are not employees of LifeMinders.com have received grants of options to
purchase shares of our common stock. On August 19, 1999, we granted Jonathan B.
Bulkeley an option to purchase 62,500 shares of our common stock, at an
exercise price of $3.86 per share.
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Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors currently consists of
Messrs. Bulkeley and Novak. No interlocking relationship exists between any
member of our board of directors or our compensation committee and any member
of the board of directors or compensation committee of any other company, and
no interlocking relationship has existed in the past.
Indemnification
Our Restated Certificate of Incorporation limits the liability of directors
to the maximum extent permitted under the Delaware General Corporation Law.
Delaware law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as directors,
except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law;
. unlawful payments of dividends or other distributions or unlawful stock
repurchases or redemptions under Section 174 of the Delaware General
Corporation Law; or
. any transaction from which the director derives an improper personal
benefit.
We or our stockholders may pursue equitable remedies for a director's
alleged breach of his or her fiduciary duties, including an injunction or
rescission, even where monetary remedies are unavailable.
Our Restated Certificate of Incorporation provides that we shall indemnify
our current and former directors and officers, and may indemnify our current
and former employees and agents, against any and all liabilities and expenses
incurred in connection with their services in those capacities to the maximum
extent permitted by Delaware law. In addition, our Restated Certificate of
Incorporation requires us to advance expenses to any person entitled to
indemnification, provided that the person undertakes to repay the advancement
if it is determined in a final judicial decision from which there is no right
of appeal that the person is not entitled to indemnification. Our Restated
Certificate of Incorporation further permits us to secure insurance on behalf
of our directors, officers, employees and agents for any expense, liability or
loss incurred in these capacities, regardless of whether the Restated
Certificate of Incorporation or Delaware law would permit indemnification
against this expense, liability or loss.
With respect to the indemnification of directors and officers for
liabilities arising under the Securities Act, the SEC has opined that this
indemnification is against public policy, as expressed in the Securities Act,
and is therefore unenforceable.
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<PAGE>
Executive Compensation
The following table sets forth information concerning the compensation we
paid to our chief executive officer and our other executive officer whose total
annual compensation exceeded $100,000 (the "named executive officer") during
the fiscal year ended December 31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
-------------------
Annual Compensation(1)
----------------------- Number of Shares
Name and Principal Underlying Other
Position Salary ($) Bonus ($) Options (#) Compensation
- ------------------ ----------------------- ------------------- ------------
<S> <C> <C> <C> <C>
Stephen R. Chapin, $ 131,250 -- -- --
Jr. ...................
President, Chief
Executive Officer and
Chairman of the Board
Mark F. Bryant.......... $ 125,000 -- 125,000 --
Vice President,
Business Development
and Advertising Sales
</TABLE>
- --------
(1) Mr. Layman was hired as an executive officer in March 1999 and is
compensated at an annual rate of $175,000, Mr. Hanlon was hired as
executive officer in July 1999 and is compensated at an annual rate of
$150,000 and Mr. Grabias was hired in August 1999 and is compensated at an
annual rate of $175,000.
The following table provides information concerning grants of options to
purchase our common stock that we made to our chief executive officer and named
executive officer during the fiscal year ended December 31, 1998. We did not
grant stock appreciation rights to these individuals during 1998.
Option Grants in Fiscal Year 1998
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Potential Realizable
Percentage Value at Assumed
Number of of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Exercise Option Term(3)
Options Employees in Price Per Expiration ----------------------
Name Granted(1) Fiscal 1998 Share(2) Date 5% 10%
- ---- ---------- ------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen R. Chapin, Jr... -- -- -- -- -- --
Mark F. Bryant.......... 125,000 26.7% $0.80 5/1/08 $ 62,889 $ 159,374
</TABLE>
- --------
(1) Of the options listed in the table above, 25% are exercisable on May 1,
2000 and a pro rata portion of the remaining 75% becomes exercisable each
month over the subsequent three year period.
(2) The exercise price is equal to the fair market value of our common stock as
valued by our board of directors on the date of grant. In determining this
fair market value, the board of directors took into account the purchase
price paid by investors for shares of our preferred stock (taking into
account the liquidation preferences and other rights, privileges and
preferences associated with our preferred stock) and an evaluation by the
board of directors of our revenue, operating history and prospects. The
exercise price may be paid in cash, in shares of our common stock valued at
fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. We may also
finance the option exercise by lending the optionee sufficient funds to pay
the exercise price for the purchased shares, together with any federal and
state income tax liability incurred by the optionee in connection with this
exercise.
(3) Potential Realizable Value assumes that the common stock appreciates at the
indicated annual rate (compounded annually) from the grant date until the
expiration of the option term and is calculated based on the rules
promulgated by the SEC. Potential Realizable Value does not represent our
estimate
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<PAGE>
of future stock price performance. The potential realizable value at 5% and
10% appreciation is calculated by assuming that the estimated fair market
value on the date of grant appreciates at the indicated rate for the entire
term of the option and that the option is exercised at the exercise price
and sold on the last day of its term at the appreciated price.
Aggregated Fiscal Year-End Option Values
The following table provides summary information regarding options held by
our chief executive officer and named executive officer for the fiscal year
ended December 31, 1998. The value of unexercised in-the-money options is based
on an assumed initial public offering price of $13.00.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised "In-the-Money" Options
Options at December 31, 1998 at December 31, 1998(1)
--------------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Stephen R. Chapin, Jr... -- -- -- --
Mark F. Bryant.......... -- 125,000 -- --
</TABLE>
- --------
(1) Value for "in-the-money" options represents the positive spread between the
exercise price of outstanding options and the fair market value of $0.80
per share on December 31, 1998. The fair market value of our common stock
at the end of 1998 was estimated by the board of directors on the basis of
the purchase price paid by investors for shares of our preferred stock
(taking into account the liquidation preferences and other rights,
privileges and preferences associated with the preferred stock) and an
evaluation by the board of our revenue, operating history and prospects.
Stock Option Plan
We adopted a stock option plan for the purpose of promoting our long-term
growth and profitability by (i) providing key people with incentives to improve
stockholder value and contribute to our growth and financial success and (ii)
enabling us to attract, retain and reward talented and skilled persons for
positions of substantial responsibility. We have used stock options as a
component of compensation for our officers and key employees.
Share Reserve. Our board of directors adopted our 1998 Stock Option Plan on
March 26, 1998 and our stockholders approved the plan in April 1998, initially
providing for a maximum of 475,000 shares to be issued pursuant to stock
options granted under the plan. The board of directors and stockholders
approved an increase in the number of shares available for issuance pursuant to
stock options under the plan of 301,250 shares on June 26, 1998, a further
increase of 643,820 shares effective January 29, 1999, a further increase of
625,000 shares effective May 28, 1999, and a further increase of 875,000 shares
effective September 22, 1999, resulting in an aggregate maximum of 2,920,070
shares of the common stock available and reserved for issuance under the plan.
Administration. The compensation committee of our board of directors
administers the 1998 Stock Option Plan. The committee has the complete
discretion to make all decisions relating to the interpretation and operation
of the plan. The committee has the discretion to determine who will receive an
option, what type of option it will be, how many shares will be covered by the
option, what the vesting requirements will be (if any), and what the other
features and conditions of each option will be. The compensation committee,
with the approval of the board of directors, may also reprice the exercise
price of outstanding options to the then current fair market value of the
underlying stock and modify outstanding awards in other ways.
Eligibility. The following groups of individuals are eligible to participate
in the 1998 Stock Option Plan: employees, members of our board of directors and
consultants. The 1998 Stock Option Plan provides that no participant may
receive options covering more than 237,500 shares in the same year.
Types of Award. The 1998 Stock Option Plan provides for the issuance of
incentive stock options, which may be granted only to employees, and
nonstatutory stock options to purchase shares of our common
48
<PAGE>
stock. An optionee who exercises an incentive stock option may qualify for
favorable tax treatment under Section 422 of the Internal Revenue Code of 1986.
On the other hand, nonstatutory stock options do not qualify for favorable tax
treatment. The exercise price for incentive stock options granted under the
1998 Stock Option Plan may not be less than 100% of the fair market value of
our common stock on the option grant date. In the case of nonstatutory stock
options, the minimum exercise price is 85% of the fair market value of our
common stock on the option grant date.
Exercise and Vesting. Optionees may pay the exercise price by using cash
and, if permitted by the compensation committee and provided in their grant
agreement, through the following:
. shares of common stock which, if acquired by option exercise, the
optionee has owned for six months prior to exercise;
. a promissory note with the security as the board of directors shall
require;
. an immediate sale of the option shares through a broker designated by
us; or a loan from a broker designated by us; or
. a loan from a broker designated by us, secured by the option shares.
Options vest (that is, become exercisable) at the time or times determined by
the compensation committee. In most cases, our options vest over the four-year
period following the date of grant. Options generally expire 10 years after
they are granted, except that they generally expire earlier if the optionee's
service terminates earlier.
Merger or Sale. If we merge with another company, or there is a sale of
substantially all of our assets to another company, an option under the 1998
Stock Option Plan will terminate if the option is not assumed by the surviving
corporation or its parent or if the surviving corporation or its parent does
not substitute another award on substantially the same terms. In that event,
the optionee will be given at least 15 days prior to the option's termination
to exercise the vested portion of the option.
Change in Capitalization. The number and price of shares covered by
outstanding stock options and the number of shares authorized under the 1998
Stock Option Plan shall be proportionately adjusted, as determined by the board
of directors, to take into account a stock split, reverse stock split, stock
dividend, combination or reclassification of shares or similar event.
Amendment or Termination. Our board may amend or terminate the 1998 Stock
Option Plan at any time. If our board amends the plan, it does not need to ask
for stockholder approval of the amendment unless applicable law requires it. No
amendment shall impair the rights of any optionee under an option previously
granted without his or her consent. The 1998 Stock Option Plan will continue in
effect until March 25, 2008, unless the board decides to terminate the plan
earlier.
Employment Agreements
In November 1997, we entered into two year employment agreements with each
of Stephen Chapin and John Chapin. Under the agreements, we agreed to pay
Stephen Chapin an annual salary of $120,000 and John Chapin an annual salary of
$72,000. The board of directors subsequently approved an annual salary for
Stephen Chapin of $200,000 effective July 1999 and an annual salary of John
Chapin of $100,000 effective July 1999. Both agreements provide for bonuses
based upon our profitability and overall financial condition, which may be
awarded by our board of directors in its sole discretion. The employment
agreements prohibit Stephen Chapin and John Chapin from competing with us and
soliciting our customers or employees during the term of the employment
agreement and the 12-month period after the date of their termination.
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<PAGE>
CERTAIN TRANSACTIONS
Stock Purchase Agreements and Related Matters
In November 1997, we sold shares of our Series A convertible preferred stock
to the following purchasers in the following amounts at a purchase price of
$1.00 per share:
<TABLE>
<S> <C>
FBR Technology Venture Partners, L.P................................. 325,000
Novak Biddle Venture Partners, L.P................................... 300,000
ABS Ventures IV, L.P................................................. 250,000
ABX Fund, L.P........................................................ 75,000
David Pensky......................................................... 50,000
</TABLE>
In addition, we also granted to each of the above-listed purchasers an
option to purchase a like number of shares of Series B convertible preferred
stock, at an exercise price of $1.00 per share. In June 1998, the above-
mentioned purchasers exercised those options. Each of the purchasers entered
into a stockholders' agreement and a registration rights agreement. See
"Certain Transactions--Stock Purchase Agreements and Related Matters--
Stockholders' Agreement and Registration Rights Agreement." B. Gene Riechers,
one of our directors, is a managing director of FBR Technology Venture
Partners, L.P. E. Rogers Novak, Jr., one of our directors, is a general partner
of Novak Biddle Venture Partners, L.P. Philip D. Black, one of our directors,
is a managing member of Calvert Capital L.C.C. and Calvert Capital II, L.C.C.,
which are the general partners of ABS Ventures IV, L.P. or its affiliates.
In January 1999, we sold shares of our Series C convertible preferred stock
to the following purchasers in the following amounts at a price of $1.5265 per
share:
<TABLE>
<S> <C>
Excelsior Private Equity Fund II, Inc.............................. 1,965,280
Novak Biddle Venture Partners, L.P................................. 240,201
FBR Technology Venture Partners, L.P............................... 207,446
ABS Ventures IV, L.P............................................... 159,574
ABX Fund, L.P...................................................... 47,872
</TABLE>
Excelsior Private Equity Fund II, Inc. became a party to the stockholders'
agreement and the registration rights agreement. See "Certain Transactions--
Stock Purchase Agreements and Related Matters--Stockholders' Agreement and
Registration Rights Agreement." Douglas A. Lindgren, one of our directors, is
the Chief Investment Officer of Excelsior Private Equity Fund II, Inc.
In May 1999, we sold shares of our Series D convertible preferred stock to
the following purchasers in the following amounts at a price of $4.7051 per
share:
<TABLE>
<S> <C>
Pyramid Ventures, Inc.............................................. 1,275,212
Excelsior Private Equity Fund II, Inc.............................. 637,606
FBR Technology Venture Partners, L.P............................... 212,535
Novak Biddle Venture Partners, L.P................................. 106,268
Four Individual Accredited Investors............................... 21,253
</TABLE>
Each of Pyramid Ventures, Inc. and the four individual accredited investors
became parties to the stockholders' agreement and the registration rights
agreement. See "Certain Transactions--Stock Purchase Agreements and Related
Matters--Stockholders' Agreement and Registration Rights Agreement." Pyramid
Ventures, Inc. is an affiliate of ABS Ventures IV, L.P.
50
<PAGE>
In September 1999, we sold shares of our Series E convertible preferred
stock to the following purchasers and to certain non-affiliated parties in the
following amounts at a price of $8.0868 per share:
<TABLE>
<S> <C>
Novak Biddle Venture Partners, L.P. ............................... 61,829
Novak Biddle Venture Partners II, L.P.............................. 49,463
ABS Ventures IV, L.P............................................... 91,187
ABX Fund, L.P...................................................... 27,861
FBR Technology Venture Partners, L.P. ............................. 111,292
Excelsior Private Equity Fund II, Inc.............................. 556,462
Jonathan Bulkeley.................................................. 61,829
Philip D. Black.................................................... 10,000
ABS Ventures LM L.L.C. ............................................ 120,000
Certain Non-Affiliated Parties..................................... 1,702,070
</TABLE>
Each of the Series E Convertible Preferred Stock purchasers became parties
to the stockholders' agreement and the registration rights agreement. See
"Certain Transactions--Stock Purchase Agreements and Related Matters--
Stockholders' Agreement and Registration Rights Agreement." E. Rogers Novak,
Jr., one of our directors, is a general partner of Novak Biddle Venture
Partners II, L.P. Jonathan Bulkeley is one of our directors.
Each of the transactions described above was priced at fair market value
according to arm's length negotiating with the purchasers. The proceeds were
used for general working capital purposes.
Stockholders Agreement and Registration Rights Agreement. Holders of the
Company's preferred stock are parties to a stockholders' agreement that
contains arrangements with respect to voting, rights of first refusal, and
"tag-along" rights, as well as other agreements relating to corporate
governance. The rights and obligations under the stockholders' agreement will
terminate upon the consummation of this offering.
In addition, we have granted holders of our preferred stock certain
registration rights. Pursuant to these registration rights, we may be required
to file registration statements under the Securities Act covering all or a
portion of the common stock issued or issuable upon the automatic conversion of
the preferred stock or may be required to include the shares of common stock in
a registration under the Securities Act that we initiate on our own behalf. See
"Description of Capital Stock--Registration Rights."
Other Transactions
During 1996 and 1997, Stephen R. Chapin, Jr. and D. Thorp Foster loaned us
$35,236 and $53,319, respectively, to provide us with working capital. We
repaid $10,000 of the loan during 1996 and $53,919 during 1997. In December
1997, Mr. Chapin and Mr. Foster forgave the outstanding loan balance of
$24,636. During 1998, we paid $84,000 to the Lordhill Company for certain
consulting services with respect to the solicitation of large advertisers. Hugh
Ronalds, one of our stockholders, is the President of the Lordhill Company. In
July 1999, we paid $150,000 to Frans Kok as a settlement of our obligations to
Mr. Kok and his company, Johan Hekelaar, Inc., for financial consulting
services provided to us. Mr. Kok is a stockholder who formerly served as a
director and financial consultant for us.
We believe that the transactions disclosed above were made on terms no less
favorable to us than would have been obtained from unaffiliated third parties.
All future transactions, including loans between us and our officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the board of directors, and will continue to be on terms no less
favorable to us than could be obtained from unaffiliated third parties.
Since January 1, 1996, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we or any of our
subsidiaries was or is to be a party in which the amount involved exceeded or
will exceed $60,000 and in which any of our directors, executive officers,
holder of more than 5% of our Common Stock or any member of the immediate
family of these persons had or will have a direct or indirect material interest
other than (i) compensation agreements and other arrangements, which are
described where required in "Management," and (ii) the transactions described
above.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to us regarding the
beneficial ownership of our common stock as of October 22, 1999, as adjusted to
reflect the sale of 4,200,000 shares of common stock in this offering and the
conversion of all outstanding shares of our convertible preferred stock into
shares of common stock, by:
. each person or group known by us to own beneficially more than 5% of our
outstanding common stock;
. each of our directors and each named executive officer; and
. our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the
SEC. Unless otherwise indicated, the persons included in the table have sole
voting and investment power with respect to all shares beneficially owned.
Shares of common stock subject to options that are currently exercisable or are
exercisable within 60 days of October 29, 1999 are treated as outstanding and
beneficially owned with respect to the person holding these options for the
purpose of computing the percentage ownership of that person. However, these
shares are not treated as outstanding for purposes of computing the percentage
ownership of any other person. Stephen R. Chapin's shares include options
exercisable for 100,000 shares, Mark Bryant's shares include options
exercisable for 74,479 shares and shares held by executive officers and
directors as a group include options exercisable for 291,184 shares. The
percentages in the "After the Offering" column assume that the underwriters do
not exercise their over-allotment option to purchase up to 630,000 additional
shares.
<TABLE>
<CAPTION>
Percent of Common Stock
Shares of Beneficially Owned
Common Stock ---------------------------
Beneficially Before the After the
Name of Beneficial Owner Owned Offering Offering
- ------------------------ ------------ ------------ -----------
<S> <C> <C> <C>
Douglas A. Lindgren............... 3,949,185 25.59% 20.12%
Excelsior Private Equity Fund II,
Inc.(1)
114 West 47th Street, New York,
New York 10036
Philip D. Black................... 2,981,507 19.32% 15.19%
Entities affiliated with ABS
Ventures(2)
1 South Street, Suite 2150,
Baltimore, Maryland 21202
B. Gene Riechers.................. 1,476,591 9.57% 7.52%
FBR Technology Venture Partners,
L.P.(3)
1001 19th Street North, 10th
Floor, Arlington, Virginia 22209
E. Rogers Novak................... 1,322,200 8.57% 6.74%
Novak Biddle Venture Partners,
L.P.(4)
1897 Preston White Drive, Reston,
Virginia 20191
Stephen R. Chapin, Jr............. 1,818,765 11.71% 9.22%
1110 Herndon Parkway, Herndon,
Virginia 20170
Jonathan B. Bulkeley(5)........... 77,286 * *
76 Ninth Avenue, 11th Floor, New
York, New York 10128
Mark F. Bryant....................
1110 Herndon Parkway, Herndon,
Virginia 20170 74,479 * *
All directors and executive
officers as a group (12
persons)......................... 12,113,234 77.25% 60.96%
</TABLE>
- --------
* Less than 1%.
52
<PAGE>
(1) Represents shares held of record by Excelsior Private Equity Fund II, Inc.
Mr. Lindgren, one of our directors, is the Chief Investment Officer of
Excelsior Private Equity Fund II, Inc. Mr. Lindgren disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest in
Excelsior Private Equity Fund II, Inc.
(2) Represents (a) 1,744,015 shares held of record by ABS Ventures LM L.L.C.
(which shares were transferred from Pyramid Ventures, Inc., an affiliate of
ABS Ventures LM L.L.C., in September 1999), the general partner of which is
Calvert Capital II LLC (b) 938,451 shares held of record by ABS Ventures
IV, L.P., the general partner of which is Calvert Capital II LLC (c)
282,166 shares held of record by ABX Fund, L.P., the general partner of
which is Calvert Capital LLC (d) 12,500 shares held of record by Philip D.
Black, (e) 1,250 shares held of record by John Burke, (f) 3,125 shares held
of record by Jin Byun. Mr. Black disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in these entities.
(3) Represents shares held of record by FBR Technology Venture Partners, L.P.,
the general partner of which is FBR Venture Capital Managers, Inc. Mr.
Riechers, one of our directors, is the Managing Director of FBR Technology
Venture Partners, L.P. Mr. Riechers disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in FBR Technology
Venture Partners, L.P.
(4) Represents shares held of record by Novak Biddle Venture Partners, L.P. and
Novak Biddle Venture Partners II, L.P. Mr. Novak, one of our directors, is
a principal of Novak Biddle Venture Partners, L.P. Mr. Novak disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest in Novak Biddle Venture Partners, L.P.
(5) Mr. Bulkeley is one of our directors.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Upon consummation of this offering, our authorized capital stock will
consist of 60,000,000 shares of common stock, $0.01 par value, and 9,665,240
shares of preferred stock, $0.01 par value. The following is a summary of
material terms of the common stock and the preferred stock. The summary is
subject to, and qualified in its entirety by, our Restated Certificate of
Incorporation and Bylaws and by the provisions of applicable law.
Common Stock
As of October 29, 1999, there were 3,349,373 shares of common stock
outstanding that were held of record by 13 stockholders. There will be
19,630,914 shares of common stock outstanding (assuming no exercise of the
underwriters' over-allotment option and assuming no exercise after October 29,
1999, of 1,700,374 outstanding options) after giving effect to the sale of the
shares of common stock to the public offered hereby and the conversion of our
preferred stock into common stock at a one-to-one ratio.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably the dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available for this
purpose. In the event of the liquidation, dissolution or winding up of
LifeMinders.com, the holders of common stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to any remaining
prior distribution rights of preferred stock. The common stock has no
cumulative voting, preemptive or conversion or other subscription rights. There
are no redemption or sinking fund provisions applicable to the common stock.
All outstanding shares of common stock are fully paid and nonassessable, and
the shares of common stock to be issued upon completion of this offering will
be fully paid and nonassessable.
Preferred Stock
Upon the closing of this offering, all 9,665,240 shares of preferred stock
will be converted into 12,081,541 shares of common stock and automatically
retired. After those shares are retired, the board of directors will have the
authority to issue up to 9,665,240 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions of those
shares, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of the series,
without further vote or action by the stockholders. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of LifeMinders.com without further action by the stockholders and may
adversely affect the voting and other rights of the holders of common stock.
The issuance of preferred stock with voting and conversion rights may adversely
affect the voting power of the holders of common stock, including the loss of
voting control to others. At present, we have no plans to issue any of the
preferred stock.
Anti-takeover Effects of Provisions of the Certificate of Incorporation, Bylaws
and Delaware Law
Restated Certificate of Incorporation and Bylaws
Effective upon the closing of this offering, we will have a classified board
of directors so that approximately one-third of the members of the board of
directors are elected at each annual meeting of our stockholders. Our Bylaws
will provide that our stockholders may call a special meeting of stockholders
only upon a written request of stockholders owning at least 25% of our capital
stock. These provisions of the Restated Certificate of Incorporation and Bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of LifeMinders.com. These provisions are intended to enhance
the
54
<PAGE>
likelihood of continuity and stability in the composition of the board of
directors and in the policies formulated by the board of directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of LifeMinders.com. These provisions are designed
to reduce our vulnerability to an unsolicited acquisition proposal. The
provisions also are intended to discourage certain tactics that may be used in
proxy fights. However, these provisions could have the effect of discouraging
others from making tender offers for our shares and, as a consequence, they
also may inhibit fluctuations in the market price of our shares that could
result from actual or rumored takeover attempts. These provisions also may have
the effect of preventing changes in our management.
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates corporate acquisitions. Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless:
. the Board of Directors approved the transaction in which the stockholder
became an interested stockholder prior to the date the interested
stockholder attained this status;
. upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
. on or subsequent to the date the business combination is approved by the
Board of Directors and authorized at an annual or special meeting of
stockholders by the holders of at least 66 2/3% of our outstanding voting
stock which is not owned by the interested stockholder.
A "business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years prior to the determination of
interested stockholder status, did own, 15% or more of a corporation's voting
stock.
Registration Rights
We have granted holders of our preferred stock certain piggy-back and demand
registration rights. These rights may require us to file registration
statements under the Securities Act covering all or a portion of the common
stock issued or issuable upon the automatic conversion of the preferred stock
or we may be required to include these shares of common stock in a registration
under the Securities Act that we initiate on our own behalf.
The demand registration rights provide that upon request of the holders of
common stock issued or issuable upon the automatic conversion of the preferred
stock, which request can be made at any time after November 12, 2000 or one
year from the date of the consummation of this offering, we may be required to
use its best efforts to register all or a portion of these shares under the
Securities Act on a Form S-1 registration statement. The request for this
registration must include at least 15% of the number of shares then held by the
holders granted registration rights or the number of shares sufficient to
result in net proceeds in excess of $15 million. We are obligated to effect no
more than three of these registrations on a Form S-1 registration statement,
but we are not required to effect any demand registration within 180 days after
any other registration statement (on any form other than the Form S-4 or the
Form S-8) involving our common stock has become effective or has been filed and
not withdrawn.
The holders of common stock issued or issuable upon the automatic conversion
of the preferred stock also have the right to request that we register these
shares under the Securities Act on a Form S-3
55
<PAGE>
registration statement, if and when we qualify to use this form of
registration statement. There is no limit on the number of registrations on
Form S-3 that these holders may request, except that no holder may request
more than two of these registrations in any twelve month period and each
request must include shares having an aggregate offering price of at least $1
million.
In addition, each of the holders indicated above has certain "piggyback"
registration rights. These rights may require that we include all or a portion
of their common stock issued or issuable upon the automatic conversion of the
preferred stock in any registration of our common stock. In connection with
any of these offerings, the managing underwriter can limit the number of
shares held by persons with "piggyback" registration rights to be included in
these registrations. These rights are not exercisable in connection with
registrations relating to certain offerings in connection with the
registration of securities under an employee benefit plan or issued in a
business combination or a registered exchange offer.
We will be responsible for all expenses incurred in connection with the
registration rights above, excluding underwriting discounts or commissions.
Transfer Agent And Registrar
The Transfer Agent and Registrar for the common stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public
market could lower prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this
offering because of contractual restrictions on resale. Sales of substantial
amounts of our common stock in the public market after the restrictions lapse
could harm the prevailing market price and impair our ability to raise equity
capital in the future.
Upon completion of the offering, we will have 19,630,914 outstanding shares
of common stock. We will also have options outstanding exercisable to purchase
1,700,374 shares of common stock, of which 417,091 are vested and exercisable
at October 29, 1999. Of the shares outstanding, the 4,200,000 shares sold in
the offering, plus any shares issued upon exercise of the underwriters' over-
allotment option, will be freely tradable without restriction under the
Securities Act, unless purchased by our "affiliates" as that term is defined
in Rule 144 under the Securities Act. In general, affiliates include officers,
directors or 10% stockholders.
The remaining 19,297,241 shares outstanding are "restricted securities"
within the meaning of Rule 144. Restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which are summarized below. Sales of the restricted securities in the
public market, or the availability of these shares for sale, could adversely
affect the market price of the common stock.
We anticipate that our directors, officers and significant securityholders
will enter into lock-up agreements in connection with this offering generally
providing that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of our common stock or any securities
exercisable for or convertible into our common stock owned by them for a
period of 180 days after the date of this prospectus without the prior written
consent of Hambrecht & Quist LLC. Taking into account the lock-up agreements,
and assuming Hambrecht & Quist LLC does not release stockholders from these
agreements, the number of shares that will be available for sale in the public
market under the provisions of Rule 144, 144(k) and 701 will be as follows:
. Beginning on the effective date of this prospectus, only the shares sold
in this offering and an additional 277,713 shares will be immediately
available for sale in the public market.
56
<PAGE>
. Beginning 180 days after the effective date, approximately 8,334,939
shares will be eligible for sale.
. At various times after 180 days subsequent to the effective date upon the
expiration of applicable holding periods, 6,818,262 shares will become
eligible for sale.
In general, under Rule 144, after the expiration of the lock-up agreements, a
person who has beneficially owned restricted securities for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:
. one percent of the number of shares of common stock outstanding at that
time which will equal approximately 196,309 shares immediately after the
offering; or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to manner
of sale, notice and the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been our affiliate at any
time during the three months preceding a sale and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell
these shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701 permits our employees, officers, directors or consultants who
purchased shares pursuant to a written compensatory plan or contract to resell
these shares in reliance upon Rule 144 but without compliance with specific
restrictions. Rule 701 provides that affiliates may sell their Rule 701 shares
under Rule 144 without complying with the holding period requirement and that
non-affiliates may sell these shares in reliance on Rule 144 without complying
with the holding period, public information, volume limitation or notice
provisions of Rule 144.
Following the closing of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering shares of common stock
subject to outstanding options under our 1998 Stock Option Plan and
nonstatutory stock option agreements which are outside of either of these
plans. Based on the number of shares subject to outstanding options as of
September 30, 1999 and currently reserved for issuance under all these plans
and agreements, this registration statement would cover approximately 2,920,070
shares. This registration statement will automatically become effective upon
filing. Accordingly, subject to the exercise of these options, shares
registered under such registration statement will be available for sale in the
open market immediately after the 180-day lock-up period expires.
57
<PAGE>
UNDERWRITING
The underwriters named below, through their representatives, Hambrecht &
Quist LLC, Thomas Weisel Partners LLC, PaineWebber Incorporated and Wit Capital
Corporation, have severally agreed to purchase, and we have agreed to sell
them, an aggregate of 4,200,000 shares of common stock pursuant to an
underwriting agreement. The number of shares of common stock that each
underwriter has agreed to purchase is listed opposite its name below:
<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
<S> <C>
Hambrecht & Quist LLC....................................
Thomas Weisel Partners LLC...............................
PaineWebber Incorporated.................................
Wit Capital Corporation..................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
---------
4,200,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are conditioned on the absence of any material adverse change in our business
and the receipt of certificates, opinions and letters from us and the selling
stockholders, their counsel and the independent auditors. The nature of the
underwriters' obligation is such that they are committed to purchase all shares
of common stock offered by this prospectus if any of the shares are purchased.
The following table shows the per share and total underwriting discounts and
commissions we will pay to the underwriters. These amounts are shown assuming
both no exercise and full exercise of the underwriters' over-allotment option
to purchase additional shares of common stock.
Underwriting Discounts and Commissions Payable by Us
<TABLE>
<CAPTION>
Without Over- With Over-
Allotment Exercise Allotment Exercise
------------------ ------------------
<S> <C> <C>
Per Share...........................
Total.............................
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be approximately $1.2 million.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the initial public offering price listed on the
cover page of this prospectus and part to selected dealers at a price that
represents a concession not in excess of $ per share under the public
offering price. The underwriters may allow, and such dealers may reallow a
concession not in excess of $ per share to other underwriters or selected
other dealers. After the initial public offering of the shares of common stock,
the offering price and other selling terms may be changed by the
representatives of the underwriters.
An electronic prospectus is available on the Web site maintained by eSchwab.
The underwriters have agreed to allocate a limited number of shares to eSchwab
for sale to its brokerage account holders. In addition, a prospectus in
electronic format is being made available on an Internet Web site maintained by
Wit Capital. In addition, all dealers purchasing shares from Wit Capital in the
offering have agreed to make a prospectus in electronic format available on Web
sites maintained by each of these dealers.
58
<PAGE>
Purchases of shares from Wit Capital are to be made through an account at Wit
Capital in accordance with Wit Capital's procedures for opening an account and
transacting in securities.
In the underwriting agreement, we have granted to the underwriters an
option, exercisable no later than 30 days after the date of this prospectus, to
purchase up to an aggregate of 630,000 additional shares of common stock at the
initial public offering price, less underwriting discounts and commissions,
listed on the cover page of this prospectus. To the extent that the
underwriters exercise this option, each underwriter will have a firm commitment
to purchase approximately the same percentage which the number of shares of
common stock to be purchased by it shown in the above table bears to the total
number of shares of common stock offered by this prospectus.
At our request, the underwriters have reserved up to 210,000 shares of
common stock to be sold in the offering and offered for sale, at the public
offering price, to our directors, officers, employees, business associates and
related persons. The number of shares of common stock available for sale to the
general public will be reduced to the extent these individuals purchase the
reserved shares. Any reserved shares which are not so purchased will be offered
by the underwriters to the general public on the same basis as the other shares
offered by this prospectus.
The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
LifeMinders.com has agreed to indemnify the underwriters against liabilities,
including liabilities under the Securities Act, and to contribute to payments
the underwriters may be required to make with respect to these liabilities.
We anticipate that our directors, officers and our significant stockholders
will agree not to directly or indirectly, without the prior written consent of
Hambrecht & Quist LLC on behalf of the underwriters, whether any such
transaction described above is to be settled by delivery of common stock or
such other securities, in cash or otherwise, during the 180-day period
following the date of this prospectus:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock (whether
any such shares or any such securities are then owned by such person or
are later acquired directly from us); or
. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock.
We have also agreed that we will not, without the prior written consent of
Hambrecht & Quist LLC, offer or sell any shares of common stock, options or
warrants to acquire shares of our common stock or securities exchangeable for
or convertible into shares of common stock during the 180-day period following
the date of this prospectus. We may issue shares upon the exercise of options
granted prior to the date of this prospectus, and may grant additional options
under our stock option plans, providing that, without the prior written consent
of Hambrecht & Quist LLC, the additional options shall not be exercisable
during the 180-day period.
The restrictions described in the previous paragraph do not apply to:
. the sale to the underwriters of the shares of common stock under the
underwriting agreement;
. the issuance of shares of our common stock upon the exercise of an option
or warrant or the conversion of a security outstanding on the date of
this prospectus which is described in the prospectus;
. transactions by any person other than LifeMinders.com relating to shares
of common stock or other securities acquired in open market transactions
after the completion of the offering of the shares of common stock; or
59
<PAGE>
. issuance of shares of common stock or options to purchase shares of
common stock pursuant to our employee benefit plans as in existence on
the date of the prospectus and consistent with past practices.
The underwriters participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the common stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase, for the purpose of pegging,
fixing or maintaining the price of the common stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with the offering. A penalty bid means an arrangement that
permits the underwriters to reclaim a selling concession from a syndicate
member in connection with the offering when shares of common stock sold by the
syndicate member are purchased in syndicate covering transactions. These
transactions may be effected on the Nasdaq National Market, in the over-the-
counter market or otherwise. Stabilizing, if commenced, may be discontinued at
any time.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners LLC has been named as a lead or co-
manager of 79 filed public offerings of equity securities, of which 53 have
been completed, and has acted as a syndicate member in an additional 39 public
offerings of equity securities. We have an agreement with Thomas Weisel
Partners LLC under which they provide financial advisory and investment banking
services to us. In connection with the closing of our offering of Series E
preferred stock, Thomas Weisel Partners LLC received a cash fee equal to 10% of
the proceeds of the offering. Thomas Weisel Partners LLC does not have any
other material relationship with us or any of our officers, directors or
controlling persons, except with respect to its contractual relationship with
us under the underwriting agreement entered into in connection with this
offering.
Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in the offering as one of the managing underwriters. The
National Association of Securities Dealers, Inc. approved the membership of Wit
Capital on September 4, 1997. Since that time, Wit Capital has acted as an
underwriter, e-manager or selected dealer in over 125 public offerings. Except
for its participation as a manager in the offering, Wit Capital has no
relationship with us or any of our affiliates.
Determination of Offering Price
Prior to the offering, there has been no public market for the common stock.
The initial public offering price for the common stock will be determined by
negotiation among LifeMinders.com and the representatives of the underwriters.
The factors that will be considered in determining the initial public offering
price are prevailing market and economic conditions, our revenue and earnings,
market valuations of other companies engaged in activities similar to us,
estimates of our business potential and prospects, the present state of our
business operations, our management and other factors deemed relevant.
60
<PAGE>
LEGAL MATTERS
The legality of the securities in this offering has been passed upon for us
by or counsel, Venable, Baetjer and Howard, LLP, of McLean, Virginia. Agreed
upon legal matters will be passed upon for the underwriters by its counsel,
Brobeck, Phleger & Harrison LLP of Washington, DC.
EXPERTS
Our financial statements at December 31, 1997, 1998 and September 30, 1999,
and for the period from August 9, 1996 (Date of Inception) through December 31,
1996, and for the years ended December 31, 1997 and 1998, and for the nine
month periods ended September 30, 1998 and 1999 appearing in this prospectus
and registration statement have been audited by PricewaterhouseCoopers LLP,
independent accountants, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock offered hereby. This
prospectus does not contain all the information set forth in the registration
statement and the exhibits and schedules filed therewith. For further
information with respect to LifeMinders.com and the common stock offered
hereby, reference is made to the registration statement and to the exhibits and
schedules filed therewith. Statements contained in this prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and each such statement is qualified in all respects by reference to
the full text of such contract or other document filed as an exhibit to the
registration statement. A copy of the registration statement and the exhibits
and schedules filed therewith may be inspected without charge at the public
reference facilities maintained by the SEC in Room 1024, 450 Fifth Street, N.W.
Washington, D.C. 20549, and at the SEC's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048, and copies of all or any part of the registration statement may be
obtained from such offices upon payment of the fees prescribed by the SEC. The
SEC maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of the site is http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934, as
amended, and, in accordance therewith, will file periodic reports, proxy
statements and other information with the SEC. Such periodic reports, proxy
statements and other information will be available for inspection and copying
at the regional offices, public reference facilities and Web site of the SEC
referred to above.
This prospectus includes statistical data regarding Internet usage and the
advertising industry which were obtained from industry publications, including
reports generated by Direct Marketing Association, dated May 7, 1999, Forrester
Research, Inc., dated September 15, 1999, International Data Corporation, dated
June 1999, Electronic Mail & Messaging Systems, dated May 7, 1999, and The
Nielsen//NetRatings Reporter, dated October 14, 1999. These industry
publications generally indicate that they have obtained information from
sources believed to be reliable, but do not guarantee the accuracy and
completeness of that information. While we believe those industry publications
to be reliable, we have not independently verified the data included in the
reports.
61
<PAGE>
LIFEMINDERS.COM, INC.
Table of Contents
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of Independent Accountants...................................... F-1
Balance Sheets as of December 31, 1997, 1998 and September 30, 1999.... F-2
Statements of Operations for the period from August 9, 1996 (date of
inception) to December 31, 1996, for the years ended December 31, 1997
and 1998 and for the nine month periods ended September 30, 1998 and
1999.................................................................. F-3
Statements of Changes in Stockholders' Equity (Deficit) for the period
from August 9, 1996 (date of inception) to December 31, 1996, for the
years ended December 31, 1997 and 1998 and for the nine month period
ended September 30, 1999.............................................. F-4
Statements of Cash Flows for the period from August 9, 1996 (date of
inception) to December 31, 1996, for the years ended December 31, 1997
and 1998 and for the nine month periods ended September 30, 1998 and
1999.................................................................. F-5
Notes to Financial Statements.......................................... F-6
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
LifeMinders.com, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in stockholders' equity (deficit) and cash flows present
fairly, in all material respects, the financial position of LifeMinders.com,
Inc. (the Company) at December 31, 1997, 1998 and September 30, 1999 and the
results of its operations and its cash flows for the period from August 9, 1996
(date of inception) to December 31, 1996, and for each of the years ended
December 31, 1997, 1998, and for each of the nine month periods ended September
30, 1998 and 1999 in conformity with generally accepted accounting principles.
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
generally accepted auditing standards 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.
/s/ PricewaterhouseCoopers LLP
McLean, Virginia
October 21,1999
F-1
<PAGE>
LIFEMINDERS.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, Pro forma at
---------------------- September 30, September 30,
1997 1998 1999 1999
--------- ----------- ------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.............. $ 792,553 $ 232,073 $11,279,137
Accounts receivable, net.. -- -- 4,167,570
Prepaid expenses and other
current assets........... -- -- 6,990,942
--------- ----------- -----------
Total current assets...... 792,553 232,073 22,437,649
Property and equipment,
net....................... 4,599 46,228 2,736,653
Deferred offering costs.... -- -- 174,284
--------- ----------- -----------
Total assets.............. $ 797,152 $ 278,301 $25,348,586
========= =========== ===========
Liabilities, Mandatorily
Redeemable Convertible
Preferred Stock and
Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable.......... $ -- $ 42,368 $ 3,273,231
Accrued expenses.......... 48,486 79,972 1,036,241
Deferred revenue.......... -- 355,000 120,274
Note payable.............. -- -- 67,494
--------- ----------- -----------
Total current
liabilities.............. 48,486 477,340 4,497,240
Note payable, net of
current portion........... -- -- 94,492
Deferred rent.............. -- -- 38,925
--------- ----------- -----------
Total liabilities......... 48,486 477,340 4,630,657
--------- ----------- -----------
Commitments and
contingencies
Mandatorily redeemable
convertible preferred
stock:
Series A, $.01 par value;
1,000,000 shares
authorized, issued and
outstanding at December
31, 1997, 1998 and
September 30, 1999
(liquidation preference
of $1,524,002 as of
September 30, 1999)...... 866,338 980,486 1,054,704
Series B, $.01 par value;
1,000,000 authorized
shares; no shares issued
and outstanding at
December 31, 1997 and
1,000,000 shares issued
and outstanding at
December 31, 1998 and
September 30, 1999
(liquidation preference
of $1,476,224 as of
September 30, 1999)...... -- 1,042,889 1,102,889
Series C, $.01 par value;
2,620,373 authorized
shares; no shares issued
at December 31, 1997 and
1998; 2,620,373 shares
issued and outstanding at
September 30, 1999
(liquidation preference
of $4,993,333 as of
September 30, 1999)...... -- -- 4,135,596
Series D, $.01 par value;
2,252,874 authorized
shares; no shares issued
at December 31, 1997 and
1998; 2,252,874 shares
issued and outstanding at
September 30, 1999
(liquidation preference
of $13,497,333 as of
September 30, 1999)...... -- -- 10,774,839
Series E, $.01 par value;
2,791,993 authorized
shares; no shares issued
at December 31, 1997 and
1998; 2,791,993 shares
issued and outstanding at
September 30, 1999
(liquidation preference
of $31,042,639 as of
September 30, 1999)...... -- -- 20,652,762
--------- ----------- -----------
Total mandatorily
redeemable convertible
preferred stock.......... 866,338 2,023,375 37,720,790
--------- ----------- -----------
Stockholders' equity
(deficit):
Common stock, $.01 par
value; 6,250,000 and
6,550,000 and 25,000,000
shares authorized at
December 31, 1997 and
1998 and September 30,
1999 respectively;
3,274,998 shares issued
and outstanding at
December 31, 1997, 1998
and 3,349,373 shares
issued and outstanding at
September 30, 1999 ...... 32,750 32,750 33,494 154,309
Additional paid-in
capital.................. 363,751 206,215 2,027,253 39,627,228
Deferred compensation on
employee stock options... -- -- (2,148,988) (2,148,988)
Accumulated deficit....... (514,173) (2,461,379) (16,914,620) (16,914,620)
--------- ----------- ----------- -----------
Total stockholders' equity
(deficit)................ (117,672) (2,222,414) (17,002,861) $20,717,929
--------- ----------- ----------- ===========
Total liabilities,
mandatorily redeemable
convertible preferred
stock and stockholders'
equity (deficit)......... $ 797,152 $ 278,301 $25,348,586
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
LIFEMINDERS.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the
period
August 9,
1996
(date of For the nine month periods
inception), For the year ended ended
to December 31, September 30,
December 31, ---------------------- ---------------------------
1996 1997 1998 1998 1999
------------ --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Advertising............ $ -- $ 67,126 $ 56,750 $ 26,750 $ 4,064,962
Opt-in................. -- -- -- -- 1,914,531
-------- --------- ----------- ------------ -------------
Total revenue......... -- 67,126 56,750 26,750 5,979,493
Cost of revenue......... -- 37,249 59,472 30,500 471,907
-------- --------- ----------- ------------ -------------
Gross margin (loss)..... -- 29,877 (2,722) (3,750) 5,507,586
-------- --------- ----------- ------------ -------------
Operating expenses:
Sales and marketing.... 15,965 147,325 868,706 591,359 16,465,006
Research and
development........... 9,800 240,498 373,788 285,784 1,012,603
General and
administrative........ 9,308 127,132 726,505 485,634 2,338,784
Stock-based
compensation.......... -- -- -- -- 268,671
-------- --------- ----------- ------------ -------------
Total operating
expenses............. 35,073 514,955 1,968,999 1,362,777 20,085,064
-------- --------- ----------- ------------ -------------
Loss from operations.... (35,073) (485,078) (1,971,721) (1,366,527) (14,577,478)
Interest income, net.... -- 5,978 24,515 22,550 124,237
-------- --------- ----------- ------------ -------------
Net loss.............. (35,073) (479,100) (1,947,206) (1,343,977) (14,453,241)
Accretion on mandatorily
redeemable convertible
preferred stock........ -- -- (157,037) (108,500) (664,377)
-------- --------- ----------- ------------ -------------
Net loss available to
common stockholders.... $(35,073) $(479,100) $(2,104,243) $ (1,452,477) $ (15,117,618)
======== ========= =========== ============ =============
Basic and diluted net
loss per common share.. $ (0.04) $ (0.19) $ (0.64) $ (0.44) $ (4.59)
======== ========= =========== ============ =============
Weighted average common
shares and common share
equivalents............ 798,220 2,530,228 3,275,000 3,275,000 3,296,181
======== ========= =========== ============ =============
Unaudited pro forma data
(Note 2):
Basic and diluted net
loss per common
share................. $ (0.40) $ (1.50)
=========== =============
Weighted average common
shares and common
share equivalents..... 5,202,083 10,082,775
=========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
LIFEMINDERS.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deferred
Common stock Common stock stock
Common stock Class A Class B Additional compensation Treasury stock
----------------- -------------- ------------- paid-in on employee Accumulated ----------------
Shares Amount Shares Amount Shares Amount capital stock options deficit Shares Amount
--------- ------- ------ ------ ------ ------ ---------- ------------- ------------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
Class A common
stock at
inception on
August 9, 1996.. -- $ -- 1,250 $ 13 -- $ -- $ 9,987 $ -- $ -- -- $ --
Net loss........ -- -- -- -- -- -- -- -- (35,073) -- --
--------- ------- ------ ----- ---- ----- ---------- ----------- ------------ -------- -----
Balance,
December 31,
1996............ -- -- 1,250 13 -- -- 9,987 -- (35,073) -- --
Issuance of
Class B common
stock........... -- -- -- -- 374 4 52,561 -- -- -- --
Conversion of
Class B common
stock to
Series A common
stock........... -- -- 536 5 (374) (4) (1) -- -- -- --
Issuance of
1,618.6144
shares of common
stock for each
Class A common
stock share and
cancellation of
Class A common
stock........... 2,891,248 28,913 (1,786) (18) -- -- (28,895) -- -- -- --
Conversion of
note payable to
common stock.... 321,250 3,212 -- -- -- -- 196,788 -- -- -- --
Issuance of
stock options to
purchase common
stock in
connection with
the Series A
convertible
preferred stock
issuance........ -- -- -- -- -- -- 38,000 -- -- -- --
Issuance of
common stock.... 62,500 625 -- -- -- -- (525) -- -- -- --
Issuance of
warrants in
connection with
the Series A
convertible
preferred stock
issuance........ -- -- -- -- -- -- 51,000 -- -- -- --
Contribution by
stockholder..... -- -- -- -- -- -- 20,200 -- -- -- --
Forgiveness of
loan payable to
stockholders in
lieu of
contributions... -- -- -- -- -- -- 24,636 -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- (479,100) -- --
--------- ------- ------ ----- ---- ----- ---------- ----------- ------------ -------- -----
Balance,
December 31,
1997............ 3,274,998 32,750 -- -- -- -- 363,751 -- (514,173) -- --
Acquisition of
treasury stock.. -- -- -- -- -- -- -- -- -- 62,500 (500)
Exercise of
stock option in
connection with
the preferred
stock offering.. -- -- -- -- -- -- (499) -- -- (62,500) 500
Accretion on
mandatorily
redeemable
convertible
preferred
stock........... -- -- -- -- -- -- (157,037) -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- (1,947,206) -- --
--------- ------- ------ ----- ---- ----- ---------- ----------- ------------ -------- -----
Balance,
December 31,
1998............ 3,274,998 32,750 -- -- -- -- 206,215 -- (2,461,379) -- --
Accretion on
mandatorily
redeemable
convertible
preferred stock
................ -- -- -- -- -- -- (664,377) -- -- -- --
Exercise of
stock options .. 74,375 744 -- -- -- -- 58,756 -- -- -- --
Issuance of
stock options in
exchange for
services ....... -- -- -- -- -- -- 9,000 -- -- -- --
Deferred
compensation ... -- -- -- -- -- -- 2,417,659 (2,417,659) -- -- --
Amortization of
deferred
compensation ... -- -- -- -- -- -- -- 268,671 -- -- --
Net loss ....... -- -- -- -- -- -- -- (14,453,241) -- --
--------- ------- ------ ----- ---- ----- ---------- ----------- ------------ -------- -----
Balance,
September 30,
1999 ........... 3,349,373 $33,494 -- $ -- -- $ -- $2,027,253 $(2,148,988) $(16,914,620) -- $ --
========= ======= ====== ===== ==== ===== ========== =========== ============ ======== =====
<CAPTION>
Total
-------------
<S> <C>
Issuance of
Class A common
stock at
inception on
August 9, 1996.. $ 10,000
Net loss........ (35,073)
-------------
Balance,
December 31,
1996............ (25,073)
Issuance of
Class B common
stock........... 52,565
Conversion of
Class B common
stock to
Series A common
stock........... --
Issuance of
1,618.6144
shares of common
stock for each
Class A common
stock share and
cancellation of
Class A common
stock........... --
Conversion of
note payable to
common stock.... 200,000
Issuance of
stock options to
purchase common
stock in
connection with
the Series A
convertible
preferred stock
issuance........ 38,000
Issuance of
common stock.... 100
Issuance of
warrants in
connection with
the Series A
convertible
preferred stock
issuance........ 51,000
Contribution by
stockholder..... 20,200
Forgiveness of
loan payable to
stockholders in
lieu of
contributions... 24,636
Net loss........ (479,100)
-------------
Balance,
December 31,
1997............ (117,672)
Acquisition of
treasury stock.. (500)
Exercise of
stock option in
connection with
the preferred
stock offering.. 1
Accretion on
mandatorily
redeemable
convertible
preferred
stock........... (157,037)
Net loss........ (1,947,206)
-------------
Balance,
December 31,
1998............ (2,222,414)
Accretion on
mandatorily
redeemable
convertible
preferred stock
................ (664,377)
Exercise of
stock options .. 59,500
Issuance of
stock options in
exchange for
services ....... 9,000
Deferred
compensation ... --
Amortization of
deferred
compensation ... 268,671
Net loss ....... (14,453,241)
-------------
Balance,
September 30,
1999 ........... $(17,002,861)
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
LIFEMINDERS.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
period
August 9,
1996 (date
of For the nine month
inception) For the year ended periods ended
to December 31, September 30,
December 31, ----------------------- -------------------------
1996 1997 1998 1998 1999
------------ ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss.............. $(35,073) $ (479,100) $(1,947,206) $(1,343,977) $(14,453,241)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation.......... -- 271 8,234 4,529 200,894
Allowance for doubtful
accounts receivable.. -- -- -- -- 201,232
Amortization of
deferred compensation
on employee stock
options.............. -- -- -- -- 268,671
Issuance of common
stock and stock
options in exchange
for services......... -- 2,565 -- -- 9,000
Changes in assets and
liabilities:
Accounts receivable.. -- -- -- (106,750) (4,368,802)
Prepaid expenses and
other current
assets.............. -- -- -- -- (6,990,942)
Deferred offering
costs............... -- -- -- -- (174,284)
Accounts payable..... -- -- 42,368 60,051 3,230,863
Accrued expenses..... -- 48,486 31,486 (48,486) 956,269
Deferred revenue..... -- -- 355,000 105,000 (234,726)
Deferred rent........ -- -- -- -- 38,925
-------- ---------- ----------- ----------- ------------
Net cash used in
operating
activities......... (35,073) (427,778) (1,510,118) (1,329,633) (21,316,141)
-------- ---------- ----------- ----------- ------------
Cash flows from
investing activities:
Acquisition of
property and
equipment............ -- (4,870) (49,863) (43,401) (2,891,319)
-------- ---------- ----------- ----------- ------------
Net cash used in
investing
activities......... -- (4,870) (49,863) (43,401) (2,891,319)
-------- ---------- ----------- ----------- ------------
Cash flows from
financing activities:
Proceeds from
borrowings on notes
payable to
stockholders......... 35,236 53,319 -- -- --
Payments on notes
payable to
stockholders......... (10,000) (53,919) -- -- --
Issuance of preferred
stock................ -- 1,000,000 -- -- 37,178,289
Cash paid for offering
costs in connection
with issuance of
preferred stock...... -- (44,662) -- -- (2,145,251)
Proceeds from the
exercise of Series B
preferred warrants... -- -- 1,000,000 1,000,000 --
Proceeds from issuance
of note payable...... -- 200,000 -- -- 161,986
Purchase of treasury
stock................ -- -- (500) (500) --
Proceeds from issuance
of common stock...... 10,000 50,100 1 1 --
Exercise of stock
options.............. -- -- -- -- 59,500
Stockholder cash
capital
contribution......... -- 20,200 -- -- --
-------- ---------- ----------- ----------- ------------
Net cash provided by
financing
activities......... 35,236 1,225,038 999,501 999,501 35,254,524
-------- ---------- ----------- ----------- ------------
Net increase (decrease)
in cash and cash
equivalents........... 163 792,390 (560,480) (373,533) 11,047,064
Cash and cash
equivalents, beginning
of period............. -- 163 792,553 792,553 232,073
-------- ---------- ----------- ----------- ------------
Cash and cash
equivalents, end of
period................ $ 163 $ 792,553 $ 232,073 $ 419,020 $ 11,279,137
======== ========== =========== =========== ============
Supplemental
disclosures of non-
cash investing and
financing activities:
Conversion of note
payable to common
stock................ $ -- $ 200,000 $ -- $ -- $ --
======== ========== =========== =========== ============
Forgiveness of notes
payable to
stockholders......... $ -- $ 24,636 $ -- $ -- $ --
======== ========== =========== =========== ============
Conversion of notes
payable due to
stockholders to
common stock......... $ 10,000 $ -- $ -- $ -- $ --
======== ========== =========== =========== ============
Issuance of common
stock in exchange for
services............. $ -- $ 2,565 $ -- $ -- $ --
======== ========== =========== =========== ============
Issuance of warrants
in connection with
Series A convertible
preferred stock
issuance............. $ -- $ 51,000 $ -- $ -- $ --
======== ========== =========== =========== ============
Issuance of stock
options in exchange
for services......... $ -- $ -- $ -- $ -- $ 9,000
======== ========== =========== =========== ============
Accretion of
mandatorily
redeemable
convertible preferred
stock................ $ -- $ -- $ 157,037 $ 108,500 $ 664,377
======== ========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Financing of Start-Up Operations
LifeMinders is an online direct marketing company that provides personalized
content and advertisements via e-mail to a community of members. E-mail
messages contain reminders and tips that enable the Company's members to better
organize and manage their lives. Proprietary member information and targeting
capabilities provide advertising partners the opportunity to more effectively
reach their target audiences.
The Company was incorporated in Maryland on August 9, 1996 ("Date of
Inception") under the name of MinderSoft, Inc. In January 1999, we changed our
name to LifeMinders.com, Inc. The Company was reincorporated in Delaware in
July 1999. From 1996 to 1998, the Company entered into arrangements with
national retailers to distribute reminder products in software form on disk. In
late 1998, the Company revised its strategy to become an online direct
marketing company that provides personalized content and advertisements via e-
mail to a loyal community of members.
On October 21, 1999, the Board of Directors approved a 5 for 4 common stock
split in connection with the filing of its initial public offering. The
conversion ratio of the mandatorily redeemable convertible preferred stock will
be adjusted from a 1 for 1 conversion ratio to a 5 for 4 conversion ratio in
connection with the stock split. The financial statements of the Company,
including all shares and per share data, have been retroactively restated to
reflect the 5 for 4 common stock split for all periods presented.
The Company was considered to be in the development stage from inception
through March 31, 1999 as it was devoting substantially all of its efforts to
establishing a new business, developing the design of its database marketing
product, raising capital, financial planning and market development. Although
revenue commenced in 1997 and continued during 1998, this revenue was generated
from distribution arrangements for its software based products and not from
planned principal operations. During the three month period ended March 31,
1999, the Company generated revenue of $23,322 (unaudited) from planned
operations. Subsequent to March 31, 1999, the Company ceased being a
development stage enterprise generating revenue of approximately $6 million
from planned principal operations which consisted of Internet related services.
Initial Public Offering and Unaudited Pro Forma stockholders' equity
(deficit)--In September 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission (SEC) that
would permit the Company to sell shares of common stock in connection with a
proposed initial public offering (IPO). If the IPO is consummated under the
terms presently anticipated, upon the closing of the proposed IPO all of the
then outstanding shares of the Company's mandatorily redeemable convertible
preferred stock will automatically convert into shares of common stock on a
five for four basis. The conversion of the convertible preferred stock has been
reflected in the accompanying unaudited pro forma stockholders' equity as if it
had occurred on September 30, 1999.
2. Summary of Significant Accounting Policies
The significant accounting policies followed by the Company in the
preparation of these financial statements are as follows:
Use of Estimates
The preparation of the 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 revenue and expenses during the reported
period. Actual results could differ from these estimates.
F-6
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Cash and Cash Equivalents
Highly liquid investments having original maturities of 90 days or less at
the date of acquisition are classified as cash equivalents. The carrying value
of cash equivalents approximate fair value.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
generally three to five years. When property and equipment is retired or
otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is included in
operations.
Research and Development Costs
Research and development costs are expensed as incurred.
Revenue Recognition
During 1997 and 1998, the Company's revenue was generated from distribution
agreements for software-based products. Revenue from these agreements has been
recognized as the services were performed.
During 1999, revenue was generated primarily by advertising and opt-in
services.
Advertising
Advertising arrangements consist primarily of advertisements that are
displayed with the Company's e-mails. Generally, advertisers pay the
Company and the Company recognizes revenue on a per e-mail basis, based on
the number of e-mails delivered to the Company's members in which the
advertisements are displayed. From time to time, the Company may guarantee
a minimum number of e-mails to be delivered containing an advertisement
directed at a specific group. Under these contracts, the Company is not
required to forfeit fees received for e-mails previously delivered. The
Company may also guarantee a minimum number of sales orders for the
advertiser based on the e-mails delivered. Under these contracts the
Company defers all revenue until notification is received from the
advertiser that the minimum number of sales orders have been achieved by
the advertiser. In addition, the Company may provide advertisers the
opportunity for the exclusive right to sponsor advertisements within a
specific e-mail category for a specified period of time for a fixed fee.
Under these contracts the Company recognizes revenue during the period the
advertisement is displayed in the Company's e-mails since there is no
obligation to provide a minimum number of e-mails for that individual
advertiser during the specific period. The Company's advertising contracts
generally have average terms ranging from one to six months.
Advertising revenue also includes barter transactions, where the Company
exchanges advertising space on their e-mails for reciprocal advertising
space or traffic on other Web sites. Revenue from these barter transactions
is recorded at the estimated fair value of the advertisements delivered and
is recognized when the advertisements are included in the Company's e-
mails. No gain or loss results from these barter transactions as the
revenue recognized equals the advertising costs incurred. For the nine
month period ended September 30, 1999, barter revenue was less than 5% of
net revenues. LifeMinders.com did not enter into barter transactions prior
to 1999.
F-7
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Opt-in Services
Revenue is recognized as affirmative member responses to the
advertisers' newsletters and other promotions offered during the Company's
sign up process. The Company derives revenue from its services through fees
that its opt-in advertising partners pay. The Company records revenue net
of estimated duplicate member responses to its opt-in partners' newsletters
and other promotions.
Duplicate member responses are names the Company provides to opt-in
advertising partners for which the Company's members have previously
registered either through the Company's sign up process or with the
Company's opt-in advertising partners directly. For the nine month period
ended September 30, 1999, revenue was recorded net of approximately
$443,000 for estimated duplicate member responses to the Company's opt-in
partners' newsletters and other promotions.
Cash received in advance of advertising and opt-in services is recorded as
deferred revenue and recognized as revenue as services are performed.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration
of credit risk consist of cash and cash equivalents and accounts receivable.
The Company's cash and cash equivalents are maintained at one U.S. financial
institution. Deposits held with banks may exceed the amount of insurance
provided on such deposits. The majority of the Company's cash equivalents are
invested in short-term commercial paper.
Revenue for the years ended December 31, 1997 and 1998 and accounts
receivable as of September 30, 1999 were concentrated as follows (amounts
represent the percentage of total revenue and accounts receivable),
respectively:
<TABLE>
<CAPTION>
Accounts
Revenue Receivable
------------ -------------
For the
year ended
December 31,
------------ September 30,
1997 1998 1999
------------ -------------
<S> <C> <C> <C>
Lowes............................................. 100% * *
The Home Depot.................................... * 88.1% *
Netcentives....................................... * * 13.7%
PETsMART.com...................................... * * 12.9%
</TABLE>
* Represents less than 10% of total.
Advertising Costs
Costs related to advertising and promotion of services is charged to sales
and marketing expense as incurred. Cash paid in advance of advertising and
services received is recorded as prepaid expenses which is amortized as
services are received. Advertising costs for the years ended December 31, 1996,
1997, 1998 and for the nine months ended September 30, 1998 were considered
immaterial. Advertising costs for the nine months ended September 30, 1999 were
approximately $15,666,000. At September 30, 1999, approximately $6,779,000 of
prepaid advertising expense is included in prepaids and other current assets.
F-8
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Income Taxes
Prior to November 1997, the Company was organized as an S Corporation and
taxable income was included in the individual tax returns of the stockholders.
In conjunction with the Company's preferred stock financing during 1997, the
Company terminated its Subchapter S corporation election for tax. The Company,
now a C corporation, is subject to federal and state income taxes and
recognizes deferred taxes using the liability approach under which deferred
income taxes are calculated based on the differences between the financial and
tax bases of assets and liabilities based upon enacted tax laws and rates
applicable to the periods in which the taxes become payable. The Company
provides a valuation allowance, if necessary, to reduce deferred tax assets to
their estimated realizable value.
The provision for income taxes consists of the Company's current tax
provision (benefit) for federal and state income taxes and the changes in the
deferred tax asset and liability during the period.
Stock Based Compensation
The Company measures compensation expense for its employee stock-based
compensation using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Under the intrinsic value method of accounting
for stock-based compensation, when the exercise price of options granted to
employees is less than the estimated fair value of the underlying stock on the
date of grant, deferred compensation is recognized and is amortized to
compensation expense over the applicable vesting period.
Impairment of Long-lived Assets
The Company evaluates the recoverability of the carrying value of its long-
lived assets periodically. The Company considers historical performance and
anticipated future results in its evaluation of potential impairment.
Accordingly, when indicators of impairment are present, the Company evaluates
the carrying value of these assets in relation to the operating performance of
the business and future discounted and undiscounted cash flows expected to
result from the use of these assets. Impairment losses are recognized when the
sum of expected future cash flows are less than the assets' carrying value. No
such impairment losses have been recognized to date.
Basic and Diluted Net Loss Per Common Share
Basic net loss per common share is based on the weighted average number
shares of common stock outstanding during each year. Diluted net loss per
common share is based on the weighted average number of shares of common stock
outstanding during each year, adjusted for the effect of common stock
equivalents arising from the assumed exercise of stock options, if dilutive.
Pro Forma Net Loss Per Share (unaudited)
Pro forma net loss per share for the year ended December 31, 1998 and for
the nine months ended September 30, 1999 is computed using the weighted average
number of common shares outstanding including the pro forma effects of the
automatic conversion of the Company's Series A, Series B, Series C, Series D
and Series E preferred stock outstanding as of September 30, 1999 into shares
of the Company's common stock effective upon the closing of the Company's
initial public offering. The resulting pro forma adjustment results in an
increase in the weighted average shares used to compute basic and diluted net
loss per share of 1,927,083 shares for the year ended December 31, 1998 and
6,786,594 shares for the nine
F-9
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
months ended September 30, 1999 and a pro forma basic and diluted net loss per
common share of $0.40 and $1.50, respectively. Pro forma common equivalent
shares, comprised of incremental common shares issuable upon the exercise of
stock options, are not included in the pro forma diluted net loss per share
because they would be antidilutive.
Comprehensive Income
The Company has adopted the accounting treatment prescribed by SFAS 130,
Comprehensive Income. The adoption of this statement had no impact on the
Company's financial statements because the Company did not have any other
comprehensive income components other than net loss during the periods
presented.
Certain Risks and Uncertainties
The Company is subject to all the risks inherent in an early stage business
in the technology industry. The risks include, but are not limited to, limited
operating history, limited management resources, reliance on distribution
arrangements for software based products for revenue where acceptance of the
Company's service on the Internet is uncertain, reliance on relationships with
a limited number of customers, dependence on the Internet and related security
risks and the changing nature of the Internet industry.
3. Accounts Receivable
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
Accounts receivable.......................................... $4,368,802
Allowance for doubtful accounts.............................. (201,232)
----------
Accounts receivable, net..................................... $4,167,570
==========
</TABLE>
4. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------- September 30,
1997 1998 1999
------ ------- -------------
<S> <C> <C> <C>
Furniture and fixtures...................... $ -- $22,204 $ 303,691
Computer equipment.......................... 4,870 32,529 2,211,887
Leasehold improvements...................... -- -- 430,474
------ ------- ----------
4,870 54,733 2,946,052
Less: accumulated depreciation (271) (8,505) (209,399)
------ ------- ----------
Property and equipment, net................. $4,599 $46,228 $2,736,653
====== ======= ==========
</TABLE>
5. Borrowings
Line of Credit
In November 1998, the Company entered into a $600,000 working capital line
of credit with a bank. The line of credit was increased to $1,000,000 upon the
receipt of $4,000,000 from institutional venture capital investors in January
1999 in connection with the issuance of Series C mandatorily redeemable
convertible preferred stock. The interest rate on the line is the bank's prime
rate plus 1.0% per annum
F-10
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(8.75% at December 31, 1998 and 9.25% at September 30, 1999). The line of
credit is collateralized by substantially all the Company's assets, including
intangible assets and future proceeds from such assets. Prior to amendment in
August 1999, the credit line included financial and other covenants, including
a requirement to maintain a monthly quick ratio of 1 to 1.
In March 1999, the working capital line of credit of $1,000,000 was reduced
by $150,000 which was allocated for a bank credit line.
On August 19, 1999, the Company amended the $1,000,000 line of credit, which
includes $850,000 for working capital expenditures and $150,000 for a business
credit line, to be increased to $1,350,000 which includes $1,000,000 for
working capital expenditures, $250,000 for a business credit line, and a
$100,000 letter of credit for leased office space. The line and business credit
line expire on November 10, 1999. No borrowings were outstanding under the line
of credit as of December 31, 1998 and September 30, 1999.
In connection with the amendment, the Company is no longer required to
maintain a monthly quick ratio financial covenant of 1 to 1. Fees paid to the
bank in relation to the amendment of the line and waiver of the quick ratio
financial covenant totaled $50,000.
Note Payable
On March 3, 1999, the Company entered into a $200,000 promissory note with
the same bank that the Company has the line of credit, for the purpose of
equipment and software purchases and general working capital. The Company can
draw from the note through November 10, 1999 (draw period). Interest during the
draw period is due monthly beginning April 10, 1999 at an annual interest rate
of the bank's prime rate plus 1.0%. On November 10, 1999, the outstanding
principal balance of the borrowings during the draw period are payable monthly
in 24 equal principal payments commencing on December 10, 1999. All remaining
principal and accrued but unpaid interest is due on maturity of November 9,
2001. The promissory note is collateralized under the same terms of the line of
credit discussed earlier and includes financial and other covenants, including
a requirement to maintain a minimum monthly quick ratio of 1.25 to 1. At
September 30, 1999, $161,986 was outstanding under this agreement.
6. Mandatorily Redeemable Convertible Preferred Stock and Stockholders' Equity
(Deficit)
Common Stock
On August 9, 1996, the founders of the Company purchased 1,250 shares of the
Company's Class A common stock for $10,000 in connection with the Company's
formation.
In June 1997, the founders were issued 374 shares of Class B common stock
for a combination of $50,000 in cash and services valued at $2,565. The
estimated fair value of services provided was determined by the Board of
Directors.
On October 15, 1997, the Company completed a plan of recapitalization which
converted the 374 shares of Class B common stock to 536 shares of Class A
common stock. Subsequent to the conversion the Class B common stock was
retired.
On November 12, 1997, the Company issued 1,618.6144 shares of common stock
for each share of Class A common stock held by stockholders at such date. Upon
the issuance of the 2,891,248 shares of common stock, 1,786 shares of Class A
common stock were retired.
F-11
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
On November 12, 1997, the Company converted a $200,000, 7% Nonassignable
Convertible Note into 321,250 shares of common stock.
On November 12, 1997, the Company issued one non-employee options to
purchase 62,500 shares of common stock for $100 in connection with a consulting
agreement for services to raise capital for the Company. These options had a
fair value of $38,000 which were recorded as direct issuance costs and offset
against the proceeds. The options were exercised on November 12, 1997. The
estimated fair value of the options were determined using the American Black-
Scholes Model.
In June 1998, the Company purchased 62,500 shares of common stock at $0.01
per share from the founders of the Company. These treasury shares were re-
issued as result of one non-employee exercising a stock option granted during
1997 in the Series A mandatorily redeemable convertible preferred stock
issuance. The total exercise price was $1.00.
Mandatorily Redeemable Convertible Preferred Stock
As of December 31, 1998, the Company had authorized two classes of
mandatorily redeemable convertible preferred stock: Series A and Series B.
The Company issued 1,000,000 shares of Series A mandatorily redeemable
convertible preferred stock on November 12, 1997 for $1.00 per share. In
conjunction with this preferred stock sale, the Company issued warrants to
purchase 1,000,000 shares of Series B mandatorily redeemable convertible
preferred stock at $1.00 per share with an estimated fair value of $51,000
determined using the American Black-Scholes Model. The Series A shares have
cumulative preferred dividends of $0.08 per share annually.
On June 17, 1998, the Company issued 1,000,000 shares of Series B preferred
stock at $1.00 per share for total proceeds of $1,000,000 resulting from the
exercise of the Series B preferred stock warrants granted in 1997. The Series B
preferred stock carry the same terms and conditions as the Series A preferred
stock.
In January 1999, the Company amended its Articles of Incorporation to
authorize 2,620,373 shares of $0.01 par value Series C mandatorily redeemable
convertible preferred stock and to include the Series A and Series B Preferred
Stock as mandatorily redeemable shares. Each shareholder of preferred stock has
the right to require the Company to redeem their respective shares upon the
earlier of (1) the fifth anniversary of the issuance of the Series C Preferred
Stock or (2) the occurrence of a liquidation and or material and incurable
breach by the Company of the Amended and Restated Articles of Incorporation.
The redemption price is equal to the original issuance price of each respective
share, plus all accrued but unpaid dividends. As of September 30, 1999, the
preferred stock carrying value has been accreted to increase the carrying value
for cumulative dividends and a portion of direct issuance costs.
On January 29, 1999, the Company issued 2,620,373 shares of Series C
convertible preferred stock at an approximate price of $1.53 per share and
total proceeds of $4,000,000. The Series C preferred stock are mandatorily
redeemable and have the same redemption rights as Series A preferred stock and
Series B preferred stock. The Series C shares have cumulative preferred
dividends of $0.08 per share annually.
On May 28, 1999, the Company Amended and Restated its Articles of
Incorporation to authorize 2,252,874 shares of Series D mandatorily redeemable
convertible preferred stock and issued 2,252,874 shares of Series D convertible
preferred stock at an approximate price of $4.71 per share and total proceeds
F-12
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
of $10,600,000. The Series D preferred stock are to be included as mandatorily
redeemable shares. In the May 28, 1999 Amendment to the Articles of
Incorporation, the mandatory redemption date for the Series A, Series B and
Series C convertible preferred stock has been amended to be the same as the
Series D shares which is upon the earlier of (1) the fifth anniversary of the
issuance of Series D convertible preferred stock or (2) the occurrence of a
liquidation and/or material and incurable breach by the Company of the Amended
and Restated Articles of Incorporation. The redemption price is equal to the
original issuance price of each respective share, plus all accrued but unpaid
dividends. As of September 30, 1999, the preferred stock carrying value has
been accreted to increase the carrying value for cumulative dividends and a
portion of direct issuance costs.
The Series D and have the same redemption rights as Series A, Series B and
Series C preferred stock. The Series D shares have cumulative preferred
dividends of $0.08 per share annually.
On September 22, 1999, the Company amended and restated its Articles of
Incorporation to authorize 2,791,993 shares of Series E mandatorily redeemable
convertible preferred stock. On September 23, 1999, the Company issued
2,791,993 shares of Series E mandatorily redeemable convertible preferred stock
at an approximate price of $8.09 per share for cash proceeds of approximately
$22.6 million. The Series E mandatorily redemption date and rights are the same
as the Series A, Series B, Series C and Series D discussed earlier. The
redemption price is equal to the original issuance price, plus all accrued but
unpaid dividends. As of September 30, 1999, the preferred stock carrying value
has been accreted to increase the carrying value for cumulative dividends and a
portion of direct issuance costs. The Series E shares have cumulative preferred
dividends of $0.08 per share annually.
Conversion
Each share of preferred stock is convertible into common stock at the option
of the holder at any time at the initial conversion ratio of 1 for 1. The
conversion ratio is subject to adjustment for events such as a stock split,
stock dividend, or certain issuances of stock. At December 31, 1997 and 1998
the conversion ratio was 1 to 1 and subsequent to September 30, 1999, the
conversion ratio was adjusted 5 for 4, giving effect to the October 21, 1999
common stock split.
Automatic conversion is required if at any time the Company shall effect an
initial public offering in which the value of the Company is at least
$30,000,000 in an offering of not less than $10,000,000, before deduction of
underwriting discounts and registration expenses.
In the January 29, 1999 Amendment to the Articles of Incorporation, the
automatic conversion of convertible preferred stock has been amended to convert
upon an initial public offering, net of underwriters' discounts, commissions
and registration expense, of at least $15,000,000 and at an offering price in
which assuming the conversion of all preferred stock and stock options and
other securities exercisable by the Company at that time would be included in
the number of common shares multiplied by the offering price would exceed at
least $45,000,000 net of underwriters' discounts, commissions and registration
expense.
In the May 28, 1999 Amendment of the Articles of Incorporation, automatic
conversion of convertible preferred stock has been amended to convert upon an
initial public offering, net of any and all underwriters' discounts,
commissions and expenses and registration expenses, of at least $20,000,000 and
at an offering price per share of common stock that is equal or greater than
two times the current applicable conversion price for the Series D convertible
preferred stock.
F-13
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
As amended in the September 22, 1999 Amended and Restated Articles of
Incorporation, automatic conversion is required if at any time the Company
shall effect an initial public offering in which results in proceeds (net of
any and all underwriters' discounts, commissions and expenses and registration
expenses) of at least $25,000,000 at an offering price per share of Common
Stock that is equal to or greater than 2.12 times the original issuance price
for the Series E Preferred Stock.
Liquidation Preferences
In the event of any liquidation or winding up of the Company, the holders of
Series A, B, C and D preferred shares will be entitled to a liquidation
preference over the Company's common stock. The liquidation preference equals
the original face amount plus any accrued but unpaid dividends. No dividends
have been declared during the years ended December 31, 1997 and 1998 and for
the nine month period ended September 30, 1999.
Series A Preferred shareholders (and Series C, D, and E, as subsequently
amended) also participate so that after payment of the original purchase price
plus unpaid dividends to the holders of Series A, B, C, D and E Preferred, the
remaining assets shall be distributed on a pro rata basis to all shareholders
on a Common equivalent share basis until the holders of Series A Preferred
shares have received an aggregate of 2.5 times their original purchase price
(including the preference amount set forth in the preceding paragraph).
A merger, acquisition or sale of substantially all of the assets of the
Company in which the shareholders of the Company do not own a majority of the
outstanding shares of the surviving corporation shall be deemed a liquidation.
In the January 29, 1999 Amendment to the Articles of Incorporation, the
liquidation preference was amended to provide the holders of Series C
convertible preferred shares with the same liquidation preference as the
holders of Series A mandatorily redeemable convertible preferred shares.
In the May 28, 1999 Amendment to the Articles of Incorporation, the
liquidation preference was amended to provide the holders of Series D
convertible preferred stock with the same liquidation preference as the holders
of Series A , and C convertible preferred stock.
In the September 22, 1999 Amendment to the Articles of Incorporation, the
liquidation preference was amended to provide the holders of Series E
convertible preferred stock with the same liquidation preference as the holders
of Series A, B and C convertible preferred stock.
Dividends, Voting and Other Rights
The Company shall not declare or pay any distributions by dividend or
otherwise, payable other than in common stock, until a dividend in an amount at
least equal to the accrued and unpaid dividends due for each outstanding share
of Series A, Series B, Series C, Series D, and Series E Preferred Stock has
been paid or declared and set apart. After the holders of the outstanding
Preferred Stock have received their dividends, any dividends declared by the
Board of Directors out of funds legally available therefore shall be shared
equally among all outstanding shares on an as converted basis. The declaration
of dividends is at the discretion of the Board of Directors.
F-14
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Each share of Preferred Stock is entitled to the number of votes equal to
the number of whole shares of common stock into which each share of Preferred
Stock could be converted.
Holders of a majority of the Preferred (or Common issued upon conversion of
the Preferred) can request the Company to file a Registration Statement for at
least 15% of their shares (or any lesser percentage if the anticipated gross
receipts from the offering exceed $15,000,000). The Company must use its best
efforts to cause such shares to be registered; provided, however, that the
Company shall not be obligated to effect any such registration prior to the
earlier of (i) November 12, 2000 or (ii) within one year following the
effective date of the Company's initial public offering.
Preferred Stockholders have the right to purchase up to their pro rata share
of any shares the Company proposes to offer to any person or entity (other than
for an employee stock grant, equipment financing, acquisition of another
company or shares offered to the public pursuant to an underwritten public
offering).
If any founder of the Company proposes to sell all or a portion of his
shares to a third party, the Preferred Stockholders have the right to
participate in such sale on a pro rata basis or to exercise a right of first
refusal on the same basis. This agreement will terminate on the earlier of (1)
the transfer of all stock owned by such stockholder, (2) January 29, 2009, (3)
when less than one quarter of the aggregate number of shares outstanding as of
January 29, 1999 for Series C, as of May 28, 1999 for Series D and as of
September 22, 1999 for Series E, remain issued and outstanding (4) sale of all
or substantially all of the Company's assets, (5) the date of which any one or
more third parties acquire control or the ability to vote 33% or more of each
class outstanding, or (6) Qualified Public Offering.
7. Stock Options
Stock Option Plan for Employees and Non-employees
During 1998, the Company adopted the 1998 Stock Option Plan (the Plan),
under which incentive stock options and nonstatutory stock options may be
granted to employees, directors and consultants of the Company. Incentive stock
options may only be granted to employees of the Company.
The Plan is administered by a committee appointed by the Board of Directors.
The options are not transferable and are subject to various restrictions
outlined in the Plan. The committee determines the number of options granted to
employees, directors, or consultants, the vesting period and the exercise
price. The exercise price for stock options granted shall not be less than the
estimated fair value per share of common stock on the date of such grant for
incentive stock options and not less than 85% of the estimated fair value per
share of common stock on the date of such grant for nonstatutory stock options.
The estimated fair value of the underlying common stock is determined by third
party equity cash transactions.
The Board of Directors had reserved originally 776,250 shares of common
stock to grant options under the Plan. Options granted under the Plan vest over
a four year period and expire ten years after the grant date. In the January
29, 1999 and May 28, 1999 Amendments to the Articles of Incorporation, the
number of common stock shares reserved under the Plan was increased to
1,420,070 and 2,045,070 shares, respectively. The reserved shares were further
increased by 875,000 shares effective September 22, 1999 resulting in a total
of 2,920,070 shares of common stock available and reserved for issuance under
the plan.
F-15
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Accounting for Stock Options Issued to Employees
The following table summarizes stock option activity for option grants:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
--------- --------
<S> <C> <C>
December 31, 1997...................................... -- $ --
Grants................................................. 469,000 0.80
Exercises.............................................. -- --
Cancellations.......................................... (15,625) 0.80
--------- -----
December 31, 1998...................................... 453,375 0.80
Grants................................................. 1,793,256 2.06
Exercises.............................................. (74,375) 0.80
Cancellations.......................................... (471,882) 0.88
--------- -----
September 30, 1999..................................... 1,700,374 $2.11
========= =====
</TABLE>
The weighted-average exercise price for options outstanding at September 30
and December 31, 1998 and September 30, 1999 was $0.80, $0.80 and $2.11,
respectively and exercise prices ranged from $0.80 to $6.47 at September 30,
1999. These options will expire if not exercised at specific dates ranging from
March 2008 to September 2009 and the weighted-average remaining contractual
life of the options outstanding is approximately ten years. At September 30,
1998, there were 434,625 options outstanding. At December 31, 1998 and
September 30, 1998, there were no outstanding options which were exercisable.
At September 30, 1999, 411,110 outstanding options were exercisable. Management
estimates that stock options granted prior to December 31, 1998 have been
either equal to or in excess of the estimated fair value of the underlying
common stock and therefore no compensation expense was recognized. The Company
has estimated the fair value of the underlying common stock on the date of
grant was in excess of the exercise price for the options granted during the
nine month period ended September 30, 1999. As a result, the Company recorded
deferred compensation of $2,417,659 for the nine months ended September 30,
1999. This amount was recorded as a reduction to stockholders' equity (deficit)
and is being amortized as a charge to operations over the vesting period of the
stock options. For the nine months ended September 30, 1999, the Company
recognized $268,671 of employee stock compensation expense related to these
options.
Annual amortization of deferred stock compensation for stock options
outstanding as of September 30, 1999, is approximately $420,000, $604,000,
$604,000, $604,000 and $185,000, for the years ending December 31, 1999, 2000,
2001, 2002 and 2003, respectively.
For disclosure purposes, the fair value of each stock option granted is
estimated on the date of grant using the American Black-Scholes option-pricing
model with the following weighted average assumptions used for stock options
granted in 1998 and for the nine months ended September 30, 1999; no annual
dividends, expected volatility of 0%, risk-free interest rate ranging from
4.66% to 5.74% and expected life of one to four years. The weighted-average
fair value of the stock options granted in 1998 and the nine months ended
September 30, 1999 were $0.80 and $2.11, respectively.
Under the above model, the total value of the stock options granted in 1998
and for the nine months ended September 30, 1998 and 1999, respectively was
$53,704, $29,654 and $951,066, respectively, which would be amortized on a pro
forma basis over the option vesting period. SFAS No. 123 "Accounting for
F-16
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Stock-Based Compensation" encourages adoption of a fair value based method for
valuing the cost of stock-based compensation. However, it allows companies to
continue to use the intrinsic value method for options granted to employees and
disclose pro forma net loss per share and loss per share. Had the Company
determined compensation cost for this plan in accordance with SFAS No. 123, the
Company's pro forma net loss for the year ended December 31, 1998 and for the
nine months ended September 30, 1998 and 1999, would have been $1,956,067,
$1,348,870 and $14,610,165, respectively, and the pro forma basic and diluted
loss per common share would have been $0.65, $0.44 and $4.63, respectively.
Changes in Stockholders' Equity (Deficit) for the Nine Months Ended
September 30, 1998 are as follows:
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------------ Paid-In Accumulated ---------------
Shares Amount Capital Deficit Shares Amount Total
--------- -------- ----------- ----------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997................... 3,274,998 $ 32,750 $ 363,751 $ (514,173) -- $-- $ (117,672)
Acquisition of treasury
stock.................. -- -- -- -- 62,500 (500) (500)
Exercise of stock option
in connection with the
preferred stock
offering............... -- -- (499) -- (62,500) 500 1
Accretion of mandatorily
redeemable convertible
preferred stock........ -- -- (108,500) -- -- -- (108,500)
Net loss................ -- -- -- (1,452,477) -- -- (1,452,477)
--------- -------- ----------- ----------- ------- ---- -----------
Balance, September 30,
1998................... 3,274,998 $254,752 $(1,966,650) $ -- -- $-- $(1,679,148)
========= ======== =========== =========== ======= ==== ===========
</TABLE>
8. Income Taxes
The provision (benefit) for income taxes consists of the following for the
following periods:
<TABLE>
<CAPTION>
Year Ended December Nine Months Ended
31, September 30, 1999
-------------------- ----------------------
1997 1998 1998 1999
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Current provision............... $ -- $ -- $ -- $ --
Deferred benefit................ (153,363) (638,315) (516,004) (5,486,886)
--------- --------- --------- -----------
(153,363) (638,315) (516,004) (5,486,886)
Change in valuation allowance... 153,363 638,315 516,004 5,486,886
--------- --------- --------- -----------
Total provision for income
taxes.......................... $ -- $ -- $ -- $ --
========= ========= ========= ===========
</TABLE>
The Company's deferred tax assets at December 31, 1997 and 1998 and
September 30, 1999, which consist primarily of net operating loss carryforwards
are $153,363, $791,678, and $6,278,564 respectively, are offset by a full
valuation allowance. Based upon the Company's limited operating history and
management's
F-17
<PAGE>
LIFEMINDERS.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
expectation of future profitability, management believes, based upon the
evidence available, that a full valuation allowance is necessary. The Company's
net operating loss carryforwards of $404,013, $1,922,365 and $15,257,892 at
December 31, 1997 and 1998 and September 30, 1999, respectively, begin expiring
in 2012.
9. Lease for Office Space
On June 14, 1999, the Company entered into a lease for office space in
Herndon, Virginia. The lease ends August 31, 2004 and has minimum annual lease
payments of $226,695 for the first year and are increased an annual rate of
3.0%. In accordance with the lease agreement, the Company is required to have a
letter of credit as a security deposit throughout the lease term. On June 18,
1999, the Company entered into a letter of credit for $100,000, which expires
November 11, 2000. The letter automatically renews on an annual basis if notice
is not received within 60 days of the anniversary date until final expiration
on November 11, 2004.
In addition, during August 1999, the Company entered into a one-year lease
for office space in Herndon, Virginia which has minimum annual payments of
$51,600 and ends during August 2000. This lease was previously a month-to-month
lease.
Future minimum lease payments under non-cancelable operating leases as of
September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Amount
-----------
<S> <C>
2000....................................... $ 271,679
2001....................................... 235,539
2002....................................... 242,605
2003....................................... 249,883
2004....................................... 213,579
-----------
$ 1,213,285
===========
</TABLE>
Rent expense was $0, $38,317, $26,567 and $106,795 for the years ended
December 31, 1997 and 1998 and for the nine month periods ended September 30,
1998 and 1999, respectively.
10. Related Party Transactions
During 1996 and 1997, two stockholders loaned $35,236 and $53,319,
respectively, to assist the Company in paying its obligations. The Company
repaid $10,000 of the loan during 1996 and $53,919 during 1997. At December 31,
1997, the outstanding loan balance of $24,636 was forgiven by the stockholders
and recorded as additional paid-in capital by the Company.
During 1998 and for the nine months ended September 30, 1999, the Company
incurred $84,000 and $63,000, respectively, in contractor expenses from a
company in which a shareholder of the Company is also the President of the
company that provided the services. At December 31, 1998, an accounts payable
balance of $3,500 was outstanding to this entity.
F-18
<PAGE>
Also in 1998 and for the nine months ended September 30, 1999, the Company
incurred $18,000 and $202,644, respectively, in consulting expenses from a
company in which a shareholder of the Company is also the President of the
company that provided the services. In the third quarter of 1999, the Company
paid $150,000 to terminate the consulting agreement.
11. Basic and Diluted Loss per Common Share:
The Company implemented SFAS No. 128, Earnings Per Share, in 1998, which
requires certain disclosures relating to the calculation of earnings per common
share. The following is a reconciliation of the numerators and denominators of
the basic and diluted loss per common share computations.
Basic and diluted net loss per common share:
<TABLE>
<CAPTION>
For the period
August 9, 1996 Nine months
(date of inception) Year ended December 31, Ended September 30,
to December 31, ------------------------- --------------------------
1996 1997 1998 1998 1999
------------------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Net loss available to
common stockholders.... $(35,073) $ (479,100) $ (2,104,243) $(1,452,477) $(15,117,618)
======== =========== ============ =========== =============
Weighted-average shares
of common stock shares
outstanding............ 798,220 2,530,228 3,275,000 3,274,999 3,296,181
======== =========== ============ =========== =============
Basic and diluted net
loss per common share.. $ (0.04) $ (0.19) $ (0.64) $ (0.44) $ (4.59)
======== =========== ============ =========== =============
</TABLE>
For the year ended December 31, 1997, 1,000,000 shares of preferred stock,
which are convertible into 1,250,000 shares of common stock, are not included
in the computation of diluted earnings per share as a result of their
antidilutive effect. For the year ended December 31, 1998 and for the nine
months ended September 30, 1999, options to purchase 453,375 and 1,700,374
shares of common stock at $0.80 per share and weighted average exercise price
of $2.11 per share, respectively, and 2,000,000 and 9,665,240 shares of
preferred stock, respectively, which are convertible into 2,500,000 and
12,081,549 shares of common stock, respectively, are not included in the
computation of diluted earnings per share as a result of their antidilutive
effect.
12. Commitments
During the nine month period ended September 30, 1999, the Company entered
into various agreements for future advertising which aggregated approximately
$24.1 million. As of September 30, 1999, the Company has prepaid approximately
$6,800,000 in connection with these agreements. The term of the agreements
range from one to nine months.
13. Subsequent Events (unaudited)
During the period from October 1, 1999 to October 29, 1999, the Company
granted 182,500 options under the 1998 Employee Stock Option Plan. The Company
has estimated the fair value of the underlying common stock on the date of the
option grants was in excess of the exercise price of the options. As a result,
the Company recorded additional deferred compensation of approximately $1
million for the period. This amount will be recorded as a reduction to
stockholders' equity (deficit) and is being amortized as a charge to operations
over the vesting period of the stock options.
F-19
<PAGE>
Back Cover
Title: Free Sanity in a Crazy World.
At the bottom is the Lifeminders.com logo. Below that is a list of services
offered at Lifeminders.com: Family* Entertainment* Shopping* Home* Personal
Events* Pet* Health* Auto* Personal Finance* Travel
At the very bottom is the lifeminders web address:
www.lifeminders.com
<PAGE>
4,200,000 Shares
[LOGO OF LIFEMINDERS APPEARS HERE]
Common Stock
----------------
PROSPECTUS
----------------
HAMBRECHT & QUIST
THOMAS WEISEL PARTNERS LLC
PAINEWEBBER INCORPORATED
WIT CAPITAL CORPORATION
----------------
, 1999
----------------
You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is current only as of
the date of this prospectus.
Until , 1999 (25 days after the date of this prospectus), all dealers
that buy, sell or trade in the securities in this offering, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
<PAGE>
Part II. Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution.
We estimate that our expenses to be paid in connection with the offering
(other than underwriting discounts, commissions and reasonable expense
allowances) will be as follows:
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 18,799
NASD filing fee............................................... $ 7,262
Nasdaq National Market listing fee............................ $ 95,000
Printing and engraving expenses............................... $ 400,000
Accounting fees and expenses.................................. $ 350,000
Legal fees and expenses....................................... $ 300,000
Miscellaneous................................................. $ 28,939
----------
Total....................................................... $1,200,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers.
LifeMinders.com organized under the laws of the State of Delaware. Our
Restated Certificate of Incorporation provides that we shall indemnify our
current and former directors and officers, and may indemnify our current and
former employees and agents, against any and all liabilities and expenses
incurred in connection with their services in those capacities to the maximum
extent permitted by Delaware law.
The Delaware General Corporation Law (the "DGCL") provides that a Delaware
corporation has the power generally to indemnify its current and former
directors, officers, employees and other agents (each, a "Corporate Agent")
against expenses and liabilities (including amounts paid in settlement) in
connection with any proceeding involving such person by reason of his being a
Corporate Agent, other than a proceeding by or in the right of the corporation,
if such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to
any criminal proceeding, such person had no reasonable cause to believe his
conduct was unlawful.
In the case of an action brought by or in the right of the corporation,
indemnification of a Corporate Agent is permitted if such person acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. However, no indemnification is permitted in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that
the court in which such proceeding was brought shall determine upon application
that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
such indemnification.
To the extent that a Corporate Agent has been successful on the merits or
otherwise in the defense of such proceeding, whether or not by or in the right
of the corporation, or in the defense of any claim, issue or matter therein,
the corporation is required to indemnify such person for expenses in connection
therewith. Under the DGCL, the corporation may advance expenses incurred by a
Corporate Agent in connection with a proceeding, provided that the Corporate
Agent undertakes to repay such amount if it shall ultimately be determined that
such person is not entitled to indemnification. Our Restated Certificate of
Incorporation requires us to advance expenses to any person entitled to
indemnification, provided that such person undertakes to repay the advancement
if it is determined in a final judicial decision from which there is no appeal
that such person is not entitled to indemnification.
The power to indemnify and advance the expenses under the DGCL does not
exclude other rights to which a Corporate Agent may be entitled to under the
certificate of incorporation, by laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Our Restated Certificate of Incorporation permits us to secure insurance on
behalf of our directors, officers, employees and agents for any expense,
liability or loss incurred in such capacities, regardless of
II-1
<PAGE>
whether the Restated Certificate of Incorporation or Delaware law would permit
indemnification against the expense, liability or loss.
The purpose of these provisions is to assist us in retaining qualified
individuals to serve as our directors, officers, employees and agents by
limiting their exposure to personal liability for serving as in these
capacities.
Item 15. Recent Sales of Unregistered Securities.
During the past three years, the following securities were issued by
LifeMinders.com without registration under the Securities Act:
(1) On June 15, June 19 and June 30, 1997, respectively, we issued and sold
28,326 shares of common stock to H. Joseph Engle for $25,000, 519,980 shares of
common stock to Hugh Ronalds for services rendered, and 130,572 shares of
common stock to John Chapin for $10,227.
(2) On July 31, 1997, we issued and sold 130,572 shares of common stock to
John Chapin for $10,227, and on August 31, 1997, we issued and sold 58,531
shares of common stock to John Chapin for $4,546.
(3) On November 12, 1997, we issued and sold 321,250 shares of common stock
to Targeted Marketing Systems, Inc. for $200,000 and 62,500 shares of common
stock to Frans Kok for $100.
(4) On June 17, 1998, we issued and sold 62,500 shares of common stock to
Frans Kok for $1.
(5) On June 28, 1999, we issued and sold 9,375 shares of common stock to
George Pickering for $7,500.
(6) On July 15 and July 16, 1999, respectively, we issued and sold 46,250
shares of common stock to Harry Layman for $37,000 and 18,750 shares of common
stock to Frank Lyman for $15,000.
(7) On November 12, 1997, we issued and sold 1,000,000 shares of Series A
Convertible Preferred Stock to five (5) accredited investors at a purchase
price of $1.00 per share, for an aggregate purchase price of $1,000,000.
Additionally, we issued options to these investors to purchase up to 1,000,000
shares of Series B Convertible Preferred Stock at an exercise price of $1.00
per share, all of which options were exercised on June 17, 1998, for an
aggregate exercise price of $1,000,000. Our outstanding Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock shall automatically
convert into common stock upon consummation of the offering.
(8) On January 29, 1999, we issued and sold 2,620,373 shares of Series C
Convertible Preferred Stock to five (5) accredited investors at a purchase
price of $1.5265 per share, for an aggregate purchase price of $4,000,000. Our
outstanding Series C Convertible Preferred Stock shall automatically convert
into common stock upon consummation of the offering.
(9) On May 28, 1999, we issued and sold 2,252,874 shares of Series D
Convertible Preferred Stock to eight (8) accredited investors at a purchase
price of $4.7051 per share, for an aggregate purchase price of $10,600,000. Our
outstanding Series D Convertible Preferred Stock shall automatically convert
into common stock upon consummation of the offering.
(10) On September 23, 1999, we issued and sold 2,791,993 shares of Series E
Convertible Preferred Stock to 31 accredited investors at a purchase price of
$8.0868 per share, for an aggregate purchase price of $22,578,289. Our
outstanding Series E Convertible Preferred Stock shall automatically convert
into common stock upon consummation of the offering.
As of September 30, 1999, options to purchase 2,920,070 shares of common
stock were available and reserved for issuance under the 1998 Stock Option Plan
and options to purchase 1,700,374 shares of common stock had been granted under
the plan and were outstanding. A total of 74,375 shares of common stock have
been issued pursuant to the exercise of options under the stock option plan,
all of which shares were exempt from registration under Rule 701 promulgated
under the Securities Act as an issuance of securities pursuant to a
compensatory benefit plan. The exercise price of the options for our common
stock ranges from $0.80 to $6.47 per share.
II-2
<PAGE>
There were no underwriters employed in connection with any of the
transactions set forth in Item 15. However, in connection with the transactions
described in Item 15(7), Frans Kok received a cash fee equal to $30,000 and in
connection with the transaction described in Item 15(10), Thomas Weisel
Partners LLC received a cash fee equal to 10% of the proceeds of the offering.
The transactions described in Items 15(1) through (4) were exempt from
registration under Section 4(2) of the Securities Act as transactions by an
issuer not involving a public offering. The transactions described in Items
15(5) and (6) were exempt from registration under rule 701 promulgated under
the Securities Act as transactions pursuant to a compensatory benefit plan. The
transactions described in Item 15(7) were exempt from registration under Rule
505 of Regulation D promulgated under the Securities Act as an issuance and
sale of securities to accredited investors. The issuance and sale of the
securities described in Items 15(8) through (10) were exempt from registration
under Rule 506 of Regulation D promulgated under the Securities Act as an
issuance and sale of securities to accredited investors.
The recipients of all of the securities described in Item 15 represented
their intention to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates and other instruments issued in
such transactions. All recipients either received or had access to, through
employment or other relationships, adequate information about us.
Item 16. Exhibits.
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
------- ----------- --------
<S> <C> <C>
1.1 Form of Underwriting Agreement between the Company and
Hambrecht & Quist, Thomas Weisel Partners LLC, PaineWebber
Incorporated and Wit Capital Corporation.
3.1 Restated Certificate of Incorporation.*
3.2 Bylaws.*
3.3 Second Amended and Restated Registration Rights Agreement,
dated as of September 23, 1999, among the Company and the
Series E investors.
4.1 Form of common stock certificate.**
5.1 Opinion of Venable, Baetjer and Howard, LLP regarding
legality.**
10.1 E-Commerce Agreement between the Company and Lycos, Inc.
dated as of August 25, 1999. (Portions of this exhibit have
been omitted pursuant to a request for confidential
treatment and have been filed separately with the
Commission)+
10.2 Office Building Lease Agreement between the Company and
Sovran Limited Company dated June 11, 1999.
10.3 Trustee License Agreement between the Company and Trust
Universal Standards in Electronic Transactions dated March
12, 1999.
10.4 Starter Kit Loan and Security Agreement, as amended,
between the Company and Imperial Bank dated November 10,
1998.
10.5 Employment Agreement between the Company and Stephen R.
Chapin, Jr. dated November 12, 1997.
10.6 Employment Agreement between the Company and John Chapin
dated November 1, 1997.
10.7 Release and Settlement dated July 15, 1999 among the
Company, Frans Kok and Johan Hekeelar, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
------- ----------- --------
<S> <C> <C>
10.8 Consulting Agreement between the Company and Lordhill
Company dated June 1, 1997, as amended on November 18,
1997, as amended on March 27, 1998, and as amended on
January 29, 1999.
10.9 The Company's 1998 Stock Option Plan.
10.10 Form of Lock-up Agreement between the Company and Hambrecht
& Quist, Thomas Weisel Partners LLC, PaineWebber
Incorporated and Wit Capital Corporation.
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.2 Consent of Venable, Baetjer and Howard, LLP (included in
Exhibit 5.1).**
24 Power of Attorney (filed as part of signature page).*
27 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment requested for portions of this document.
Item 17. Undertakings.
(a) The undersigned LifeMinders.com hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment to the registration statement) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement). Notwithstanding the
forgoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in "Calculation
of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to the information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial
bona fide offering of those securities.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in the denominations and registered in the names as required by
the underwriter to permit prompt delivery to each purchaser.
(c) 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 foregoing provisions, or
II-4
<PAGE>
otherwise, the Registrant has been advised that in the opinion of the SEC this
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against these 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 a
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 the indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of the issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, 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 the securities at that time shall be
deemed to be the initial bona fide offering of the securities.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized in Herndon,
Virginia on the 29th day of October 1999.
LIFEMINDERS.COM, INC.
/s/ Stephen R. Chapin, Jr.
By: _________________________________
Stephen R. Chapin, Jr.
President and Chief Executive
Officer
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen R. Chapin, Jr. Chairman of the Board October 29, 1999
______________________________________ President and Chief
Stephen R. Chapin, Jr. Executive Officer
(Principal Executive
Officer)
/s/ Joseph S. Grabias Vice President and Chief October 29, 1999
______________________________________ Financial Officer
Joseph S. Grabias (Principal Financial
Officer)
* Director October 29, 1999
______________________________________
E. Rogers Novak, Jr.
* Director October 29, 1999
______________________________________
B. Gene Riechers
* Director October 29, 1999
______________________________________
Douglas A. Lindgren
* Director October 29, 1999
______________________________________
Philip D. Black
* Director October 29, 1999
______________________________________
Jonathan B. Bulkeley
</TABLE>
/s/ Stephen R. Chapin, Jr.
*By: _______________________
Stephen R. Chapin, Jr.
Attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement between the Company and Hambrecht &
Quist, Thomas Weisel Partners LLC, PaineWebber Incorporated and
Wit Capital Corporation.
3.1 Restated Certificate of Incorporation.*
3.2 Bylaws.*
3.3 Second Amended and Restated Registration Rights Agreement, dated
as of September 23, 1999, among the Company and the Series E
investors.
4.1 Form of common stock certificate.**
5.1 Opinion of Venable, Baetjer and Howard, LLP regarding legality.**
10.1 E-Commerce Agreement between the Company and Lycos, Inc. dated as
of August 25, 1999. (Portions of this exhibit have been omitted
pursuant to a request for confidential treatment and have been
filed separately with the Commission).+
10.2 Office Building Lease Agreement between the Company and Sovran
Limited Company dated June 11, 1999.
10.3 Trustee License Agreement between the Company and Trust Universal
Standards in Electronic Transactions dated March 12, 1999.
10.4 Starter Kit Loan and Security Agreement, as amended, between the
Company and Imperial Bank dated November 10, 1998.
10.5 Employment Agreement between the Company and Stephen R. Chapin,
Jr. dated November 12, 1997.
10.6 Employment Agreement between the Company and John Chapin dated
November 1, 1997.
10.7 Release and Settlement dated July 15, 1999 among the Company,
Frans Kok and Johan Hekelaar, Inc.
10.8 Consulting Agreement between the Company and Lordhill Company
dated June 1, 1997 as amended on November 18, 1997, as amended on
March 27, 1999, and as amended on January 29, 1999.
10.9 The Company's 1998 Stock Option Plan.
10.10 Form of Lock-up Agreement between the Company and Hambrecht &
Quist, Thomas Weisel Partners LLC, PaineWebber Incorporated and
Wit Capital Corporation.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Venable, Baetjer and Howard, LLP (included in Exhibit
5.1).**
24 Power of Attorney (filed as part of signature page).*
27 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment requested for portions of this document.
<PAGE>
EXHIBIT 1.1
LIFEMINDERS.COM, INC.
_______________ Shares/1/
Common Stock
UNDERWRITING AGREEMENT
----------------------
__________ ___, 1999
HAMBRECHT & QUIST LLC
THOMAS WEISEL PARTNERS, LLC
PAINEWEBBER INCORPORATED
WIT CAPITAL CORPORATION
As Representatives of the Several Underwriters
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
LifeMinders.com, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell ______________ shares of its authorized but unissued Common
Stock, $0.01 par value (the "Firm Shares"). In addition, the Company proposes
to grant to the Underwriters (as hereinafter defined) an option to purchase up
to ________ additional shares of Common Stock (the "Option Shares"). The Firm
Shares and, if and to the extent such option is exercised, the Option Shares are
collectively referred to herein as the "Shares." The Common Stock is more fully
described in the Registration Statement and the Prospectus hereinafter
mentioned.
The Company hereby confirms the agreements made with respect to the
purchase of the Shares by the several underwriters, for whom you are acting,
named in Schedule I hereto (collectively, the "Underwriters," which term shall
also include any underwriter purchasing Shares pursuant to Section 3(b) hereof).
You represent and warrant that you have been authorized by each of the other
Underwriters to enter into this Agreement on its behalf and to act for it in the
manner herein provided.
1. Registration Statement. The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1 (No.
333-_______), including the related preliminary prospectus, for the registration
of the Shares under the Securities Act of 1933, as amended (the "Securities
Act"). Copies of such registration statement and of each amendment thereto, if
any, including the related preliminary prospectus (meeting the requirements of
Rule 430A of the rules and regulations of the Commission) heretofore filed by
the Company with the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the
__________________
/1/ Plus an option to purchase from the Company up to ___ additional shares to
cover over-allotments.
<PAGE>
rules and regulations of the Commission with respect to the Shares (a "Rule
462(b) registration statement"), and, in the event of any amendment thereto
after the effective date of such registration statement (the "Effective Date"),
shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended (including any Rule 462(b) registration
statement). The term Prospectus as used in this Agreement shall mean the
prospectus relating to the Shares first filed with the Commission pursuant to
Rule 424(b) and Rule 430A (or if no such filing is required, as included in the
Registration Statement) and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the filing
with the Commission of such supplement or the effectiveness of such amendment)
such prospectus as so supplemented or amended and, if applicable, shall also
mean an electronic Prospectus as defined in Section 9(___) hereof. The term
Preliminary Prospectus as used in this Agreement shall mean each preliminary
prospectus included in such registration statement prior to the time it becomes
effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.
2. Representations and Warranties of the Company.
The Company hereby represents and warrants to each of the Underwriters as
follows:
(a) Compliance with Registration Requirements. Each Preliminary
-----------------------------------------
Prospectus and the Prospectus when filed complied in all material respect with
the Securities Act and, if filed by electronic transmission pursuant to EDGAR
(except as may be permitted by Regulation S-T under the Securities Act), was
identical to the copy thereof delivered to the Underwriters for use in
connection with the offer and sale of the Shares. Each of the Registration
Statement, any Rule 462(b) Registration Statement and any post-effective
amendment thereto, at the time it became effective and at all subsequent times,
complied and will comply in all material respects with the Securities Act and
did not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, as amended or supplemented,
as of its date and at all subsequent times, did not and will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The representations and warranties set
forth in the two immediately preceding sentences do not apply to statements in
or omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
the Representative expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters. The Company has
--------------------------------------------
delivered to the Representatives four (4) complete conformed copy of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and each of the Preliminary Prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
-2-
<PAGE>
(c) Distribution of Offering Material By the Company. The Company has
------------------------------------------------
not distributed and will not distribute, prior to the latest Closing Date (as
defined in Section 5 below) and the completion of the Underwriters' distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than a Preliminary Prospectus, the Prospectus or the
Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Shares To Be Sold by the Company. The Shares
-----------------------------------------------------
to be purchased by the Underwriters from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and delivered
by the Company pursuant to this Agreement, will be validly issued, fully paid
and nonassessable.
(f) Authorization of the Shares to be sold by the Selling Shareholders.
------------------------------------------------------------------
The Shares to be purchased by the Underwriters from the Selling Shareholders,
were validly issued, fully paid and nonassessable.
(g) No Applicable Registration or Other Similar Rights. There are no
--------------------------------------------------
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(h) No Material Adverse Change. Subsequent to the respective dates as
--------------------------
of which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business of the Company, considered as
one entity (any such change or effect, where the context so requires, is called
a "Material Adverse Change" or a "Material Adverse Effect"); (ii) the Company
has not incurred any material liability or obligation, indirect, direct or
contingent, not in the ordinary course of business nor entered into any material
transaction or agreement not in the ordinary course of business; and (iii) there
has been no dividend or distribution of any kind declared, paid or made by the
Company on any class of capital stock or repurchase or redemption by the Company
of any class of capital stock.
(i) Independent Accountants. PriceWaterhouseCoopers LLC, who have
-----------------------
expressed their opinion with respect to the financial statements of the Company,
including the related notes thereto, filed with the Commission as a part of the
Registration Statement and included in the Prospectus (the "Financial
Statements") is an independent public or certified public accountant as required
by the Securities Act.
(j) Preparation of the Financial Statements. The Financial Statements
---------------------------------------
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the financial position of the Company as of and
at the dates indicated and the results of their operations and cash flows for
the periods specified. Such Financial Statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
-3-
<PAGE>
related notes thereto. No other financial statements are required to be included
in the Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Selected Financial Data",
"Selected Financial Data" and "Capitalization" fairly present the information
set forth therein on a basis consistent with that of the audited financial
statements contained in the Registration Statement. The pro forma financial
statements of the Company and the related notes thereto included under the
caption "Prospectus Summary Summary Pro Forma consolidated Selected Financial
Data", "Pro Forma Consolidated Selected Financial Date" and elsewhere in the
Prospectus and in the Registration Statement present fairly the information
contained therein, have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements and have been
properly presented on the bases describes therein, and the assumptions used in
the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to
therein. No other pro forma financial information is required to be included in
the Registration Statement Pursuant to Regulation S-X.
(k) Company's Accounting System. The Company maintains a system of
---------------------------
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.
(l) Subsidiaries of the Company. The Company does not own or control,
---------------------------
directly or indirectly, any corporation, association or other entity.
(m) Incorporation and Good Standing of the Company. 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 full corporate power and authority
to own its properties and conduct its business as described in the prospectus,
and is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such qualification.
(n) Capitalization and Other Capital Stock Matters. The authorized,
----------------------------------------------
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Stock (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding Common Stock were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company other than those accurately described in the Prospectus. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in
the Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
-4-
<PAGE>
(o) Stock Exchange Listing. The Shares have been approved for listing
----------------------
on the Nasdaq National Market, subject only to official notice of issuance.
(p) No Consents, Approvals or Authorizations Required. No consent,
-------------------------------------------------
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, Inc. and (iii) by the federal
and provincial laws of Canada.
(q) Non-Contravention of Existing Instruments Agreements. Neither the
----------------------------------------------------
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company pursuant to, (i) the
charter or by-laws of the Company, (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the Company is
a party or bound or to which its or their property is subject or (iii) any
statute, law, rule, regulation, judgment, order or decree applicable to the
Company of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or any of its
properties.
(r) No Defaults or Violations. The Company is not in violation or
-------------------------
default of (i) any provision of its charter or by-laws, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which it is a party or bound or to which its property is subject or (iii) any
statute, law, rule, regulation, judgment, order or decree of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or such subsidiary or any of its
properties, as applicable, except any such violation or default which would not,
singly or in the aggregate, result in a Material Adverse Change except as
otherwise disclosed in the Prospectus.
(s) No Actions, Suits or Proceedings. No action, suit or proceeding by
--------------------------------
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or its property is pending or, to the best knowledge of
the Company, threatened that (i) could reasonably be expected to have a Material
Adverse Effect on the performance of this Agreement or the consummation of any
of the transactions contemplated hereby or (ii) could reasonably be expected to
result in a Material Adverse Effect.
(t) All Necessary Permits, Etc. The Company possesses such valid and
---------------------------
current certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct their
respective businesses, and has not received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could result in a
Material Adverse Change.
(u) Title to Properties. The Company has good and marketable title to
-------------------
all the properties and assets reflected as owned in the Financial Statements
referred to above, in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, claims and other defects, except such
as do not materially and adversely affect the value of such
-5-
<PAGE>
property and do not materially interfere with the use made or proposed to be
made of such property by the Company. The real property, improvements, equipment
and personal property held under lease by the Company are held under valid and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company.
(v) Tax Law Compliance. The Company has filed all necessary federal,
------------------
state and foreign income and franchise tax returns and has paid all taxes
required to be paid by it and, if due and payable, any related or similar
assessment, fine or penalty levied against it. The Company has made adequate
charges, accruals and reserves in the applicable Financial Statements referred
to above in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company has not been
finally determined. The Company is not aware of any tax deficiency that has been
or might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(w) Intellectual Property Rights. The Company owns or possesses
----------------------------
adequate rights to use all patents, patent rights or licenses, inventions,
collaborative research agreements, trade secrets, know-how, trademarks, service
marks, trade names and copyrights which are necessary to conduct its businesses
as described in the Registration Statement and Prospectus; the expiration of any
patents, patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not result in a Material Adverse Change that is not otherwise
disclosed in the Prospectus; the Company has not received any notice of, and has
no knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights; and the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, might have a Material
Adverse Change. There is no claim being made against the Company regarding
patents, patent rights or licenses, inventions, collaborative research, trade
secrets, know-how, trademarks, service marks, trade names or copyrights. The
Company's business as now or proposed to be conducted as described in the
Prospectus does not infringe or conflict with any right or patent of any third
party, or any discovery, invention, product or process which is the subject of a
patent application filed by any third party, known to the Company, which such
infringement or conflict is reasonably likely to result in a Material Adverse
Change.
(x) Year 2000 Preparedness. There are no issues related to the
----------------------
Company's preparedness for the Year 2000 that (i) are of a character required to
be described or referred to in the Registration Statement or by the Securities
Act which have not been accurately described in the Registration Statement or
Prospectus or (ii) might reasonably be expected to result in any Material
Adverse Change or that might materially affect their properties, assets or
rights. All internal computer systems and each Constituent Component (as defined
below) of those systems and all computer-related products and each Constituent
Component (as defined below) of those products of the Company fully comply with
Year 2000 Qualification Requirements. "Year 2000 Qualifications Requirements"
means that the internal computer systems and each Constituent Component (as
defined below) of those systems and all computer-related products and each
Constituent Component (as defined below) of those products of the Company (i)
have been reviewed to confirm that they store, process (including sorting and
performing mathematical operations, calculations and computations), input and
output data containing date and information correctly regardless of whether the
date contains dates and times before, on or after January 1, 2000, (ii) have
been designated to ensure date and time entry recognition and
-6-
<PAGE>
calculations, and date data interface values that reflect the century, (iii)
accurately manage and manipulate data involving dates and times, including
single century formulas and multi-century formulas, and will not cause an
abnormal ending scenario within the application or generate incorrect values or
invalid results involving such dates, (iv) accurately process any date rollover,
and (v) accept and respond to two-digit year date input in a manner that
resolves any ambiguities as to the century. "Constituent Component" means all
software (including operating systems, programs, packages and utilities),
firmware, hardware, networking components, and peripherals provided as part of
the configuration. The Company has inquired of material vendors as to their
preparedness for the Year 2000 and has disclosed in the Registration Statement
or Prospectus any issues that might reasonably be expected to result in any
Material Adverse Change.
(y) No Transfer Taxes or Other Fees. There are no transfer taxes or
-------------------------------
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares.
(z) Company Not an "Investment Company". The Company has been advised
-----------------------------------
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(aa) Insurance. The Company is insured by recognized, financially sound
---------
and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate and
customary for their businesses including, but not limited to, policies covering
real and personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and earthquakes, general liability and Directors
and Officers liability. The Company has no reason to believe that it will not be
able (i) to renew its existing insurance coverage as and when such policies
expire or (ii) to obtain comparable coverage from similar institutions as may be
necessary or appropriate to conduct its business as now conducted and at a cost
that would not result in a Material Adverse Change. The Company has not been
denied any insurance coverage which it has sought or for which it has applied.
(bb) Labor Matters. To the best of the Company's knowledge, no labor
-------------
disturbance by the employees of the Company exists or is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, that might be expected to result in
a Material Adverse Change.
(cc) No Price Stabilization or Manipulation. The Company has not taken
--------------------------------------
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(dd) Lock-Up Agreements. Each officer and director of the Company and
------------------
each beneficial owner of the outstanding issued share capital of the Company has
signed an agreement substantially in the form attached hereto as Exhibit A
---------
(the "Lock-up Agreements"). The Company has provided to counsel for the
Underwriters a complete and accurate list of all securityholders of the Company
and the number and type of securities held by each securityholder. The Company
has provided to counsel for the Underwriters true, accurate and
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complete copies of all of the Lock-up Agreements presently in effect or effected
hereby. The Company hereby represents and warrants that it will not release any
of its officers, directors or other stockholders from any Lock-up Agreements
currently existing or hereafter effected without the prior written consent of
Hambrecht & Quist LLC.
(ee) Related Party Transactions. There are no business relationships or
--------------------------
related-party transactions involving the Company or any other person required to
be described in the Prospectus which have not been described as required.
(ff) Certificates. 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.
3. Purchase of the Shares by the Underwriters.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
__________ shares of the Firm Shares to the several Underwriters and each of the
Underwriters agrees to purchase from the Company the respective aggregate number
of shares of Firm Shares set forth opposite its name in Schedule I. The price
at which such shares of Firm Shares shall be sold by the Company and purchased
by the several Underwriters shall be $_____ per share. In making this
Agreement, each Underwriter is contracting severally and not jointly; except as
provided in paragraphs (b) and (c) of this Section 3, the agreement of each
Underwriter is to purchase only the respective number of shares of the Firm
Shares specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Shares agreed to be purchased by such
Underwriter or Underwriters, the Company shall immediately give notice thereof
to you, and the non-defaulting Underwriters shall have the right within 24 hours
after the receipt by you of such notice to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between you and such purchasing Underwriter or Underwriters and upon the terms
herein set forth, all or any part of the shares of the Shares which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-
defaulting Underwriters fail so to make such arrangements with respect to all
such shares and portion, the number of shares of the Shares which each non-
defaulting Underwriter is otherwise obligated to purchase under this Agreement
shall be automatically increased on a pro rata basis to absorb the remaining
shares and portion which the defaulting Underwriter or Underwriters agreed to
purchase; provided, however, that the non-defaulting Underwriters shall not be
obligated to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Shares exceeds 10% of the total number of shares of the Shares which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Shares which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such shares and portion on the terms herein
set forth. In any such case, either you or the Company shall have the right to
postpone the Closing Date determined as provided in Section 5 hereof for not
more than seven business days after the date originally fixed as the Closing
Date pursuant to said Section 5 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
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may be made. If neither the non-defaulting Underwriters nor the Company shall
make arrangements within the 24-hour periods stated above for the purchase of
all the shares of the Shares which the defaulting Underwriter or Underwriters
agreed to purchase hereunder, this Agreement shall be terminated without further
act or deed and without any liability on the part of the Company to any non-
defaulting Underwriter and without any liability on the part of any non-
defaulting Underwriter to the Company. Nothing in this paragraph (b), and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company grants an option to the several Underwriters to purchase, severally and
not jointly, up to __________ shares in the aggregate of the Option Shares from
the Company at the same price per share as the Underwriters shall pay for the
Firm Shares. Said option may be exercised only to cover over-allotments in the
sale of the Firm Shares by the Underwriters and may be exercised in whole or in
part at any time (but not more than once) on or before the thirtieth day after
the date of this Agreement upon written or telegraphic notice by you to the
Company setting forth the aggregate number of shares of the Option Shares as to
which the several Underwriters are exercising the option. Delivery of
certificates for the shares of Option Shares, and payment therefor, shall be
made as provided in Section 5 hereof. The number of shares of the Option Shares
to be purchased by each Underwriter shall be the same percentage of the total
number of shares of the Option Shares to be purchased by the several
Underwriters as such Underwriter is purchasing of the Firm Shares, as adjusted
by you in such manner as you deem advisable to avoid fractional shares.
4. Offering by Underwriters.
(a) The terms of the initial public offering by the Underwriters of the
Shares to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) The information set forth under "Underwriting" in the Registration
Statement, any Preliminary Prospectus and the Prospectus relating to the Shares
filed by the Company (insofar as such information relates to the Underwriters)
constitutes the only information furnished by the Underwriters to the Company
for inclusion in the Registration Statement, any Preliminary Prospectus, and the
Prospectus, and you on behalf of the respective Underwriters represent and
warrant to the Company that the statements made therein are correct.
5. Delivery of and Payment for the Shares.
(a) Delivery of the Firm Shares and the Option Shares (if the option
granted by Section 3(c) hereof shall have been exercised not later than 10:00
a.m., Washington, D.C. time, on the date two business days preceding the Closing
Date), and payment therefor, shall be made at the office of Brobeck, Phleger &
Harrison, LLP, 701 Pennsylvania Avenue, N.W., Suite 220, Washington, D.C. 20004,
at 10:00 a.m., Washington, D.C. time, on the fourth business day after the date
of this Agreement, or at such time on such other day, not later than seven full
business days after such fourth business day, as shall be agreed upon in writing
by the Company and you. The date and hour of such delivery and payment (which
may be postponed as provided in Section 3(b) hereof) are herein called the
Closing Date.
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<PAGE>
(b) If the option granted by Section 3(c) hereof shall be exercised
after 7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of the Option Shares, and payment therefor, shall be made
at the office of Brobeck, Phleger & Harrison, LLP, 701 Pennsylvania Avenue,
N.W., Suite 220, Washington, D.C. 20004, at 7:00 a.m., San Francisco time, on
the third business day after the exercise of such option.
(c) Payment for the Shares purchased from the Company shall be made to
the Company or its order by wire transfer in same day funds. Such payment shall
be made upon delivery of the Shares to you for the respective accounts of the
several Underwriters against receipt therefor signed by you. The Shares to be
delivered to you shall be registered in such name or names and shall be in such
denominations as you may request at least one business day before the Closing
Date, in the case of Firm Shares, and at least one business day prior to the
purchase thereof, in the case of the Option Shares. Such Shares will be made
available to the Underwriters for inspection, checking and packaging at the
offices of Lewco Securities Corporation, 2 Broadway, New York, New York 10004 on
the business day prior to the Closing Date or, in the case of the Option Shares,
by 3:00 p.m., New York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose wire transfer shall not have
been received by you on the Closing Date or any later date on which Option
Shares are purchased for the account of such Underwriter. Any such payment by
you shall not relieve such Underwriter from any of its obligations hereunder.
6. Further Agreements of the Company. The Company covenants and agrees as
follows:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A and
(ii) not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the event of
(i) the request by the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company will
make every reasonable effort to prevent the issuance of such a stop order and,
if such an order shall at any time be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you
a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each post-
effective amendment, if any, to the Registration Statement (together with, in
each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of
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<PAGE>
additional conformed copies of each of the foregoing (but without exhibits) so
that one copy of each may be distributed to each Underwriter, (ii) as promptly
as possible deliver to you and send to the several Underwriters, at such office
or offices as you may designate, as many copies of the Prospectus as you may
reasonably request, and (iii) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an Underwriter or
dealer, likewise send to the Underwriters as many additional copies of the
Prospectus and as many copies of any supplement to the Prospectus and of any
amended prospectus, filed by the Company with the Commission, as you may
reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Shares,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so
supplemented or amended will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the initial public
offering of the Shares by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Shares may be sold by the
several Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Shares in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Shares for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will, from time
to time, prepare and file such statements, reports, and other documents as are
or may be required to continue such qualifications in effect for so long a
period as you may reasonably request for distribution of the Shares.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of
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all periodic and special reports furnished to stockholders of the Company and of
all information, documents and reports filed with the Commission .
(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders an earnings statement in
accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc. (the "NASD")
of the Registration Statement, any Preliminary Prospectus and the Prospectus,
(ii) the furnishing to the Underwriters of copies of any Preliminary Prospectus
and of the several documents required by paragraph (c) of this Section 6 to be
so furnished, (iii) the printing of this Agreement and related documents
delivered to the Underwriters, (iv) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph (d) of
this Section 6, (v) the furnishing to you and the Underwriters of the reports
and information referred to in paragraph (g) of this Section 6 and (vi) the
printing and issuance of stock certificates, including the transfer agent's
fees.
(j) The Company agrees to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including counsel
fees and disbursements and cost of printing memoranda for the Underwriters) paid
by or for the account of the Underwriters or their counsel in qualifying the
Shares under state securities or blue sky laws and in the review of the offering
by the NASD.
(k) The Company hereby agrees that, without the prior written consent of
Hambrecht & Quist LLC on behalf of the Underwriters, the Company will not, for a
period of 180 days following the commencement of the public offering of the
Shares by the Underwriters, directly or indirectly, (i) sell, offer, contract to
sell, make any short sale, pledge, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any rights to
purchase or acquire Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences or
ownership of Common Stock, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Shares to be sold to the Underwriters pursuant to this Agreement, (B) shares
of Common Stock issued by the Company upon the exercise of options granted under
the stock option plans of the Company (the "Option Plans") or upon the exercise
of warrants outstanding as of the date hereof, all as described in footnote
(____) to the table under the caption "capitalization" in the Preliminary
Prospectus, and (C) options to purchase Common Stock granted under the Option
Plans.
(l) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Shares has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement,
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<PAGE>
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
(m) The Company is familiar with the Investment Company Act of 1940, as
amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person (including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the common law or otherwise, and the Company agrees to reimburse each
such Underwriter and controlling person for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement), or 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, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was made in
reliance upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of any Underwriter
for use in any Preliminary Prospectus or the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto and (2) the
indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Shares which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 6 hereof. The indemnity agreements of
the Company contained in this paragraph (a) and the representations and
warranties of the Company contained in Section 2 hereof shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any indemnified party and shall survive the delivery of and payment
for the Shares.
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(b) Each Underwriter severally, and not jointly, agrees to indemnify
and hold harmless the Company, each of its officers who signs the Registration
Statement on his own behalf or pursuant to a power of attorney, each of its
directors, each other Underwriter and each person (including each partner or
officer thereof) who controls the Company or any such other Underwriter within
the meaning of Section 15 of the Securities Act, from and against any and all
losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement) or 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 or (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto) or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished as herein stated or otherwise
furnished in writing to the Company by or on behalf of such indemnifying
Underwriter for use in the Registration Statement or the Prospectus or any such
amendment thereof or supplement thereto. The indemnity agreement of each
Underwriter contained in this paragraph (b) shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Shares.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (the "Notice") of such service
or notification to the party or parties from whom indemnification may be sought
hereunder. No indemnification provided for in such paragraphs shall be
available to any party who shall fail so to give the Notice if the party to whom
such Notice was not given was unaware of the action, suit, investigation,
inquiry or proceeding to which the Notice would have related and was prejudiced
by the failure to give the Notice, but the omission so to notify such
indemnifying party or parties of any such service or notification shall not
relieve such 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 such indemnity agreement. Any indemnifying party shall be entitled at its
own expense to participate in the defense of any action, suit or proceeding
against, or investigation or inquiry of, an indemnified party. Any indemnifying
party shall be entitled, if it so elects within a reasonable time after receipt
of the Notice by giving written notice (the "Notice of Defense") to the
indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties
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reasonably determine that there may be a conflict between the positions of the
indemnifying party or parties and of the indemnified party or parties in
conducting the defense of such action, suit, investigation, inquiry or
proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. If, within a reasonable time after receipt of
the Notice, an indemnifying party gives a Notice of Defense and the counsel
chosen by the indemnifying party or parties is reasonably satisfactory to the
indemnified party or parties, the indemnifying party or parties will not be
liable under paragraphs (a) through (c) of this Section 7 for any legal or other
expenses subsequently incurred by the indemnified party or parties in connection
with the defense of the action, suit, investigation, inquiry or proceeding,
except that (A) the indemnifying party or parties shall bear the legal and other
expenses incurred in connection with the conduct of the defense as referred to
in clause (i) of the proviso to the preceding sentence and (B) the indemnifying
party or parties shall bear such other expenses as it or they have authorized to
be incurred by the indemnified party or parties. If, within a reasonable time
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable
or insufficient to hold harmless an indemnified party under paragraph (a) or (b)
of this Section 7, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in paragraph (a) or (b) of this Section 7 (i) in such proportion as
is appropriate to reflect the relative benefits received by each indemnifying
party from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each indemnifying party in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Underwriters shall be deemed to be in the same respective proportions as the
total net proceeds from the offering of the Shares received by the Company and
the total underwriting discount received by the Underwriters, as set forth in
the table on the cover page of the Prospectus, bear to the aggregate public
offering price of the Shares. 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 each indemnifying party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparing to defend or defending against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this
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paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Shares purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or proceeding.
8. Termination. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company if after the
date of this Agreement trading in the Common Stock shall have been suspended, or
if there shall have occurred (i) the engagement in hostilities or an escalation
of major hostilities by the United States or the declaration of war or a
national emergency by the United States on or after the date hereof, (ii) any
outbreak of hostilities or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
calamity, crisis or change in economic or political conditions in the financial
markets of the United States would, in the Underwriters' reasonable judgment,
make the offering or delivery of the Shares impracticable, (iii) suspension of
trading in securities generally or a material adverse decline in value of
securities generally on the New York Shares Exchange, the American Shares
Exchange, The Nasdaq Shares Market, or limitations on prices (other than
limitations on hours or numbers of days of trading) for securities on either
such exchange or system, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of, or
commencement of any proceeding or investigation by, any court, legislative body,
agency or other governmental authority which in the Underwriters' reasonable
opinion materially and adversely affects or will materially or adversely affect
the business or operations of the Company, (v) declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in the Underwriters' reasonable opinion has a
material adverse effect on the securities markets in the United States. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company to the Underwriters and no liability of the
Underwriters to the Company; provided, however, that in the event of any such
termination the Company agrees to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of the
Company under this Agreement, including all costs and expenses referred to in
paragraphs (i) and (j) of Section 6 hereof.
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<PAGE>
9. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares shall be subject to the
performance by the Company of all its obligations to be performed hereunder at
or prior to the Closing Date or any later date on which Option Shares are to be
purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Shares hereunder
and the validity and form of the certificates representing the Shares, all
corporate proceedings and other legal matters incident to the foregoing, and the
form of the Registration Statement and of the Prospectus (except as to the
financial statements contained therein), shall have been approved at or prior to
the Closing Date by Brobeck, Phleger & Harrison LLP, counsel for the
Underwriters.
(c) You shall have received from Venable, Baetjer & Howard, LLP, counsel
for the Company, an opinion, addressed to the Underwriters and dated the Closing
Date, covering the matters set forth in Annex A hereto, and if Option Shares are
purchased at any date after the Closing Date, additional opinions from each such
counsel, addressed to the Underwriters and dated such later date, confirming
that the statements expressed as of the Closing Date in such opinions remain
valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
(iv) the Company does not have any material contingent obligations which are not
disclosed in the Registration Statement and the Prospectus, (v) there are not
any pending or known threatened legal proceedings to which the Company is a
party or of which property of the Company is the subject which are material and
which are not disclosed in the Registration Statement and the Prospectus, (vi)
there are not any franchises, contracts, leases or other documents which are
required to be filed as exhibits to the Registration Statement which have not
been filed as required, (vii) the representations and warranties of the Company
herein are true and correct in all material respects as of the Closing Date or
any later date on which Option Shares are to be purchased, as the case may be,
and (viii) there has not been any material change in the market for securities
in general or in political, financial or economic conditions from those
reasonably foreseeable as to render it impracticable in your reasonable judgment
to make a public offering of the Shares, or a material adverse change in market
levels for securities in general (or those of companies in particular) or
financial or economic conditions which render it inadvisable to proceed.
-17-
<PAGE>
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and Chief
Executive Officer and the Chief Financial Officer of the Company, stating that
the respective signatories of said certificate have carefully examined the
Registration Statement in the form in which it originally became effective and
the Prospectus contained therein and any supplements or amendments thereto, and
that the statements included in clauses (i) through (vii) of paragraph (d) of
this Section 9 are true and correct.
(f) You shall have received from PricewaterhouseCoopers LLP, a letter
or letters, addressed to the Underwriters and dated the Closing Date and any
later date on which Option Shares are purchased, confirming that they are
independent public accountants with respect to the Company within the meaning of
the Securities Act and the applicable published rules and regulations thereunder
and based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (the "Original Letter"), but
carried out to a date not more than three business days prior to the Closing
Date or such later date on which Option Shares are purchased (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date, as the case may
be, and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter which are necessary to reflect any
changes in the facts described in the Original Letter since the date of the
Original Letter or to reflect the availability of more recent financial
statements, data or information. The letters shall not disclose any change, or
any development involving a prospective change, in or affecting the business or
properties of the Company which, in your sole judgment, makes it impractical or
inadvisable to proceed with the public offering of the Shares or the purchase of
the Option Shares as contemplated by the Prospectus.
(g) You shall have been furnished evidence in usual written or telegraphic
form from the appropriate authorities of the several jurisdictions, or other
evidence satisfactory to you, of the qualification referred to in paragraph (f)
of Section 6 hereof.
(i) Prior to the Closing Date, the Shares to be issued and sold by the
Company shall have been duly authorized for quotation on the Nasdaq National
Market upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have received from all
directors, officers, and beneficial holders of the outstanding Common Stock
agreements, in form reasonably satisfactory to Hambrecht & Quist LLC, stating
that without the prior written consent of Hambrecht & Quist LLC on behalf of the
Underwriters, such person or entity will not, for a period of 180 days following
the commencement of the public offering of the Shares by the Underwriters,
directly or indirectly, (i) sell, offer, contract to sell, make any short sale,
pledge, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any rights to purchase or acquire Common
Stock or (ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences or ownership of Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
(k) The Company shall cause to be prepared and delivered, at its expense,
within one business day from the effective date of this Agreement, to the
Representatives an
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<PAGE>
"electronic Prospectus" to be used by the Underwriters in connection with the
offering and sale of the Shares. As used herein, the term "electronic
Prospectus" means a form of Prospectus, and any amendment or supplement thereto,
that meets each of the following conditions: (i) it shall be encoded in an
electronic format, satisfactory to the Representatives, that may be transmitted
electronically by the Representatives to offerees and purchasers of the Shares
for at least the Prospectus delivery period; (ii) it shall disclose the same
information as the paper Prospectus and Prospectus filed pursuant to EDGAR,
except to the extent that graphic and image material cannot be disseminated
electronically, in which case such graphic and image material shall be replaced
in the electronic Prospectus with a fair and accurate narrative description or
tabular representation of such material, as appropriate; and (iii) it shall be
in or convertible into a paper format or an electronic format, satisfactory to
the Representatives, that will allow investors to store and have continuously
ready access to the Prospectus at any future time, without charge to investors
(other than any fee charged for subscription to the system as a whole and for
on-line time). Such electronic Prospectus may consist of a Rule 434 preliminary
prospectus, together with the applicable term sheet, provided that it otherwise
satisfies the format and conditions described in the immediately preceding
sentence. The Company hereby confirms that it has included or will include in
the Prospectus filed pursuant to EDGAR or otherwise with the Commission and in
the Registration Statement at the time it was declared effective an undertaking
that, upon receipt of a request by an investor or his or her representative
within the Prospectus delivery period, the Company shall transmit or cause to be
transmitted promptly, without charge, a paper copy of the Prospectus.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Brobeck, Phleger & Harrison LLP, counsel for the
Underwriters, shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all out-
of-pocket expenses (including reasonable fees and disbursements of counsel) that
shall have been incurred by them in connection with the transactions
contemplated hereby.
10. Conditions of the Obligation of the Company. The obligation of the
Company to deliver the Shares shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall
not be fulfilled, this Agreement may be terminated by the Company by giving
notice to you. Any such termination shall be without liability of the Company
to the Underwriters and without liability of the Underwriters to the Company;
provided, however, that in the event of any such termination the Company agrees
to indemnify and hold harmless the Underwriters from all costs or expenses
-19-
<PAGE>
incident to the performance of the obligations of the Company under this
Agreement, including all costs and expenses referred to in paragraphs (i) and
(j) of Section 6 hereof.
11. Reimbursement of Certain Expenses. In addition to its other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
-------- --------
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 7 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions of
said Section 7, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Shares from any of the several Underwriters.
13. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush Street,
San Francisco, California 94104; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office, 1110 Herndon Parkway, Herndon,
Virginia 20170, Attention: Stephen R. Chapin, Jr., President and Chief
Executive Officer. All notices given by telegraph shall be promptly confirmed
by letter.
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 their respective directors or officers, and (c)
delivery and payment for the Shares under this Agreement; provided, however,
-------- -------
that if this Agreement is terminated prior to the Closing Date, the provisions
of paragraphs (k) and (l) of Section 6 hereof shall be of no further force or
effect.
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 California.
Please sign and return to the Company the enclosed duplicates of this
letter, whereupon this letter will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
-20-
<PAGE>
Very truly yours,
LIFEMINDERS.COM, INC.
By
-------------------------------------
Stephen R. Chapin, Jr.
President and Chief Executive Officer
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
THOMAS WEISEL PARTNERS, LLC
PAINEWEBBER INCORPORATED
WIT CAPITAL CORPORATION
By Hambrecht & Quist LLC
By
-----------------------
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
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<PAGE>
SCHEDULE I
UNDERWRITERS
Number of Shares
Underwriters to be Purchased
------------ ---------------
Hambrecht & Quist LLC
Thomas Weisel Partners, LLC
PaineWebber Incorporated
Wit Capital Corporation
---------------
Total
===============
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<PAGE>
ANNEX A
Matters to be Covered in the Opinion of Venable, Baetjer & Howard, LLP
Counsel for the Company
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified as a foreign
corporation and in good standing in each state of the United States of
America in which its ownership or leasing of property requires such
qualification (except where the failure to be so qualified would not have a
material adverse effect on the business, properties, financial condition or
results of operations of the Company, and has full corporate power and
authority to own or lease its properties and conduct its business as
described in the Registration Statement;
(ii) the authorized capital stock of the Company consists of _______
shares of Common Stock, $0.01 par value, of which there are outstanding
_________ shares (including the Firm Shares plus the number of shares of
Option Shares, if any, issued on the date hereof) and ____________ shares
of Preferred Stock, $0.01 par value, of which there are no share
outstanding; proper corporate proceedings have been taken to validly
authorize such authorized capital stock; all of the outstanding shares of
such capital stock (including the Firm Shares and the shares of Option
Shares issued, if any) have been duly and validly issued and are fully paid
and nonassessable; any Option Shares purchased after the Closing Date, when
issued and delivered to and paid for by the Underwriters as provided in the
Underwriting Agreement, will have been duly and validly issued and be fully
paid and nonassessable; and no preemptive rights of, or rights of refusal
in favor of, shareholders exist with respect to the Shares, or the issue
and sale thereof, pursuant to the Certificate of Incorporation or Bylaws of
the Company and, to the knowledge of such counsel, there are no contractual
preemptive rights that have not been waived, rights of first refusal or
rights of co-sale which exist with respect to the Shares being sold by the
Selling Shareholders or with respect to the issue and sale of the Shares;
(iii) the Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus is in effect and no proceedings for
that purpose have been instituted or are pending or contemplated by the
Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Securities Act
and with the rules and regulations of the Commission thereunder;
(v) the information required to be set forth in the Registration
Statement in answer to Items 9, 10 (insofar as it relates to such counsel)
and 11(c) of Form S-1 is to the best of such counsel's knowledge accurately
and adequately set forth therein in all material respects or no response is
required with respect to such Item and the description of the Company's
stock option plan and the options granted and which may be granted
thereunder in the Prospectus accurately and fairly presents the information
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<PAGE>
required to be shown with respect to said plan and options to the extent
required by the Securities Act and the rules and regulations of the
Commission thereunder;
(vi) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion
of such counsel are of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not described and filed as required;
(vii) the Underwriting Agreement has been duly authorized, executed
and delivered by the Company;
(viii) the issue and sale by the Company of the Shares as
contemplated by the Underwriting Agreement will not conflict with, or
result in a breach of, the Certificate of Incorporation or Bylaws of the
Company or any agreement or instrument known to such counsel to which the
Company is a party or any applicable law or regulation, or so far as is
known to such counsel, any order, writ, injunction or decree, of any
jurisdiction, court or governmental instrumentality;
(ix) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights
or such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration Statement;
(x) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated in the Underwriting Agreement, except such as
have been obtained under the Securities Act and such as may be required
under state securities or blue sky laws in connection with the purchase and
distribution of the Shares by the Underwriters; and
(xi) the Shares issued and sold by the Company will been duly
authorized for quotation on the Nasdaq National Market upon official notice
of issuance.
____________________________________
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or of the State of Delaware,
upon opinions of local counsel satisfactory in form and scope to counsel for the
Underwriters. Copies of any opinions so relied upon shall be delivered to the
Representatives and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such local counsel.
In addition to the matters set forth above, counsel rendering the
foregoing opinion shall also include a statement to the effect that nothing has
come to the attention of such counsel that leads them to believe that the
Registration Statement (except as to the financial statements and schedules and
other financial and statistical data contained therein, as to which such counsel
need not express any opinion or belief) at the Effective Date contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
that the Prospectus (except as to the financial statements and schedules and
other financial and statistical data contained or incorporated by
-24-
<PAGE>
reference therein, as to which such counsel need not express any opinion or
belief) as of its date or at the Closing Date (or any later date on which Option
Shares are purchased), contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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<PAGE>
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
dated as of September 23, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS.............................. 1
SECTION 2. REQUIRED REGISTRATION.................... 3
SECTION 3. PIGGYBACK REGISTRATION................... 6
SECTION 4. REGISTRATIONS ON FORM S-3................ 6
SECTION 5. HOLDBACK AGREEMENT....................... 7
SECTION 6. PREPARATION AND FILING................... 7
SECTION 7. EXPENSES................................. 10
SECTION 8. INDEMNIFICATION.......................... 10
SECTION 9. UNDERWRITING AGREEMENT................... 13
SECTION 10. INFORMATION BY HOLDER.................... 13
SECTION 11. EXCHANGE ACT COMPLIANCE.................. 13
SECTION 12. NO CONFLICT OF RIGHTS.................... 13
SECTION 13. TERMINATION.............................. 13
SECTION 14. SUCCESSORS AND ASSIGNS................... 14
SECTION 15. ASSIGNMENT............................... 14
SECTION 16. LEGEND ON CERTIFICATES; NEW CERTIFICATES. 14
SECTION 17. ENTIRE AGREEMENT......................... 15
SECTION 18. NOTICES.................................. 15
SECTION 19. MODIFICATIONS; AMENDMENTS; WAIVERS....... 16
SECTION 20. COUNTERPARTS; FACSIMILE SIGNATURES....... 17
SECTION 21. HEADINGS................................. 17
SECTION 22. GOVERNING LAW............................ 17
<PAGE>
SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as of
September 23, 1999, among LIFEMINDERS.COM, INC., a Delaware corporation (the
"Company"), and the INVESTORS (as herein defined).
The Investors own or have the right to purchase or otherwise acquire
shares of the Common Stock (as hereinafter defined) of the Company. The Company
and the Investors deem it to be in their respective best interests to set forth
their rights in connection with public offerings and sales of the Common Stock
and are entering into this Agreement as a condition to and in connection with
the Series E Purchase Agreement (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the Company and the Investors hereby
agree as follows:
Section 1. Definitions.
---------- ------------
As used in this Agreement, the following terms shall have the
following meanings:
"Board" means the Board of Directors of the Company.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934 or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Investor Rights Agreement" means the Investor Rights Agreement dated
as of November 12, 1997, among the Company and certain of the Investors, as the
same may be amended, supplemented or otherwise modified from time to time.
"Investors" means (i) the persons listed under the caption "Investors"
on Schedule I on the date hereof, (ii) any other person who, with the written
consent of the Company, the Majority of the Series A & B Investors (voting as a
single class), the Majority of the Series C Investors (voting as a separate
class), the Majority of the Series D Investors (voting as a separate class) and
the Majority of the Series E Investors (voting as a separate class), agrees in
writing to become a party to, and be bound by and obligated to comply with the
terms and provisions of, this Agreement and the Stockholders' Agreement and to
be treated as an Investor hereunder and a Stockholder thereunder, and (iii) any
purchaser, assignee or other transferee of any of the foregoing in a purchase,
assignment or other transfer permitted under Section 15 hereof and in which such
purchaser, assignee or other transferee has complied in full with the joinder
requirements set forth in Section 15. Upon the addition of each new Investor as
a party to this Agreement, the Company shall amend Schedule I solely to reflect
the name and address of such new Investor, and the Company shall distribute to
the Investors such amended Schedule I.
<PAGE>
"Majority of the Series A & B Investors" means those Investors which
hold in the aggregate in excess of 50% of the then-outstanding Registrable
Shares held by all of the Investors and which were issued or are issuable upon
the conversion of Series A Preferred or Series B Preferred.
"Majority of the Series C Investors" means those Investors which hold
in the aggregate in excess of 50% of the then-outstanding Registrable Shares
held by all of the Investors and which were issued or are issuable upon the
conversion of Series C Preferred.
"Majority of the Series D Investors" means those Investors which hold
in the aggregate in excess of 50% of the then-outstanding Registrable Shares
held by all of the Investors and which were issued or are issuable upon the
conversion of Series D Preferred.
"Majority of the Series E Investors" means those Investors which hold
in the aggregate in excess of 50% of the then-outstanding Registrable Shares
held by all of the Investors and which were issued or are issuable upon the
conversion of Series E Preferred.
"Other Shares" means at any time those shares of Common Stock which do
not constitute Primary Shares or Registrable Shares.
"Preferred Stock" means the Series A Preferred, the Series B
Preferred, the Series C Preferred, the Series D Preferred and the Series E
Preferred.
"Primary Shares" means at any time the authorized but unissued shares
of Common Stock and shares of Common Stock held by the Company in its treasury.
"Registrable Shares" means at any time, with respect to any Investor,
the shares of Common Stock held by such Investor, or into which shares of
Preferred Stock held by such Investor are convertible, which constitute
Restricted Shares.
"Registration Date" means the date upon which the registration
statement pursuant to which the Company shall have initially registered shares
of Common Stock under the Securities Act for sale to the public shall have been
declared effective.
"Related Documents" means this Agreement, the Series E Purchase
Agreement, the Series D Purchase Agreement, the Series C Purchase Agreement and
the Stockholders' Agreement.
"Restricted Shares" means any shares of Common Stock, any shares of
Common Stock issuable upon the conversion of shares of Preferred Stock and any
other securities which by their terms are exercisable or exchangeable for or
convertible into Common Stock or other securities which are so exercisable or
convertible and any securities received in respect thereof, which are held by
such Investor. As to any particular Restricted Shares, once issued, such
Restricted Shares shall cease to be Restricted Shares when (i) they have been
registered under the Securities Act, the registration statement in connection
therewith has been declared effective and they have been disposed of pursuant to
such effective registration statement, (ii) they have been otherwise transferred
in accordance with the terms and conditions of the Related Documents, as
applicable, and new certificates for them not bearing a restrictive legend and
not
2
<PAGE>
subject to any stop transfer order or other restriction on transfer have
been delivered by the Company in exchange for the Restricted Shares, (iii) they
are eligible to be sold or distributed pursuant to Rule 144 within any
consecutive three month period (including, without limitation, Rule 144(k))
without volume limitations, or (iv) they shall have ceased to be outstanding.
"Rule 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto (such as Rule 144A).
"Securities Act" means the Securities Act of 1933 or any successor
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect from time to time.
"Series A Preferred" means the Series A Convertible Preferred Stock,
$.01 par value, of the Company, held by any Investor.
"Series B Preferred" means the Series B Convertible Preferred Stock,
$.01 par value, of the Company, held by any Investor.
"Series C Preferred" means the Series C Convertible Preferred Stock,
$.01 par value, of the Company, held by any Investor.
"Series C Purchase Agreement" means the Securities Purchase Agreement
dated as of January 29, 1999, among the Company and certain of the Investors, as
amended, supplemented or otherwise modified from time to time.
"Series D Preferred" means the Series D Convertible Preferred Stock,
$.01 par value, of the Company, held by any Investor.
"Series D Purchase Agreement" means the Securities Purchase Agreement
dated as of May 28, 1999, among the Company and certain of the Investors, as
amended, supplemented or otherwise modified from time to time.
"Series E Preferred" means the Series E Convertible Preferred Stock,
$.01 par value, of the Company, held by any Investor.
"Series E Purchase Agreement" means the Securities Purchase Agreement
dated as of the date hereof, among the Company and certain of the Investors, as
amended, supplemented or otherwise modified from time to time.
"Stockholders' Agreement" means the Second Amended and Restated
Stockholders' Agreement dated as of the date hereof among the Company, the
Investors and the other parties thereto (if any), as amended, supplemented or
otherwise modified from time to time.
Section 2. Required Registration.
---------- ----------------------
(a) On or after the earlier of (i) November 12, 2000 and (ii) the
expiration of six months following the Registration Date of a Qualified
Public Offering, if a Majority of
3
<PAGE>
the Series A & B Investors (voting as a single class), a Majority of the
Series C Investors (voting as a separate class), a Majority of the Series D
Investors (voting as a separate class) or a Majority of the Series E
Investors (voting as a separate class) shall in writing state that such
Investors desire to sell Registrable Shares (representing at least 15% of
the Registrable Shares then held by such Investors or any lesser percentage
thereof if the reasonably anticipated aggregate net proceeds to such
Investors of such sale is expected to exceed $15,000,000) in the public
securities markets and request the Company to effect the registration under
the Securities Act of such Registrable Shares, the Company shall:
(i) promptly give written notice of the proposed registration to
all other Investors, who shall have the right, subject to the
applicable terms of this Agreement, to include in such registration
Registrable Shares held by them (exercisable by delivering to the
Company written notice specifying the number of Registrable Shares
requested to be included within 20 days after receipt of such notice of
such registration from the Company); and
(ii) promptly use its best efforts to register under the
Securities Act all of the Registrable Shares that the Investors request
to be registered within 20 days after receipt of such written notice
from the Company.
(b) Notwithstanding anything contained in this Section 2 to the
contrary, the Company shall not be obligated to effect any registration
under the Securities Act except in accordance with the following
provisions:
(i) The Company shall not be obligated to use its best efforts
to file and cause to become effective (i) more than one registration
statement initiated at the request of a Majority of the Series A & B
Investors pursuant to Section 2(a) above on Form S-1 promulgated under
the Securities Act or any successor form thereto, (ii) more than one
registration statement initiated at the request of a Majority of the
Series C Investors pursuant to the Section 2(a) above on Form S-1
promulgated under the Securities Act or any successor form thereto,
(iii) more than one registration statement initiated at the request of
a Majority of the Series D Investors pursuant to Section 2(a) above on
Form S-1 promulgated under the Securities Act or any successor form
thereto, (iv) more than one registration statement initiated at the
request of a Majority of the Series E Investors pursuant to Section
2(a) above on Form S-1 promulgated under the Securities Act or any
successor form thereto, or (v) any registration statement during any
period in which any other registration statement (other than on Form S-
4 or Form S-8 promulgated under the Securities Act or any successor
forms thereto) pursuant to which Primary Shares are to be or were sold
has been filed and not withdrawn or has been declared effective within
the prior 180 days.
(ii) The Company may delay the filing or effectiveness of any
registration statement for a period of up to 90 days after the date of
a request for registration pursuant to this Section 2 if at the time of
such request the Company is engaged, or has fixed plans to engage
within 90 days of the time of such request, in a firm
4
<PAGE>
commitment underwritten public offering of Primary Shares in which the
holders of Registrable Shares may include Registrable Shares pursuant
to Section 3.
(iii) With respect to any registration pursuant to this Section 2,
the Company shall give notice of such registration to the Investors who
do not request registration hereunder and to the holders of all Other
Shares which are entitled to registration rights and the Company may
include in such registration any Primary Shares or Other Shares;
provided, however, that if the managing underwriter advises the Company
in writing that the inclusion of all Registrable Shares, Primary Shares
and/or Other Shares proposed to be included in such registration would
interfere with the successful marketing (including pricing) of the
Registrable Shares proposed to be included in such registration, then
the number of Registrable Shares, Primary Shares and/or Other Shares
proposed to be included in such registration shall be included in the
following order:
(A) first, the Registrable Shares requested to be included
in such registration (or, if necessary, such Registrable Shares pro
---
rata among the holders thereof based upon the number of Registrable
----
Shares requested to be registered by each such holder);
(B) second, the Primary Shares; and
(C) third, the Other Shares that are entitled to
registration rights.
(iv) If the Investors that are holders of the Registrable Shares
requesting to be included in a registration pursuant to Section 2(a) so
elect, the offering of such Registrable Shares pursuant to such
registration shall be in the form of an underwritten offering. The
Investors that are holders of Registrable Shares then holding a
majority of the Registrable Shares requested to be included in such
registration shall select one or more nationally recognized firms of
investment bankers reasonably acceptable to the Company to act as the
lead managing underwriter or underwriters in connection with such
offering.
(v) At any time before the registration statement covering
Registrable Shares becomes effective, the holders of a majority of such
shares may request the Company to withdraw or not to file the
registration statement. In that event, if such request of withdrawal
shall not have been caused by, or made in response to, the material
adverse effect of an event on the business, properties, condition,
financial or otherwise, or operations of the Company, the holders shall
have used the demand registration right of a Majority of the Series A &
B Investors, a Majority of the Series C Investors, a Majority of the
Series D Investors or a Majority of the Series E Investors, as the case
may be, set forth in Section 2(a) and the Company shall no longer be
obligated to register Registrable Shares pursuant to a demand therefor
by such group of Investors pursuant to Section 2(a), unless the Company
shall be paid the expenses incurred by it through the date of such
request.
5
<PAGE>
Section 3. Piggyback Registration.
---------- -----------------------
If the Company at any time proposes for any reason to register Primary
Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto), it shall give written
notice to the Investors of its intention to so register such Primary Shares at
least 30 days before the initial filing of such registration statement and, upon
the written request, delivered to the Company within 10 business days after
delivery of any such notice by the Company, of the Investors to include in such
registration Registrable Shares (which request shall specify the number of
Registrable Shares proposed to be included in such registration and shall state
that such Investors desire to sell such Registrable Shares in the public
securities markets), the Company shall use its best efforts to cause all such
Registrable Shares to be included in such registration on the same terms and
conditions as the securities otherwise being sold in such registration;
provided, however, that if the managing underwriter advises the Company that the
inclusion of all Registrable Shares requested to be included in such
registration would interfere with the successful marketing (including pricing)
of the Primary Shares proposed to be registered by the Company, then the number
of Primary Shares, and Registrable Shares proposed to be included in such
registration shall be included in the following order: first, the Primary
Shares; second, the Registrable Shares (or, if necessary, the Registrable Shares
pro rata among the holders thereof based upon the number of Registrable Shares
- --- ----
requested to be registered by each such holder); and third, the Other Shares
requested to be included in such registration. Notwithstanding anything herein
to the contrary, the rights set forth in this Section 3 shall not be applicable
to the registration of the Company's Common Stock on Form S-1, provided such
Form S-1 is filed on or before October 15, 1999.
Section 4. Registrations on Form S-3.
---------- --------------------------
Anything contained in Section 2 to the contrary notwithstanding, at
such time as the Company shall have qualified for the use of Form S-3
promulgated under the Securities Act or any successor form thereto, the holders
of the Registrable Shares then outstanding shall have the right to request in
writing an unlimited number (but in any event not in excess of (A) two from the
Investors holding Registrable Shares that were issued or are issuable upon the
conversion of Series A Preferred or Series B Preferred in any one twelve month
period, (B) two from the Investors holding Registrable Shares that were issued
or are issuable upon the conversion of Series C Preferred in any one twelve
month period, (C) two from the Investors holding Registrable Shares that were
issued or are issuable upon the conversion of Series D Preferred in any twelve
month period and (D) two from the Investors holding Registrable Shares that were
issued or are issuable upon the conversion of the Series E Preferred in any
twelve month period) of registrations of Registrable Shares on Form S-3 or such
successor form, which request or requests shall (i) specify the number of
Registrable Shares intended to be sold or disposed of and the holders thereof,
(ii) state the intended method of disposition of such Registrable Shares and
(iii) relate to Registrable Shares having an aggregate offering price of at
least $1,000,000. A requested registration on Form S-3 or any such successor
form in compliance with this Section 4 shall not count as a registration
statement initiated pursuant to Section 2 but shall otherwise be treated as a
registration initiated pursuant to, and shall, except as otherwise expressly
provided in this Section 4, be subject to Section 2, including, without
limitation, Section 2(b)(i).
6
<PAGE>
Section 5. Holdback Agreement.
---------- -------------------
If the Company at any time shall register shares of Common Stock under
the Securities Act (including any registration pursuant to Sections 2, 3 or 4
hereof) for sale to the public, the Investors shall not sell publicly, make any
short sale of, grant any option for the purchase of, or otherwise dispose
publicly of, any capital stock of the Company (other than those shares of Common
Stock included in such registration pursuant to Sections 2, 3 or 4 hereof)
without the prior written consent of the Company, for a period designated by the
Company in writing to the Investors, which period shall begin not more than 10
days prior to the effectiveness of the registration statement pursuant to which
such public offering shall be made and shall not last more than 180 days after
the effective date of such registration statement. The Company shall obtain the
agreement of any person permitted to sell shares of stock in a registration to
be bound by and to comply with this Section 5 as if such person was an Investor
hereunder. In the event the Company fails to attain the agreement of the
holders of at least 90% of the Company's then outstanding Stock (other than any
such Stock held by Investors), the restrictions set forth in this Section 5
shall cease to apply to the Investors.
Section 6. Preparation and Filing.
---------- -----------------------
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the registration
of any Registrable Shares, the Company shall, as expeditiously as practicable:
(a) use its best efforts to cause a registration statement that
registers such Registrable Shares to become and remain effective for a
period of 90 days or until all of such Registrable Shares have been
disposed of (if earlier);
(b) furnish, at least five business days before filing a registration
statement that registers such Registrable Shares, a prospectus relating
thereto or any amendments or supplements relating to such a registration
statement or prospectus, to one counsel selected by a majority of the
Investors initiating the registration (the "Investors' Counsel") copies of
all such documents proposed to be filed (it being understood that such
five-business-day period need not apply to successive drafts of the same
document proposed to be filed so long as such successive drafts are
supplied to the Investors' Counsel in advance of the proposed filing by a
period of time that is customary and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least a period of 90 days or until all of such
Registrable Shares have been disposed of (if earlier) and to comply with
the provisions of the Securities Act with respect to the sale or other
disposition of such Registrable Shares;
(d) notify in writing the Investor's Counsel (i) of the receipt by the
Company of any notification with respect to any comments by the Commission
with respect to such registration statement or prospectus or any amendment
or supplement thereto or any
7
<PAGE>
request by the Commission for the amending or supplementing thereof or for
additional information with respect thereto, (ii) of the receipt by the Company
of any notification with respect to the issuance by the Commission of any stop
order suspending the effectiveness of such registration statement or prospectus
or any amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose and (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification of such
Registrable Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purposes;
(e) use its best efforts to register or qualify such Registrable Shares
under such other securities or blue sky laws of such jurisdictions as the
Investors reasonably request and do any and all other acts and things which may
be reasonably necessary or advisable to enable the Investors to consummate the
disposition in such jurisdictions of the Registrable Shares owned by the
Investors; provided, however, that the Company will not be required to qualify
generally to do business, subject itself to general taxation or consent to
general service of process in any jurisdiction where it would not otherwise be
required to do so but for this paragraph (e) or to provide any material
undertaking or make any changes in its By-laws or Certificate of Incorporation
which the Board determines to be contrary to the best interests of the Company
or to modify any of its contractual relationships then existing;
(f) furnish to the Investors holding such Registrable Shares such number of
copies of a summary prospectus, if any, or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Investors may reasonably request in order
to facilitate the public sale or other disposition of such Registrable Shares;
(g) without limiting subsection (e) above, use its best efforts to cause
such Registrable Shares to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Investors holding such
Registrable Shares to consummate the disposition of such Registrable Shares;
(h) notify the Investors holding such Registrable Shares on a timely basis
at any time when a prospectus relating to such Registrable Shares is required to
be delivered under the Securities Act within the appropriate period mentioned in
subparagraph (a) of this Section 6, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and, at the request
of the Investors, prepare and furnish to such Investors a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the offerees of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
8
<PAGE>
(i) subject to the execution of confidentiality agreements in form and
substance satisfactory to the Company, make available upon reasonable notice and
during normal business hours, for inspection by the Investors holding such
Registrable Shares, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent retained
by the Investors or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information (together
with the Records, the "Information") reasonably requested by any such Inspector
in connection with such registration statement. Any of the Information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, shall not be disclosed by the Inspectors unless
(i) the disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the registration statement, (ii) the release of such
Information is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or (iii) such Information has been made generally
available to the public; the Investors agree that they will, upon learning that
disclosure of such Information is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the Information deemed
confidential;
(j) use its best efforts to obtain from its independent certified public
accountants "cold comfort" letters in customary form and at customary times and
covering matters of the type customarily covered by cold comfort letters;
(k) use its best efforts to obtain from its counsel an opinion or opinions
in customary form;
(l) provide a transfer agent and registrar (which may be the same entity
and which may be the Company) for such Registrable Shares;
(m) issue to any underwriter to which the Investors holding such
Registrable Shares may sell shares in such offering certificates evidencing such
Registrable Shares;
(n) list such Registrable Shares on any national securities exchange on
which any shares of the Common Stock are listed or, if the Common Stock is not
listed on a national securities exchange, use its best efforts to qualify such
Registrable Shares for inclusion on the automated quotation system of the
National Association of Securities Dealers, Inc. (the "NASD"), or such other
national securities exchange as the holders of a majority of such Registrable
Shares shall reasonably request;
(o) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make available to its securityholders, as soon
as reasonably practicable, earnings statements (which need not be audited)
covering a period of 12 months beginning within three months after the effective
date of the registration
9
<PAGE>
statement, which earnings statements shall satisfy the provisions of Section
11(a) of the Securities Act; and
(p) subject to all the other provisions of this Agreement, use its best
efforts to take all other steps necessary to effect the registration of
such Registrable Shares contemplated hereby.
Each holder of the Registrable Shares, upon receipt of any notice from
the Company of any event of the kind described in Section 6(h) hereof, shall
forthwith discontinue disposition of the Registrable Shares pursuant to the
registration statement covering such Registrable Shares until such holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 6(h) hereof, and, if so directed by the Company, such holder shall
deliver to the Company all copies, other than permanent file copies then in such
holder's possession, of the prospectus covering such Registrable Shares at the
time of receipt of such notice.
Section 7. Expenses.
---------- ---------
All expenses (other than underwriting discounts and commissions
relating to the Registrable Shares, as provided in the last sentence of this
Section 7) incurred by the Company in complying with Section 6, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the NASD), fees and expenses of complying with
securities and blue sky laws, printing expenses, fees and expenses of the
Company's counsel and accountants and reasonable fees and expenses of the
Investors' Counsel, as the case may be, shall be paid by the Company; provided,
however, the Company shall not be required to pay any fees and expenses of the
Investor's Counsel incurred in connection with a registration pursuant to
Section 3, to the extent the same exceed $25,000; and provided, further,
however, that all underwriting discounts, selling commissions applicable to the
Registrable Shares and Other Shares shall be borne by the holders selling such
Registrable Shares and Other Shares, in proportion to the number of Registrable
Shares and Other Shares sold by each such holder.
Section 8. Indemnification.
---------- ----------------
(a) In connection with any registration of any Registrable Shares under the
Securities Act pursuant to this Agreement, the Company shall indemnify and hold
harmless the holders of Registrable Shares, each underwriter, broker or any
other person acting on behalf of the holders of Registrable Shares and each
other person, if any, who controls any of the foregoing persons within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several (or actions in respect thereof), to which any of
the foregoing persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or allegedly untrue
statement of a material fact contained in the registration statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, or arise
out of or are based upon the omission or alleged omission to
10
<PAGE>
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein in light of the circumstances under
which they were made not misleading, or any violation by the Company of the
Securities Act or state securities or blue sky laws applicable to the Company
and relating to action or inaction required of the Company in connection with
such registration or qualification under such state securities or blue sky laws;
and shall reimburse the holders of Registrable Shares, such underwriter, such
broker or such other person acting on behalf of the holders of Registrable
Shares and each such controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action (including any legal or other expenses
incurred) arises out of or is based upon an untrue statement or allegedly untrue
statement or omission or alleged omission made in said registration statement,
preliminary prospectus, final prospectus, amendment, supplement or document
incident to registration or qualification of any Registrable Shares in reliance
upon and in conformity with written information furnished to the Company through
an instrument duly executed by the holders of Registrable Shares or their
counsel or underwriter specifically for use in the preparation thereof; provided
further, however, that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any untrue statement, allegedly untrue
statement, omission or alleged omission made in any preliminary prospectus but
eliminated or remedied in the final prospectus (filed pursuant to Rule 424 of
the Securities Act), such indemnity agreement shall not inure to the benefit of
any holder of Registrable Shares, underwriter, broker or other person acting on
behalf of holders of the Restricted Shares from whom the person asserting any
loss, claim, damage, liability or expense purchased the Restricted Shares which
are the subject thereof, if a copy of such final prospectus had been made
available to such person and such holder of Registrable Shares, underwriter,
broker or other person acting on behalf of holders of the Registrable Shares and
such final prospectus was not delivered to such person with or prior to the
written confirmation of the sale of such Registrable Shares to such person.
(b) In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each holder of Registrable Shares
shall severally and not jointly indemnify and hold harmless (in the same manner
and to the same extent as set forth in the preceding paragraph of this Section
8) the Company, each director of the Company, each officer of the Company who
shall sign such registration statement, each underwriter, broker or other person
acting on behalf of the holders of Registrable Shares and each person who
controls any of the foregoing persons within the meaning of the Securities Act
with respect to any statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company or such underwriter specifically for use in
connection with the preparation of such registration statement, preliminary
prospectus, final prospectus, amendment, supplement or document; provided,
however, that the maximum amount of liability in
11
<PAGE>
respect of such indemnification shall be limited, in the case of each seller of
Registrable Shares, to an amount equal to the proceeds actually received by such
Seller from the sale of Registrable Shares effected pursuant to such
registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 8, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. The failure of any indemnified party to
notify an indemnifying party of any such action shall not (unless such failure
shall have a material adverse effect on, or be materially prejudicial to, the
indemnifying party) relieve the indemnifying party from any liability in respect
of such action that it may have to such indemnified party on account of this
Section 8. In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available to
such indemnified party which are additional to or conflict with those available
to the indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity agreement provided
in this Section 8, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party (but shall have the
right to participate therein with counsel of its choice) and such indemnifying
party shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the fees and expenses of any one counsel
retained by the indemnified party which are reasonably related to the matters
covered by the indemnity agreement provided in this Section 8. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel with respect to such claim.
(d) If the indemnification provided for in this Section 8 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
12
<PAGE>
omission. The parties agree that it would not be just and equitable if
contribution pursuant hereto were determined by pro rata allocation which does
--- ----
not take account of the equitable considerations referred to herein. No person
guilty of fraudulent misrepresentation shall be entitled to contribution from
any person.
Section 9. Underwriting Agreement.
---------- -----------------------
Notwithstanding the provisions of Sections 5, 6, 7 and 8, to the
extent that the Investors shall enter into an underwriting or similar agreement,
which agreement contains provisions covering one or more issues addressed in
such Sections, the provisions contained in such agreement addressing such issue
or issues shall control.
Section 10. Information by Holder.
----------- ----------------------
The Investors shall furnish to the Company such written information
regarding the Investors and the distribution proposed by the Investors, as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.
Section 11. Exchange Act Compliance.
----------- ------------------------
From the Registration Date or such earlier date as a registration
statement filed by the Company pursuant to the Exchange Act relating to any
class of the Company's securities shall have become effective, the Company shall
comply with all of the reporting requirements of the Exchange Act applicable to
it (whether or not it shall be required to do so, but specifically excluding
Section 14 of the Exchange Act if not then applicable to the Company) and shall
comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Stock. The Company shall cooperate with the Investors in supplying
such information as may be necessary for the Investors to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of Rule 144.
Section 12. No Conflict of Rights.
----------- ----------------------
Without the prior written consent of a Majority of the Series A & B
Investors (voting as a single class), a Majority of the Series C Investors
(voting as a separate class), a Majority of the Series D Investors (voting as a
separate class) and a Majority of the Series E Investors (voting as a separate
class), the Company shall not, after the date hereof, grant any registration
rights which conflict with or impair the registration rights granted hereby.
Section 13. Termination.
----------- ------------
This Agreement shall terminate and be of no further force or effect
when there shall no longer be any Registrable Shares outstanding.
13
<PAGE>
Section 14. Successors and Assigns.
----------- -----------------------
This Agreement shall bind and inure to the benefit of the Company and
the Investors and, subject to Section 15, the respective successors and assigns
of the Company and the Investors.
Section 15. Assignment.
----------- -----------
Each Investor may sell, assign or otherwise transfer its rights
hereunder to any purchaser, assignee or other transferee of Registrable Shares;
provided, however, that any such sale, assignment or other transfer shall be (i)
in connection with the sale, assignment or other transfer of either all the
Registrable Shares of such Investor or at least 250,000 Registrable Shares of
such Investor (as adjusted to reflect any stock dividends, stock splits, reverse
stock splits or combination or other pro rata recapitalization event affecting
such Registrable Shares) or (ii) to a member of such Investor's Group (as
defined in the Stockholders' Agreement); and provided, further, however, that
any such purchaser, assignee or other transferee of such rights hereunder shall,
as a condition to the effectiveness of such sale, assignment or other transfer,
agree to become a party to, and be bound by and obligated to comply with the
terms and provisions of, (i) this Agreement, (ii) the Stockholders' Agreement,
(iii) if such Registrable Shares were issued or are issuable upon the conversion
of Series C Preferred, the Series C Purchase Agreement, (iv) if such Registrable
Shares were issued or are issuable upon the conversion of Series D Preferred,
the Series D Purchase Agreement and (v) if such Registrable Shares were issued
or are issuable upon conversion of the Series E Preferred, the Series E Purchase
Agreement.
Section 16. Legend on Certificates; New Certificates.
----------- ----------------------------------------
(a) Each certificate representing Restricted Shares shall bear a
legend containing the following words (in addition to any other legend
required by law or applicable agreement):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT DATED SEPTEMBER 23, 1999, AMONG LIFEMINDERS.COM, INC.
AND CERTAIN HOLDERS OF THE OUTSTANDING STOCK OF SUCH COMPANY. COPIES
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF SUCH
COMPANY."
(b) As expeditiously as possible after the registration of Restricted
Shares under the Securities Act pursuant to a registration statement that
has been declared effective, the Company shall deliver in exchange for any
legended certificate evidencing Restricted Shares so registered, new stock
certificates not bearing any restrictive legends, provided that in the
event less than all of the Restricted Shares evidenced by such legended
14
<PAGE>
certificate are registered, the holder thereof agrees that a new
certificate evidencing such unregistered shares will be issued bearing the
appropriate restrictive legend.
Section 17. Entire Agreement.
----------- -----------------
This Agreement, the other Related Documents and any other writings
referred to herein or delivered pursuant hereto contain the entire agreement
among the parties hereto with respect to the subject matter hereof and hereby
amend, restate and otherwise supersede all prior and contemporaneous agreements
and understandings with respect thereto, including, but not limited to, the
Investor Rights Agreement.
Section 18. Notices.
----------- --------
All notices, requests, demands, claims, consents and other
communications which are required or otherwise delivered hereunder shall be in
writing and shall be deemed to have been duly given if (i) personally delivered,
(ii) sent by nationally recognized overnight courier, (iii) mailed by registered
or certified mail with postage prepaid, return receipt requested, (iv)
transmitted by electronic mail, with receipt acknowledged by the recipient by
return electronic mail (with a copy of such transmission concurrently
transmitted by registered or certified mail with postage prepaid, return receipt
requested), or (v) transmitted by facsimile or telecopy (with a copy of such
transmission concurrently transmitted by registered or certified mail with
postage prepaid, return receipt requested), to the parties hereto at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) if to the Company, to:
LifeMinders.com, Inc.
1110 Herndon Parkway
Herndon, VA 20170
Telephone: (703) 707-8261
Telecopy: (703) 707-8269
Attention: Stephen R. Chapin, Jr.
E-mail: [email protected]
-----------------------
with a copy to:
Venable, Baetjer and Howard, LLP
2010 Corporate Ridge, Suite 400
McLean, VA 22102
Telephone: (703) 760-1600
Telecopy: (703) 821-8949
Attention: John L. Sullivan III, Esq.
E-mail: [email protected]
15
<PAGE>
(ii) if to the Investors, to their respective addresses set forth on
Schedule I hereto, with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 408-2400
Telecopy: (212) 408-2420
Attention: Gordon R. Caplan, Esq.
E-mail: [email protected]
-----------
and a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue, 31st Floor
New York, NY 10103-3198
Telephone: (212) 318-3000
Telecopy: (212) 752-5958
Attention: Carl E. Kaplan, Esq.
E-mail: [email protected]
-----------------
and a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Telephone: (617) 248-7000
Telecopy: (617) 248-7100
Attention: Rufus C. King, Esq.
E-mail: [email protected]
All notices, requests, demands, claims, consents and other
communications which are required or otherwise delivered hereunder shall be
deemed to have been given and received (i) in the case of personal delivery, on
the date of such delivery, (ii) in the case of delivery by nationally recognized
overnight courier, on the second business day following dispatch, (iii) in the
case of mailing by registered or certified mail with postage prepaid, return
receipt requested, on the fifth business day after the posting thereof, (iv) in
the case of transmission by electronic mail, on the date of such transmission,
and (v) in the case of transmission by facsimile or telecopy, on the date of
such delivery.
Section 19. Modifications; Amendments; Waivers.
----------- -----------------------------------
The terms and provisions of this Agreement may not be modified or
amended, nor may any provision be waived, except pursuant to the written consent
of each of the Company, the Majority of the Series A & B Investors (voting as a
single class), the Majority of the Series C Investors (voting as a separate
class), the Majority of the Series D Investors (voting as a separate class) and
the Majority of the Series E Investors (voting as a separate class); provided,
however,
16
<PAGE>
no such written consent shall be required for the amendment of Schedule
I solely to reflect the name and address of any new Investor who has become a
party to this Agreement in accordance with the terms and conditions hereof.
Section 20. Counterparts; Facsimile Signatures.
----------- -----------------------------------
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable at the Closing (as
defined in the Securities Purchase Agreement) if the originally executed
counterpart is delivered within a reasonable period thereafter.
Section 21. Headings.
----------- ---------
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
Section 22. Governing Law.
----------- --------------
This Agreement shall be governed by and construed and enforced in
accordance with the Delaware General Corporation Law as to matters within the
scope thereof and as to all other matters shall be governed by and construed and
enforced in accordance with the internal laws of the Commonwealth of Virginia
applicable to contracts made and to be performed wholly therein.
* * * *
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Registration Rights Agreement on the date first written above.
COMPANY
-------
LIFEMINDERS.COM, INC.
By: /s/ Stephen R. Chapin, Jr.
----------------------------
Name: Stephen R. Chapin, Jr.
Title: President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
ABS VENTURES LM L.L.C.
BY: CALVERT CAPITAL II L.L.C.,
its general partner
By: /s/ Philip D. Black
-----------------------
Name: Philip D. Black
Title: Managing Member
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
ABS VENTURES IV L.P.
BY: CALVERT CAPITAL L.L.C.,
its general partner
By: /s/ Philip D. Black
------------------------
Name: Philip D. Black
Title: Managing Member
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
ABX FUND, L.P.
BY: CALVERT CAPITAL II L.L.C.,
its general partner
By: /s/ Philip D. Black
------------------------
Name: Philip D. Black
Title: Managing Member
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
DUNLAP-BLACK INVESTMENTS L.L.C.
By: /s/ Thomas F. Dunlap
---------------------------
Name: Thomas F. Dunlap
Title: Manager
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Philip D. Black
_________________________________________
Philip D. Black
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ John Burke
_________________________________________
John Burke
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Jin Byun
_________________________________________
Jin Byun
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Shaun G. Andrikopoulos
_________________________________________
Shaun G. Andrikopoulos
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Mark Kaufman
_________________________________________
Mark Kaufman
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Frank Comas
_________________________________________
Frank Comas
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
EXCELSIOR PRIVATE EQUITY FUND II, INC.
By: /s/ Douglas A. Lindgren
-----------------------------------
Name: Douglas A. Lindgren
Title: Chief Investment Officer
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
NOVAK BIDDLE VENTURE PARTNERS, L.P.
BY: NOVAK BIDDLE COMPANY, LLC,
its general partner
By: /s/ E. Rogers Novak
----------------------------------
Name: E. Rogers Novak
Title: Member
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
NOVAK BIDDLE VENTURE PARTNERS II, L.P.
BY: NOVAK BIDDLE COMPANY II, LLC,
its general partner
By: /s/ E. Rogers Novak
------------------------------
Name: E. Rogers Novak
Title: Member
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
FBR TECHNOLOGY VENTURE PARTNERS, L.P.
By: /s/ Gene Riechers
------------------------------
Name: Gene Riechers
Title: Managing Director
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Doug Alexander
__________________________________________
Doug Alexander
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Walter Buckley
_________________________________________
Walter Buckley
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Ken Fox
_________________________________________
Ken Fox
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Bob Pollan
_________________________________________
Bob Pollan
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ David Pensky
-------------------------------------------
David Pensky
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
LYCOS VENTURES, L.P.
BY: LYCOS TRIANGLE PARTNERS, LLC,
its general partner
By: /s/ Edward Philip
------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
LYCOS VENTURES CO-INVESTMENT FUND, L.P.
BY: LYCOS, INC.,
its general partner
By: /s/ Edward Philip
---------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
R & R DAVIS FAMILY LIMITED PARTNERSHIP
By: /s/ Robert Davis
---------------------------------------
Name: Robert Davis
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
NETWORTH PARTNERS IV, LLC
By: /s/ Paul D. Cohn
------------------------------------------
Name: Paul D. Cohn
Title: Vice-President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
WEISS, PECK & GREER VENTURE ASSOCIATES V, L.L.C.
BY: WPG VC FUND ADVISER II, L.L.C.,
Fund Investment Advisory Member
By: R. B. Mharte
----------------------------------------
Name:
Title: Managing Member
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
WEISS, PECK & GREER VENTURE ASSOCIATES V-A, L.L.C.
BY: WPG VC FUND ADVISER II, L.L.C.,
Fund Investment Advisory Member
By: R. B. Mharte
------------------------------------------
Name:
Title: Managing Member
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
WEISS, PECK & GREER VENTURE ASSOCIATES V CAYMAN,
L.P.
BY: WPG VC FUND ADVISER II, L.L.C.,
Fund Investment Advisory Partner
By: R. B. Mharte
----------------------------------------
Name:
Title: Managing Member
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
IMPERIAL VENTURES, INC.
By: /s/ James B. Rutter
____________________________________
Name: James B. Rutter
Title: President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Kevin Quinn
----------------------------------------
Kevin Quinn
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
TAILWIND CAPITAL PARTNERS, L.P.
BY: THOMAS WEISEL CAPITAL PARTNERS LLC
its general partner
By: /s/ David A. Baylor
------------------------------------
Name: David A. Baylor
Title: General Counsel
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
/s/ Jonathan Bulkeley
-----------------------------------------
Jonathan Bulkeley
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Registration Rights Agreement on the date first above
written.
INVESTOR
--------
VAN WAGONER CAPITAL MANAGEMENT, INC.
By: /s/ Garrett Van Wagoner
------------------------------------
Name: Garrett Van Wagoner
Title: President
<PAGE>
Schedule I
----------
INVESTORS
- ---------
ABS VENTURES LM L.L.C.
1 South Street, Suite 2150
Baltimore, MD 21202
Tel: (410) 895-3895
Fax: (410) 895-3899
Attention: Bruns Grayson
E-mail: [email protected]
ABS VENTURES IV L.P.
1 South Street, Suite 2150
Baltimore, MD 21202
Tel: (410) 895-3895
Fax: (410) 895-3899
Attention: Bruns Grayson
E-mail: [email protected]
ABX FUND, L.P.
1 South Street, Suite 2150
Baltimore, MD 21202
Tel: (410) 895-3895
Fax: (410) 895-3899
Attention: Bruns Grayson
E-mail: [email protected]
DUNLAP-BLACK INVESTMENTS L.L.C.
c/o ABS Ventures
1 South Street, Suite 2150
Baltimore, MD 21202
Tel: (410) 895-3895
Fax: (410) 895-3899
E-mail:
PHILIP D. BLACK
c/o ABS Ventures
1 South Street, Suite 2150
Baltimore, MD 21202
Tel:
Fax:
E-mail:
<PAGE>
JOHN BURKE
c/o ABS Ventures
1 South Street, Suite 2150
Baltimore, MD 21202
Tel:
Fax:
E-mail:
JIN BYUN
c/o ABS Ventures
1 South Street, Suite 2150
Baltimore, MD 21202
Tel:
Fax:
E-mail:
SHAUN G. ANDRIKOPOULOS
1112 Cole Street
San Francisco, CA 94117
Tel: (415) 242-9489
Fax: (415) 242-3109
E-mail: [email protected]
--------------------------
MARK KAUFMAN
4405 Bedford Place
Baltimore, MD 21218
Tel: (410) 366-8390
Fax: (410) 366-8391
E-mail: [email protected]
-------------------
FRANK COMAS
12 E. Mount Vernon Place #302
Baltimore, MD 21202
Tel: (410) 895-2704
Fax: (410) 962-8511
E-mail: [email protected]
------------------
<PAGE>
EXCELSIOR PRIVATE EQUITY FUND II, INC.
114 West 47th Street
New York, NY 10036
Tel: (212) 852-3235
Fax: (212) 852-3759
Attention: Douglas A. Lindgren
E-mail: [email protected]
NOVAK BIDDLE VENTURE PARTNERS, L.P.
1897 Preston White Drive
Reston, VA 20191
Tel: (703) 264-7820
Fax: (703) 264-1438
Attention: E. Rogers Novak
E-mail: [email protected]
NOVAK BIDDLE VENTURE PARTNERS II, L.P.
1897 Preston White Drive
Reston, VA 20191
Tel: (703) 264-7820
Fax: (703) 264-1438
Attention: E. Rogers Novak
E-mail: [email protected]
FBR TECHNOLOGY VENTURE PARTNERS, L.P.
1001 19th Street, North, 10th Floor
Arlington, VA 22209
Tel: (703) 312-9755
Fax: (703) 312-9655
Attention: Gene Riechers
E-mail: [email protected]
DOUG ALEXANDER
ICG
800 The Safeguard Bldg.
435 Devon Park Drive
Wayne, PA 19087
Tel: (610) 989-0111
Fax: (610) 989-0112
E-mail: [email protected]
------------------------------
<PAGE>
WALTER BUCKLEY
ICG
800 The Safeguard Bldg.
435 Devon Park Drive
Wayne, PA 19087
Tel: (610) 989-0111
Fax: (610) 989-0112
E-mail: [email protected]
----------------------------
KEN FOX
ICG
44 Montgomery Street
Suite 3705
San Francisco, CA 94104
Tel: (415) 398-9929
Fax: (415) 398-9998
E-mail: [email protected]
------------------------
BOB POLLAN
ICG
44 Montgomery Street
Suite 3705
San Francisco, CA 94104
Tel: (415) 398-9929
Fax: (415) 398-9998
E-mail: [email protected]
---------------------------
DAVID PENSKY
11921 Freedom Drive, Suite 550
Reston, VA 22209
Tel: (708) 736-8088
Fax: (708) 736-8089
LYCOS VENTURES, L.P.
Two Gateway Center, 17th Floor
Pittsburgh, PA 15122
Tel: (412) 288-9800
Fax: (412) 288-9799
Attention: J.A. Katarincic, Jr.
E-mail: [email protected]
-----------------
<PAGE>
LYCOS VENTURES CO-INVESTMENT FUND, L.P.
Two Gateway Center, 17th Floor
Pittsburgh, PA 15122
Tel: (412) 288-9800
Fax: (412) 288-9799
Attention: J.A. Katarincic, Jr.
E-mail: [email protected]
-----------------
R & R DAVIS FAMILY LIMITED PARTNERSHIP
c/o Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451
Tel: 781-370-2700
Fax: 781-370-2800
E-mail: [email protected]
----------------
NETWORTH PARTNERS IV, LLC
c/o Mellon Ventures
One Mellon Bank Center, Suite 5300
Pittsburgh, PA 15258-0001
Tel: (412) 236-3594
Fax: (412) 236-3595
Attention: Mr. Ron Coombs
E-mail: [email protected]
--------------------
WEISS,PECK & GREER VENTURE ASSOCIATES V, L.L.C.
c/o Weiss, Peck & Greer, LLC
555 California Street, Suite 3130
San Francisco, CA 94104
Tel: (415) 622-6864
Fax: (415) 989-5108
Attention: Mr. Ravi Mhatre
E-mail: [email protected]
WEISS,PECK & GREER VENTURE ASSOCIATES V-A, L.L.C.
c/o Weiss, Peck & Greer, LLC
555 California Street, Suite 3130
San Francisco, CA 94104
Tel: (415) 622-6864
Fax: (415) 989-5108
Attention: Mr. Ravi Mhatre
E-mail: [email protected]
WEISS,PECK & GREER VENTURE ASSOCIATES V CAYMAN, L.P.
c/o Weiss, Peck & Greer, LLC
555 California Street, Suite 3130
San Francisco, CA 94104
<PAGE>
Tel: (415) 622-6864
Fax: (415) 989-5108
Attention: Mr. Ravi Mhatre
E-mail: [email protected]
IMPERIAL VENTURES, INC.
9920 s. La Cienega Blvd., 14th Floor
Inglewood, CA 90009-2991
Tel: (408) 451-8555
Fax: (408) 451-8586
Attention: James B. Rutter
E-mail: [email protected]
KEVIN QUINN
310 Sportsmans Hall Rd.
Queenstown, MD 21658
Tel: (703) 707-8261 ext. 246
Fax: (703) 707-2374
E-mail: [email protected]
TAILWIND CAPITAL PARTNERS, L.P.
One Montgomery Street, Suite 3700
San Francisco, CA 94104
Tel:
Fax:
Attention:
E-mail:
JONATHAN BULKELEY
1133 5th Avenue
New York, NY 10128
Tel: (212) 414-6002
Fax: (212) 414-6652
E-mail: [email protected]
VAN WAGONER CAPITAL MANAGEMENT, INC.
345 California Street, Suite 2450
San Francisco, CA 94104
Tel: (415) 835-5000
Fax: (415) 835-5050
Attention: Audrey Lam
E-mail:
<PAGE>
Exhibit 10.1
E-COMMERCE AGREEMENT
This Agreement, dated as of August 25, 1999 (the "Effective Date"), is made by
------------
and between Lycos, Inc., a Delaware corporation with a principal place of
business at 400-2 Totten Pond Road, Waltham, MA 02451 ("Lycos") and
-----
LifeMinders.com Inc., a Maryland corporation with a principal place of business
at 1110 Herndon Parkway, Herndon, VA 20170 ("LifeMinders").
Recitals
- --------
A. Lycos is the owner or licensee of certain Web services (collectively, the
"Lycos Services"), which are accessible through the URLs www.lycos.com ,
- --------------- -------------
www.tripod.com, www.angelfire.com, www.mailcity.com, www.wired.com,
- -------------- ----------------- ---------------- -------------
www.hotbot.com, my.lycos.com, clubs.lycos.com, and www.whowhere.com (all sites
- -------------- --------- ---------- ----------------
are collectively referred to as the "Lycos Network").
-------------
B. LifeMinders is the operator of a Web site accessible through the URL
www.lifeminders.com (the "LifeMinders Site") on which LifeMinders promotes a
----------------
free e-mail reminder service (the "Email Service").
-------------
C. Lycos and LifeMinders wish to establish a relationship through which
Lifeminders shall launch a co-branded version of the LifeMinders Site (the
"Co-branded Site"), including a co-branded version of the Email Service (the
---------------
"Co-branded Email Service") which Lycos will link to throughout the Lycos
------------------------
Network. Collectively, the Co-branded Site and Co-branded Email Service are
referred to herein as the "Co-branded Services".
-------------------
D. All the content and information on the Co-branded Site and in any and all e-
mails sent by Lifeminders through the Co branded Email Service shall be referred
to herein as the "Content".
-------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lycos and LifeMinders hereby agree
as follows:
Terms
- -----
1. Co-branded Services.
-------------------
1.1 Serving and Hosting. LifeMinders will operate and serve the Co-
-------------------
branded Site in a manner consistent with the present quality standards of the
LifeMinders Site. In addition, LifeMinders will be responsible for system
operation software costs, hardware costs, and network costs. LifeMinders shall
provide Lycos with a contact at LifeMinders who shall be available to assist
Lycos twenty-four hours a day, seven days a week. LifeMinders will provide
Lycos with daily traffic and Member (as defined in Section 6.2) registration
reports. Without Lycos' prior approval, which will not be unreasonably withheld,
LifeMinders shall not (i) sell or place advertisements or sponsorships on any
page of the Co-Branded Services for any Lycos Competitor listed on attached
Exhibit D; (ii) sell any merchandise or other items on any page of the Co-
- ---------
branded Site, excluding the "Opt-In Services" page of the registration pages and
except as otherwise contemplated herein; or (iii) place a link to any site,
other than the LifeMinders Site and the TRUSTe Site, on the Co-branded Site,
excluding the "Opt-In Services" page of the registration pages. In addition,
Lycos will not sell any merchandise or other items on any page of the Co-branded
Site, except as otherwise contemplated herein. LifeMinders shall provide
additional services and functionality that are developed by LifeMinders for the
LifeMinders Site (or any successor to the LifeMinders Site) at no additional
cost so that the Co-Branded Services are maintained at a level substantially
equal to the LifeMinders Site and the Email Service as they appear from time to
time. Lycos may elect not to include on the Co-branded Services any such
additional services and functionality if Lycos, in its sole discretion, deems
such additional services and functionality to be competitive to Lycos' products
and services. Lycos shall have the right to provide online access to the Co-
Branded Services to Lycos' subsidiaries, joint venture partners of Lycos, and
licensees of the Lycos Services.
1.2 Launch Date. LifeMinders shall launch the Co-branded Services thirty
-----------
(30) days after the Effective Date (the "Launch Date").
-----------
1.3 Branding.
--------
1.3.1 Co-branded Site. The Co-branded Site will have the Lycos
---------------
Network branding bar on each page and the Lycos "look and feel," unless
otherwise agreed to by both parties. The URL of the Co-branded Site will be
substantially similar to:
Co-branded Site URL: www.lifeminders.lycos.com.
1.3.2 Co-branded E-mail Service. All emails sent through the Co-branded
-------------------------
E-mail Service (both text and web based emails) to users who subscribe for the
Co-branded Email Service on the Co-branded Site will be co-branded with the
Lycos logo as mutually agreed to by the parties.
1.4 Content. Subject to Section 1.1 above and the terms of this Section
-------
1.4, the content on the Co-branded Services shall include all Content on the
LifeMinders Site and the E-mail Service, unless otherwise mutually agreed to by
the parties. Notwithstanding anything to the contrary contained herein, it is
expressly understood that: (a) any Content that conflicts with Lycos' exclusive
advertising obligations shall be omitted from the Co-branded Site at the request
of Lycos, (b) any advertising that conflicts with Lycos' exclusive e-commerce
obligations shall be omitted from the Co-branded Site at the request of Lycos;
and (c) the Co-branded Services shall not include any pornographic or adult
Content, Content conveying a racist, hate or discriminatory message, or Content
promoting or advertising firearms or any illegal products or services. In
addition, if Lycos or its users reasonably find any Content to be offensive and
Lycos notifies LifeMinders of the offensive Content, LifeMinders will discuss in
good faith with Lycos the removal of such Content. In the event that
LifeMinders receives Content from any Lycos Competitor listed in attached
Exhibit D, LifeMinders shall immediately notify Lycos in writing (email being
- ---------
considered written notice) of the type of Content being provided by such Lycos
Competitor, and give Lycos the opportunity to provide LifeMinders with
comparable Content within five (5) business days after receipt of such notice,
which shall be displayed on the Co-branded Services in lieu of the competitive
Content. In the event that Lycos fails to provide such comparable Content
within such five (5) business day period, LifeMinders may display the Lycos
Competitor's Content.
<PAGE>
1.5 Co-branded E-Mail Service LifeMinders shall be responsible for all
-------------------------
aspects of the Co-branded Services, including, without limitation, sending out
all the e-mails requested by users. Lycos shall take no part in, and have no
responsibility or liability for, the Co-branded Services.
2. Lycos Network Integration.
-------------------------
2.1 Links on the Lycos Network. During the Term, Lycos will display the
--------------------------
impressions outlined in the attached Exhibit A in accordance with the time
----------
schedule specified therein. Based upon availability, Lycos may change the
impressions to be provided pursuant to Exhibit A if the parties mutually agree
---------
that substitute impressions may increase traffic to the Co-branded Site.
2.2 Additional Integration. In addition to the impressions outlined in
-----------------------
Exhibit A, Lycos will place additional links to the Co-branded Site throughout
- ---------
the Lycos Network, which shall initially include, but not limited to, the links
described in Exhibit B. From time to time, Lycos may change the additional
---------
links to be provided pursuant to this Section 2.2 so long as such links are
comparable to the links described in Exhibit B. Lycos will begin integrating
---------
the links described in attached Exhibit B promptly following the Effective Date,
---------
and shall complete the integration on or before ninety (90) days after the
Effective Date.
2.3 LifeMinders Obligations. LifeMinders shall provide Lycos with any
-----------------------
commercially reasonable assistance requested by Lycos in establishing the links
between the Lycos Network and the Co-branded Site, and with all artwork (subject
to Lycos' approval) for the advertising banners, buttons, boxes and links.
3. Redesigning of the Lycos Network Sites. LifeMinders acknowledges that,
--------------------------------------
consistent with Lycos' need for editorial discretion, Lycos may redesign, delete
or replace any pages on any site in the Lycos Network, including those pages on
which the impressions described in Section 2 will be displayed. In addition,
Lycos may redesign or replace the type of links, buttons, boxes and banners
described in Section 2. Notwithstanding the foregoing, Lycos will use good
faith efforts to provide LifeMinders with comparable links, buttons, boxes and
banners on any re-designed or replacement pages. In addition, Lycos will use
good faith efforts to provide LifeMinders reasonable notice of any major
redesigns of the Lycos Network Sites that will significantly effect those pages
on which the impressions described in Section 2 will be displayed.
4. Standard Terms and Conditions. The advertising products outlined in
-----------------------------
Exhibits A and B will be provided pursuant to the Terms and Conditions outlined
- ---------- -
in attached Exhibit C, which Terms and Conditions are incorporated herein by
---------
reference. Throughout the Term, all advertising banners must meet the Lycos
specifications found at http://adreporting.lycos.com/specs.html, as they appear
---------------------------------------
from time to time.
5. Impression Guarantees. Lycos guarantees that during the Term, Lycos shall
---------------------
provide LifeMinders with the number of Lycos Network impressions outlined in
Exhibit A. In the event that multiple impressions described in Exhibit A appear
- --------- ---------
on a single page of a Lycos Network site (e.g. a site page includes a banner ad
and a showcase box), each impression will be counted toward the Lycos impression
guarantees set forth herein.
6. Royalties and Fees.
------------------
6.1 Lycos Network Integration Fees. During the Term, LifeMinders shall pay
------------------------------
Lycos integration fees, payable as follows:
Total Amount: $ *** of which:
Payable thirty (30) days after the Effective Date: $ *** ; and
Payable in two equal
payments due 90 and 180
days after the Effective Date: $ *** .
6.2 Lycos Bounty Royalties. During the Term, in addition to the
----------------------
integration fees outlined above, from and after the date the aggregate number of
users who have subscribed to the Co-branded E-mail Service by completing the
registration process on the Co-branded Site (each a "Member") equals *** ,
------
LifeMinders shall pay Lycos the following bounties (the "Bounties"):
--------
Bounties payable to Lycos: $ *** per new Member after
*** Members
Payment will be made in the month following the month in which the Lycos user
becomes a Member.
6.3 Advertising.
-----------
6.3.1 Sale. During the first ninety (90) day period following the Launch
----
Date (the "Advertising Period"), Lycos will sell advertising on the Co-branded
------------------
Services. At the end of the Advertising Period, LifeMinders and Lycos will
determine the fill rate of the Co-branded Services for the Advertising Period
(the "Fill Rate"). During the remainder of the term, Lycos will be entitled to
---------
sell an amount of advertising on the Co-branded Services equal to the Fill Rate,
and LifeMinders will be entitled to sell an amount of advertising on the
Co-branded Services equal to the unsold amount of advertising during the
Advertising Period. For example, if the Fill Rate during the Advertising Period
equals sixty percent (60%), during the remainder of the Term, Lycos will be
entitled to sell sixty percent (60%) of the advertising and LifeMinders will be
entitled to sell forty percent (40%) of the advertising.
6.3.2 CPM. Lycos will sell the advertising at a rate equal to no greater
---
than *** percent (***%) above and not less than *** percent (***%) below
LifeMinders' then-current rate card, unless mutually agreed to by the parties.
6.3.3 Sharing of Revenue. The Net Revenue from all Lycos advertising sales
------------------
will be split as follows:
Lycos: ***% of Net Revenue
LifeMinders: ***% of Net Revenue
"Net Revenue" means gross revenue from the sale of banner ads targeted to the
-----------
Co-branded Services less Lycos' costs (which will be a flat *** percent (***%)
of gross advertising revenue). Payment will be made within 45 days following the
calendar quarter in which Lycos actually receives the revenues. Lycos will
attempt to collect any amounts due Lycos for advertising on the Co-branded
Services according to its standard collection practices. LifeMinders shall
retain all revenue generated from advertising sales completed by LifeMinders.
*** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
6.4 Reporting. LifeMinders shall provide Lycos with weekly reports
---------
regarding: (i) clickthrus to the Co-branded Site from the impressions outlined
in Section 2; (ii) the number of Members; and (iii) the Bounties. Lycos shall
provide LifeMinders with weekly reports regarding: (i) the number of impressions
outlined in Section 2.1 displayed, and (ii) the clickthrus to the Co-branded
Site from the impressions outlined in Section 2.1.
6.5 Audit Rights. Each party shall maintain complete and accurate records
------------
with respect to the calculation of all payments due under this Agreement. Each
party shall have the right, at its expense (except as provided below), to audit
the other party's books and records for the purpose of verifying and tracking
payment amounts and Members. Any audits made pursuant to this Section 6.5 shall
be made not more than once per year, on not less then ten (10) days written
notice, during regular business hours, by auditors reasonably acceptable to the
party being audited (the "Audited Party"). If the auditor's figures reflect
-------------
payment due under this Agreement other than that reported by the Audited Party,
then the Audited Party shall pay the amount owed (if such amount is higher than
reported), or the party conducting the audit shall reimburse the difference (if
such amount is lower than reported), as the case may be. In addition, for any
audit performed hereunder, if the auditor's figures vary by more than 10% from
the figures provided by the Audited Party, then the Audited Party shall also pay
the reasonable cost of the audit.
7. User Information. LifeMinders shall manage the user database of the
----------------
Co-branded Services which shall include, without limitation, any and all
information provided by users on the Co-branded Site and the Co-branded E-mail
Service (the "User Information"), and LifeMinders shall own all User Information
----------------
obtained in connection with the Co-branded Site and the Co-branded E-mail
Service. On a monthly basis, LifeMinders shall provide Lycos with aggregate
demographic, psychographic, and geographic User Information obtained in
connection with the Co-branded Services within ten (10) days after the end of
each month, in a manner to be mutually agreed to by the parties, for use by
Lycos in connection with performing its obligations hereunder. The User
Information provided to Lycos hereunder shall include substantially all of the
User Information provided by LifeMinders to its advertising sales force and to
third parties who sell advertising on behalf of LifeMinders. Without a user's
express permission, neither Lycos nor LifeMinders may sell or otherwise transfer
a user's User Information to any third party (other than by merger,
consolidation or sale of all or substantially all of the assets of such party).
Both LifeMinders and Lycos agree that the sharing of any such User Information
and the use thereof shall be consistent with the parties' privacy policies
disclosed to the users when the information is collected. During the Term,
LifeMinders shall not use any of the User Information to promote, advertise, or
solicit purchases of or interest in services, sites or products of the Lycos
Competitors listed in Exhibit D.
8. Licenses; Approvals. To the extent access to the Co-branded Services is
-------------------
deemed a use, public display, transmission, distribution or reproduction of the
Content, or to the extent the Content is actually used, publicly displayed,
transmitted, distributed or reproduced on the Lycos Network sites, LifeMinders
hereby grants Lycos a non-exclusive, non-transferable (except as provided
herein), royalty-free (except as provided herein), worldwide license to use,
publicly display, transmit, distribute and reproduce the Co-branded Services and
the Content during the Term solely for the purposes described herein.
LifeMinders represents and warrants that it has obtained all necessary licenses,
consents and approvals relating to all Content provided by a third party and
that it is responsible for obtaining any such licenses, consents and approvals
during the Term. Lycos acknowledges that the licenses granted hereunder do not
allow Lycos to use portions of the Content throughout the Lycos Network except
as permitted under this Agreement or with LifeMinders' prior approval. To the
extent Lycos provides LifeMinders with Content pursuant to Section 1.4, and such
Content is displayed on the Co-branded Services, Lycos hereby grants LifeMinders
a non-exclusive, non-transferable (except as provided herein), royalty-free
(except as provided herein), worldwide license to use, publicly display,
transmit, distribute and reproduce the Co-branded Services and the Content
during the Term solely for the purposes described herein.
9. Term. The term ("Term") of this Agreement shall commence on the Effective
----- ----
Date and continue for nine (9) months unless terminated earlier as provided in
Section 15 below or extended as provided herein. If, at the conclusion of the
original Term, *** Members have not subscribed
to the Co-branded E-mail Service, the Term will automatically extend for an
additional ninety (90) day period (the "Extended Term") during which Lycos will
-------------
provide LifeMinders, at no additional cost to LifeMinders, with additional Lycos
Network impressions and integration to be displayed in Lycos' sole discretion
and based on availability. The number and placement of the impressions and
integration displayed during the Extended Term will be comparable to the
impressions and integration displayed during the previous ninety (90) day
period. At the end of the Term, the parties may mutually agree to renew this
Agreement for an additional nine (9) month period.
10. Marks. Lycos hereby grants to LifeMinders a non-exclusive, non-
-----
transferable license to reproduce and display Lycos' trademarks, service marks,
logos and the like solely for the purposes specified in this Agreement and in
accordance with Lycos' established trademark usage policies and procedures.
LifeMinders hereby grants Lycos a non-exclusive, non-transferable license to
reproduce and display LifeMinders' trademarks, service marks, logos and the like
solely for the purposes specified in this Agreement and in accordance with
LifeMinders' established trademark usage policies and procedures. Except as
expressly stated herein, neither party shall make any other use of the other
party's marks. Upon request of either party, the other party shall provide
appropriate attribution of the use of the requesting party's marks. (e.g., "Go
Get It(R) is a registered service mark of Lycos, Inc. All Rights Reserved.") or
immediately cease using such requesting party's marks. In connection with the
licenses granted hereunder, each party shall have the unilateral right to
establish such quality standards and additional terms and conditions concerning
the use of its trademarks as such party deems necessary to reasonably protect
its trademarks. Such licenses shall terminate automatically upon the effective
date of expiration or termination of this Agreement.
***CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
11. Representations and Warranties. Each party hereby represents and warrants
------------------------------
as follows:
(a) Corporate Power. Such party is duly organized and validly existing
---------------
under the laws of the state of its incorporation and has full corporate power
and authority to enter into this Agreement and to carry out the provisions
hereof.
(b) Due Authorization. Such party is duly authorized to execute and
-----------------
deliver this Agreement and to perform its obligations hereunder.
(c) Binding Agreement. This Agreement is a legal and valid obligation
-----------------
binding upon it and enforceable with its terms. The execution, delivery and
performance of this Agreement by such party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.
(d) Intellectual Property Rights.
----------------------------
(i) LifeMinders has the full and exclusive right to grant or otherwise
permit Lycos to access the LifeMinders Site and the Co-branded Services, and to
use LifeMinders' intellectual property as necessary for Lycos to perform its
obligations under this Agreement, and LifeMinders is aware of no claims by any
third parties adverse to any of such intellectual property rights.
(ii) Lycos has the full and exclusive right to grant or otherwise permit
LifeMinders to access the Lycos Network and to use Lycos' intellectual property
as necessary for LifeMinders to perform its obligations under this Agreement,
and Lycos is aware of no claims by any third parties adverse to any of such
intellectual property rights.
(iii) If either party's (the "Infringing Party") intellectual property
----------------
rights are alleged or held to infringe the intellectual property rights of a
third party, the Infringing Party shall, at its own expense, and in its sole
discretion, (1) procure for the non-Infringing Party the right to continue to
use the allegedly infringing intellectual property or (2) replace or modify the
intellectual property to make it non-infringing; provided, however, if neither
option is possible or economically feasible and if the inability to use such
intellectual property would cause a material breach of this Agreement (as
determined by the non-Infringing Party), the Infringing Party may terminate this
Agreement.
The representations and warranties and covenants in this Section 11 are
continuous in nature and shall be deemed to have been given by each party at
execution of this Agreement and at each stage of performance hereunder. These
representations, warranties and covenants shall survive termination or
expiration of this Agreement.
12. Limitation of Warranty. EXCEPT AS EXPRESSLY WARRANTED IN
----------------------
SECTION 11 ABOVE, EACH PARTY EXPRESSLY DISCLAIMS ANY FURTHER WARRANTIES,
EXPRESS, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, LYCOS MAKES NO EXPRESS OR IMPLIED
WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE LYCOS NETWORK OR THE CO-
BRANDED SERVICES, AND LYCOS SHALL NOT BE LIABLE FOR THE CONSEQUENCES OF ANY
INTERRUPTIONS OR ERRORS RELATED THERETO. LYCOS SPECIFICALLY DISCLAIMS ALL
LIABILITY FOR THE LIFEMINDERS SITE, THE CO-BRANDED SERVICES, AND THE CONTENT
THEREIN, AND LIFEMINDERS SPECIFICALLY DISCLAIMS ALL LIABILITY FOR THE LYCOS
NETWORK AND THE CONTENT THEREIN. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, LYCOS MAKES NO EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH
RESPECT TO ANY PRODUCTS OFFERED OR SOLD THROUGH THE LYCOS NETWORK, THE
LIFEMINDERS SITE OR THE CO-BRANDED SERVICES (INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF FITNESS, MERCHANTABILITY, NON-INFRINGEMENT OR ANY IMPLIED
WARRANTIES ARISING OUT OF A COURSE OF PERFORMANCE, DEALING OR TRADE USAGE).
13. Indemnification; Insurance.
--------------------------
13.1 Indemnification.
---------------
13.1.1 LifeMinders Indemnity. LifeMinders will at all times defend,
---------------------
indemnify and hold harmless Lycos and its officers, directors, shareholders,
employees, accountants, attorneys, agents, affiliates, subsidiaries, successors
and assigns from and against any and all third party claims, damages,
liabilities, costs and expenses, including reasonable legal fees and expenses,
arising out of or related to: (i) any breach of any warranty, representation,
covenant or agreement made by LifeMinders in this Agreement; (ii) the
development, operation or maintenance of the LifeMinders Site, the Co-Branded
Site, the Co-branded Email Service, and the Content thereon; and (iii) the sale
or offering of any subscription to the Co-branded Email Service, and any other
products or services through the LifeMinders Site or the Co-branded Services,
including without limitation the purchase, acceptance, use or misuse of, or
reliance on, such products and services by any customer or user, so long as such
claims, damages, liabilities, costs and expenses do not arise out of the gross
negligence or willful misconduct of Lycos and its officers, directors,
shareholders, employees, accountants, attorneys, agents, affiliates,
subsidiaries. Lycos shall give LifeMinders prompt written notice of any claim,
action or demand for which indemnity is claimed. LifeMinders shall have the
right, but not the obligation, to control the defense and/or settlement of any
claim in which it is named as a party. Lycos shall have the right to
participate in any defense of a claim by LifeMinders with counsel of Lycos'
choice at Lycos' own expense. The foregoing indemnity is conditioned upon:
prompt written notice by Lycos to LifeMinders of any claim, action or demand
for which indemnity is claimed; complete control of the defense and settlement
thereof by LifeMinders; and such reasonable cooperation by Lycos in the defense
as LifeMinders may request.
13.1.2 Lycos Indemnity. Lycos will at all times defend, indemnify
---------------
and hold harmless LifeMinders and its officers, directors, shareholders,
employees, accountants, attorneys, agents, affiliates, subsidiaries, successors
and assigns from and against any and all third party claims, damages,
liabilities, costs and expenses, including reasonable legal fees and expenses,
arising out of or related to any breach of any warranty, representation,
covenant or agreement made by Lycos in this Agreement or the development,
operation or maintenance of the Lycos Network, including the content thereon
(but specifically excluding any content posted by users, including content
appearing in search results, chat or bulletin boards) so long as such claims,
damages, liabilities, costs and expenses do not arise out of the gross
negligence or willful misconduct of LifeMinders and its officers, directors,
shareholders, employees, accountants, attorneys, agents, affiliates,
subsidiaries. LifeMinders shall give Lycos prompt written notice of any claim,
action or demand for which indemnity is claimed. Lycos shall have the right, but
not the obligation, to control the defense and/or settlement of any claim in
which it is named as a party. LifeMinders shall have the right to participate in
any defense of a claim by Lycos with counsel of LifeMinders' choice at
LifeMinders' own expense. The foregoing indemnity is conditioned upon; prompt
written notice by LifeMinders to Lycos of any claim, action or demand for which
indemnity is claimed; complete control of the defense and settlement thereof by
Lycos; and such reasonable cooperation by LifeMinders in the defense as Lycos
may request.
<PAGE>
13.1.3 Settlement. Neither party shall, without the prior written
----------
consent of the other party, settle, compromise or consent to the entry of any
judgment with respect to any pending or threatened claim unless the settlement,
compromise or consent provides for and includes an express, unconditional
release of all claims, damages, liabilities, costs and expenses, including
reasonable legal fees and expenses, against the indemnified party.
13.2 Insurance. For the length of the Term, LifeMinders shall cause
---------
Lycos to be included as an "additional insured" on all of LifeMinders relevant
insurance policies that provide coverage of any kind relating to or regarding
the services or content provided by or the goods and products sold by
LifeMinders in accordance with the terms of this Agreement.
14. Confidentiality, Press Releases.
-------------------------------
14.1 Non-Disclosure Agreement. The parties agree and acknowledge that, as
------------------------
a result of negotiating, entering into and performing this Agreement, each party
has and will have access to certain of the other party's Confidential
Information (as defined below). Each party also understands and agrees that
misuse and/or disclosure of that information could adversely affect the other
party's business. Accordingly, the parties agree that, during the Term of this
Agreement and thereafter, each party shall use and reproduce the other party's
Confidential Information only for purposes of this Agreement and only to the
extent necessary for such purpose and shall restrict disclosure of the other
party's Confidential Information to its employees, consultants or independent
contractors with a need to know and shall not disclose the other party's
Confidential Information to any third party without the prior written approval
of the other party. Notwithstanding the foregoing, it shall not be a breach of
this Agreement for either party to disclose Confidential Information of the
other party if required to do so under law or in a judicial or other
governmental investigation or proceeding, provided the other party has been
given prior notice and the disclosing party has sought all available safeguards
against widespread dissemination prior to such disclosure. Notwithstanding
anything to the contrary in this section, in the event that LifeMinders engages
in a public offering, this Agreement may be made available in a SEC filing,
subject to Lycos' prior approval, such approval not to be unreasonably withheld,
and subject to customary redaction.
14.2 Confidential Information Defined. As used in this Agreement, the
--------------------------------
term "Confidential Information" refers to: (i) the terms and conditions of this
------------------------
Agreement; (ii) each party's trade secrets, business plans, strategies, methods
and/or practices; and (iii) other information relating to either party that is
not generally known to the public, including information about either party's
personnel, products, customers, marketing strategies, services or future
business plans. Notwithstanding the foregoing, the term "Confidential
------------
Information" specifically excludes (A) information that is now in the public
- -----------
domain or subsequently enters the public domain by publication or otherwise
through no action or fault of the other party; (B) information that is known to
either party without restriction, prior to receipt from the other party under
this Agreement, from its own independent sources as evidenced by such party's
written records, and which was not acquired, directly or indirectly, from the
other party; (C) information that either party receives from any third party
reasonably known by such receiving party to have a legal right to transmit such
information, and not under any obligation to keep such information confidential;
and (D) information independently developed by either party's employees or
agents provided that either party can show that those same employees or agents
had no access to the Confidential Information received hereunder.
14.3 Press Releases. Lycos and LifeMinders will jointly prepare a press
--------------
release concerning the existence of this Agreement and the terms hereof which
shall be released on or before thirty (30) days after the Launch Date and which
shall include quotes from senior executives of both parties. Otherwise, no
public statements concerning the existence or terms of this Agreement shall be
made or released to any medium except with the prior approval of Lycos and
LifeMinders or as required by law.
15. Termination. Either party may terminate this Agreement if (a) the other
-----------
party files a petition for bankruptcy or is adjudicated bankrupt; (b) a petition
in bankruptcy is filed against the other party and such petition is not
dismissed within sixty (60) days of the filing date; (c) the other party becomes
insolvent or makes an assignment for the benefit of its creditors pursuant to
any bankruptcy law; (d) a receiver is appointed for the other party or its
business; (e) upon the occurrence of a material breach of a material provision
by the other party if such breach is not cured within thirty (30) days after
written notice is received by the breaching party identifying the matter
constituting the material breach; or (f) by mutual consent of the parties.
16. Force Majeure. In the event that either party is prevented from
-------------
performing, or is unable to perform, any of its obligations under this Agreement
due to any cause beyond the reasonable control of the party invoking this
provision, the affected party's performance shall be excused and the time for
performance shall be extended for the period of delay or inability to perform
due to such occurrence.
17. Relationship of Parties. LifeMinders and Lycos are independent
-----------------------
contractors under this Agreement, and nothing herein shall be construed to
create a partnership, joint venture or agency relationship between LifeMinders
and Lycos. Neither party has authority to enter into agreements of any kind on
behalf of the other.
<PAGE>
18. Assignment, Binding Effect. Neither Lycos nor LifeMinders may assign
--------------------------
this Agreement or any of its rights or delegate any of its duties under this
Agreement without the prior written consent of the other which consent shall not
be unreasonably withheld, delayed or conditioned. Notwithstanding the
foregoing, Lycos may assign this Agreement to any successor of Lycos.
19. Choice of Law and Forum. This Agreement, its interpretation, performance
-----------------------
or any breach thereof, shall be construed in accordance with, and all questions
with respect thereto shall be determined by, the laws of the Commonwealth of
Massachusetts applicable to contracts entered into and wholly to be performed
within said state. LifeMinders hereby consents to the personal jurisdiction of
the Commonwealth of Massachusetts, acknowledges that venue is proper in any
state or Federal court in the Commonwealth of Massachusetts, agrees that any
action related to this Agreement must be brought in a state or Federal court in
the Commonwealth of Massachusetts, and waives any objection LifeMinders has or
may have in the future with respect to any of the foregoing.
20. Good Faith. The parties agree to act in good faith with respect to each
----------
provision of this Agreement and any dispute that may arise related hereto.
21. Counterparts and Facsimile Signatures. This Agreement may be executed in
-------------------------------------
multiple counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument. Facsimile
signatures will be considered original signatures.
22. No Waiver. The waiver by either party of a breach or a default of any
---------
provision of this Agreement by the other party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of either party to exercise or avail itself of
any right, power or privilege that it has, or may have hereunder, operate as a
waiver of any right, power or privilege by such party.
23. Successors and Assigns. This Agreement shall be binding upon and inure to
----------------------
the benefit of the parties hereto and their respective heirs, successors and
assigns.
24. Severability. Each provision of this Agreement shall be severable from
------------
every other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
25. Notices. All notice required to be given under this Agreement must be
-------
given in writing and delivered either in hand, by certified mail, return receipt
requested, postage pre-paid, or by Federal Express or other recognized overnight
delivery service, all delivery charges pre-paid, and addressed:
If to Lycos:
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451
Fax No.: (781) 370-2600
Attention: General Counsel
If to LifeMinders:
LifeMinders.com
733 Elden Street
Herndon, VA 20170
Fax No: (703) 707-8269
Attention: CEO
26. Entire Agreement. This Agreement and all exhibits contain the entire
----------------
understanding of the parties hereto with respect to the transactions and matters
contemplated hereby, supersedes all previous agreements between Lycos and
LifeMinders concerning the subject matter, and cannot be amended except by a
writing signed by both parties. No party hereto has relied on any statement,
representation or promise of any other party or with any other officer, agent,
employee or attorney for the other party in executing this Agreement except as
expressly stated herein.
27. Limitations of Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE
------------------------
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF SUCH DAMAGES ARE FORSEEABLE OR THAT PARTY HAS BEEN
ADVISED OR HAS CONSTRUCTIVE KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES),
ARISING FROM SUCH PARTY'S PERFORMANCE OR NON-PERFORMANCE PURSUANT TO ANY
PROVISION OF THIS AGREEMENT OR THE OPERATION OF SUCH PARTY'S SITE (INCLUDING
SUCH DAMAGES INCURRED BY THIRD PARTIES), SUCH AS, BUT NOT LIMITED TO, LOSS OF
REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. IN NO EVENT SHALL EITHER PARTY
BE LIABLE FOR DAMAGES IN EXCESS OF THE VALUE RECEIVED BY SUCH PARTY UNDER THIS
AGREEMENT. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, HOWEVER, THIS
SECTION SHALL NOT LIMIT EITHER PARTY'S LIABILITY TO THE OTHER FOR (A) WILLFUL
AND MALICIOUS MISCONDUCT; (B) DIRECT DAMAGES TO REAL OR TANGIBLE PERSONAL
PROPERTY; (C) BODILY INJURY OR DEATH CAUSED BY NEGLIGENCE; OR (D)
INDEMNIFICATION OR CONFIDENTIALITY OBLIGATIONS HEREUNDER.
28. Survival. All terms of this Agreement, which by their nature extend
--------
beyond its termination, remain in effect until fulfilled, and apply to
respective successors and assigns.
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the date set forth above.
LIFEMINDERS.COM INC.
By: /s/ Stephen R. Chapin, Jr.
------------------------------
Name: Stephen R. Chapin, Jr.
----------------------------
Title: President and CEO
---------------------------
Date: 8/31/99
----------------------------
<PAGE>
LYCOS, INC.
By: /s/ illegible
------------------------------
Name: illegible
----------------------------
Title: VP Finance & Admin.
---------------------------
Date: August 25, 1999
----------------------------
<PAGE>
EXHIBIT A
- ---------
<TABLE>
<CAPTION>
Total
Targeting September October November December January February March April May Imps
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lycos Channels
- ----------------
Computers 4,000,000 4,000,000 4,000,000 4,000,000 3,000,000 3,000,000 2,000,000 1,500,000 1,500,000 27,000,000
Games 2,000,000 2,000,000 2,000,000 2,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 15,500,000
Entertainment 4,000,000 4,000,000 4,000,000 4,000,000 3,000,000 3,000,000 3,000,000 1,000,000 1,000,000 27,000,000
Weather 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 4,500,000
Regional 250,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 6,250,000
Science & 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 900,000
Technology
Real Estate 350,000 300,000 400,000 200,000 100,000 100,000 400,000 600,000 600,000 3,050,000
Travel 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 3,600,000
News & Politics 1,200,000 1,200,000 1,200,000 1,200,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 9,800,000
Pictures & 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 9,000,000
Sounds
Chat 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 9,000,000
MyTime 250,000 250,000 300,000 300,000 370,000 370,000 370,000 370,000 370,000 2,950,000
Lycos 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 54,000,000
Personaliztion
Tripod Zones
- ----------------
Entertainment 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 9,000,000
Teens 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 4,500,000
Fun & Games 600,000 150,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 4,950,000
Homepage Banners
- ----------------
Lycos 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 6,750,000
WhoWhere 750,000 750,000 750,000 750,000 750,000 3,750,000
Angelfire 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 6,750,000
MailCity 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 6,750,000
HotBot 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 6,750,000
ROS Banners
- ----------------
Lycos 7,000,000 7,000,000 7,000,000 7,000,000 7,000,000 7,000,000 7,000,000 7,000,000 7,000,000 63,000,000
WhoWhere 2,000,000 6,000,000 10,000,000 12,500,000 20,000,000 22,500,000 25,000,000 27,500,000 30,000,000 155,500,000
Angelfire 25,000,000 27,500,000 35,000,000 35,000,000 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 322,500,000
MailCity 20,000,000 25,000,000 30,000,000 35,000,000 45,000,000 45,000,000 45,000,000 45,000,000 45,000,000 335,000,000
HotBot 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 36,000,000
Angelfire 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 81,000,000
HomePage
(106x60)
Text Links
- ----------------
MyTime Text 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 810,000
Link
Halloween 700,000 700,000
Promotion
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total
Targeting September October November December January February March April May Imps
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other Promotions 1,500,000
Millenium Guide 500,000 750,000 1,000,000 1,000,000 500,000 3,750,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B
- ---------
Initially, Lycos shall place prominent links to the Co-branded Site as follows:
1. On the www.mailcity.com navigation bar, and on the www.mailcity.com
---------------- ----------------
registration pages, promoted as an opt in service for users;
2. On the New Services area and as a configurable component of my.lycos.com;
3. On the Activities Center of clubs.lycos.com;
4. In the following pages or areas of www.tripod.com: (a) Log-in Page, (b) text
--------------
link on the Front Page, (c) Tripod Builder Pages, and (d) Welcome Page; and
5. Tripod Insider Newsletter second page, promoted as an opt-in email service
for users.
<PAGE>
EXHIBIT C
---------
ADDITIONAL ADVERTISING TERMS
----------------------------
1. Changes and Cancellations. All artwork must be received at least five days
-------------------------
in advance of publication date. Cancellations or copy changes will not be
accepted after the published closing date of the update to the Lycos site.
Lycos must receive changes to artwork at least five days in advance of requested
change date. Lycos may not unreasonably limit the amount of artwork submitted by
LifeMinders. Lycos' ad banner specifications are accessible through the URL
adreporting.lycos.com/specs.html; Lycos reserves the right to change any of its
ad banner specifications at any time. Any cancellations or change orders must
be made in writing and acknowledged by Lycos.
2. Licenses and Indemnification. LifeMinders represents that it is the owner
----------------------------
or is licensed to use the entire contents and subject matter contained in its
advertising and collateral information, including, without limitation, (a) the
names and/or pictures of persons; (b) any copyrighted material, trademarks,
service marks, logos, and/or depictions of trademarked or service marked goods
or services; and (c) any testimonials or endorsements contained in any
advertisement submitted to Lycos. In consideration of Lycos' acceptance of such
advertisements and information for publication, LifeMinders will jointly and
severally indemnify and hold Lycos harmless against all loss, liability, damage
and expense of any nature (including reasonable attorney's fees) arising out of
the copying, printing, distributing, or publishing of LifeMinders'
advertisements. If LifeMinders possesses any preexisting copyright interests in
the advertisements, advertiser grants Lycos the right to use, reproduce, and
distribute the advertisements.
3. Key Words and Phrases. Each advertiser may be given a "first right" to its
---------------------
exact company name and trademarks for keyword/phrase advertising. Lycos may
pre-empt an existing key word/phrase advertiser by submitting a three-month
advertising contract. The existing contract-holder for the key word/phrase will
be provided with a two-week notification of preemption and will receive a pro-
rated refund for any unfulfilled number of guaranteed impressions. If two or
more advertisers have the same name or trademark, the allocation will be on a
first-come basis and the existing contract will take precedence.
4. Rejections. Lycos reserves the right, without liability, to reject, omit or
----------
exclude any advertisement or to reject or terminate any links for any reason at
any time, with or without notice to LifeMinders, and whether or not such
advertisement or link was previously acknowledged, accepted, or published.
5. Limitation of Liability. Lycos shall not be liable for any errors in
-----------------------
content or omissions. Should an error appear in an advertisement, Lycos'
liability will be limited to the cost of the advertisement (prorated for the
publishing completed).
<PAGE>
EXHIBIT D
---------
LYCOS COMPETITORS
-----------------
The term "Lycos Competitors" shall include the following entities:
Alta Vista
AOL
Excite/At Home
FortuneCity
Geocities
Go Network
Go.com
Go2Net
GoTo.com
Infoseek
Infospace
Looksmart
Microsoft
Netscape
Planet Direct
Snap
The Globe
Xoom
Yahoo
Within five business days after the Effective Date, and on a quarterly basis
thereafter, Lycos may update this Exhibit D with additional Competitors, subject
---------
to LifeMinders' approval, which approval shall not be unreasonably withheld or
delayed.
<PAGE>
OFFICE BUILDING LEASE AGREEMENT
DEFINITIONS AND BASIC LEASE INFORMATION
LEASE DATE: June 11, 1999
TENANT: Lifeminders.com inc.
1110 Herndon Parkway
(Third Floor)
Herndon, VA 20170
PHONE:
LANDLORD: SOVRAN LIMITED COMPANY
LANDLORD ADDRESS: c/o The Mark Winkler Company
4900 Seminary Road, Suite 900
Alexandria, VA 22312
CONTACT: Donald L. Schubring
TELEPHONE: (703)758-2299
PREMISES: The third floor of building No. 4 also known as
1110 Herndon Parkway, Herndon, Fairfax County,
Virginia ("Building") constituting a part of the
--------
shopping center known as Herndon Parkway Center
("Shopping Center"). The premises are outlined on
---------------
the plan attached to the Lease as Exhibit A, and
shall be deemed to contain 12,954 square feet of
Rentable Area.
TENANT IMPROVEMENTS: Landlord will pay up to fifteen dollars ($15.00)
per RSF ("Tenant Improvement Allowance") expendable
for the costs of the design and construction of the
Tenant Improvements to be carried out by Tenant's
contractor according to a mutually agreed upon
space plan within two months after the execution of
the Lease Agreement.
A rough drawing of a space plan for the Premises
has been prepared by Tenant's architect and has
been presented to, and met the approval of,
Landlord (Appendix A). The final space plan for the
Premises, incorporating the details and Landlord's
suggestions shall be prepared by Tenant and
presented to Landlord within two (2) weeks
following the execution of the Lease Agreement and
its delivery to Landlord. The parties agree
<PAGE>
to negotiate in good faith to resolve their differences
of opinion, if any, concerning the space plan and will
agree to any changes which might be required by the
appropriate authorities in order to receive the final
approval of a space plan.
The build out of the Premises shall start shortly after
Tenant obtained the approval of the appropriate
authorities of the changes required. All cost of design
and construction of Tenant Improvements in excess of the
Tenant Improvement Allowance shall be paid by Tenant.
LANDLORD'S WORK Landlord shall, with reasonable notice, have access to
the Premises after the Lease Commencement Date and when
appropriate for the purposes of installing new air
conditioning units and repairing and rearranging the duct
works. Landlord shall coordinate with Tenant's
construction manager times which will not interfere with
on-going construction. Landlord shall complete the
installment of air conditioning units and the repair of
duct works within forty five (45) days after the
execution of the Lease Agreement. Tenant shall receive
day to day rent abatement if HVAC does not function after
the expiration of sixty (60) days from the execution of
the Lease Agreement.
OCCUPANCY/COMMENCEMENT The Lease shall commence upon the execution of the
TERM: Lease Agreement and shall end five (5) years and two (2)
months after the execution of the Lease Agreement.
RENT ABATEMENT: Landlord shall abate first two (2) months' rent.
RENT: Rent per year, payable in monthly installments, as
follows:
Annual Basic Monthly
Year Rental Rate Installment
---- ----------- -----------
First year $226,695.00 $18,891.25
ESCALATION: 3% Annually after the first year.
PARKING: Tenant shall be entitled to fifty five (55) parking
spaces at the location
2
<PAGE>
designated by Landlord. Landlord shall have no
obligation to police the use of such spaces.
TENANT'S PROPORTIONATE 28.10% which is the percentage obtained by dividing
SHARE OF OPERATING EXPENSES: (i) the 12,954 square feet of Rentable Area in the
Premises by (ii) the total 46,059 rentable square
feet contained in all of the buildings located in
the Shopping Center.
TENANT'S PROPORTIONATE 49.6% which is the percentage obtained by dividing
SHARE OF BUILDING EXPENSES: (i) the 12,954 square feet of Rentable area in the
Premises by (ii) the total 26,107 square feet of
Rentable Area in the office portion of the
Building.
PERMITTED USE: General office use and no other purpose. The
premises may not be used by a bank or financial
institution.
SECURITY DEPOSIT: One hundred thousand Dollars ($100,000.00) in the
form of letter of credit.
APPURTENANT FACILITIES: The parking areas, landscaping, sidewalks, and
other facilities now or hereafter located on the
Land (other than the Building) which are used in
connection with the operation of the Building.
BROKER: Trammel Crow Real Estate Services, Inc. (TCRES)
represented the interests of the Tenant throughout
this transaction and the Mark Winkler Company
represented Landlord throughout this transaction.
The brokers' fee shall be paid by Landlord under
separate agreement.
THE FOREGOING LEASE INFORMATION IS INCORPORATED INTO AND MADE A PART OF THE
LEASE, BUT DOES NOT CONSTITUTE THE ENTIRE LEASE. IN THE EVENT OF ANY CONFLICT
BETWEEN THE FOREGOING LEASE INFORMATION AND THE TERMS OF THE OFFICE BUILDING
LEASE AGREEMENT WHICH FOLLOWS, THE TERM OF THE OFFICE BUILDING LEASE AGREEMENT
WILL GOVERN. TENANT ACKNOWLEDGES THAT IT HAS READ ALL THE PROVISIONS CONTAINED
IN THE ENTIRE LEASE AND ALL EXHIBITS WHICH ARE A PART THEREOF AND AGREES THAT
THIS LEASE, INCLUDING THE BASIC LEASE INFORMATION AND ALL EXHIBITS, REFLECTS
THE ENTIRE UNDERSTANDING AND REASONABLE EXPECTATIONS OF LANDLORD AND TENANT
REGARDING THE PREMISES. TENANT ALSO ACKNOWLEDGES THAT IT HAS THE OPPORTUNITY TO
3
<PAGE>
REVIEW THIS LEASE PRIOR TO EXECUTION WITH LEGAL COUNSEL AND SUCH OTHER ADVISORS
AS TENANT DEEMS APPROPRIATE. IN THE EVENT ANY CONFLICT EXISTS BETWEEN ANY BASIC
LEASE INFORMATION AND THE LEASE, THEN THE LEASE SHALL CONTROL.
SOVRAN LIMITED COMPANY LIFEMINDERS.COM INC.
LANDLORD TENANT
By: /s/ Mahmoud Katirai By:[SIGNATURE APPEARS HERE]
-------------------------- --------------------------
Mahmoud Katirai Its: VP & CFO
Its: President
EXHIBITS:
Exhibit "A": Outline of Premises
-------------------
Exhibit "B": Building Rules and Regulations
------------------------------
Exhibit "C": Form of Letter of Credit
-------------------------
Exhibit "D": Option of Review
----------------
4
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS AND BASIC PROVISIONS
a. Basic Lease Information.................................... 1
-----------------------
b. Rentable Area.............................................. 1
-------------
c. Service Areas.............................................. 1
-------------
d. Building-Shared Areas...................................... 1
---------------------
e. Floor-Shared Areas......................................... 1
------------------
f. Stipulations as to Area.................................... 1
-----------------------
2. LEASE GRANT........................................................... 1
3. TERM.................................................................. 2
4. RENT.................................................................. 2
a. Payment.................................................... 2
-------
b. Operating and Building Expense Escalator................... 3
----------------------------------------
c. Operating Expenses......................................... 3
------------------
d. Building Expenses.......................................... 5
-----------------
e. Adjustment................................................. 6
----------
f. Gross-Up................................................... 7
--------
g. Direct Taxes............................................... 7
------------
h. Survivability of Obligations............................... 7
----------------------------
5. DELINQUENT PAYMENT; LATE CHARGES...................................... 7
6. SECURITY DEPOSIT...................................................... 8
7. LANDLORD'S OBLIGATIONS................................................ 8
a. Services................................................... 9
--------
b. Utility Charges............................................ 9
---------------
c. Discontinuance............................................. 9
--------------
d. Restoration of Services; Abatement......................... 9
----------------------------------
8. IMPROVEMENTS; ALTERATIONS; REPAIRS; MAINTENANCE....................... 9
a. Improvements; Alterations.................................. 9
-------------------------
b. Repairs; Maintenance....................................... 10
--------------------
c. Performance of Work........................................ 10
-------------------
d. Mechanic's Liens........................................... 10
----------------
e. Landlord's Warranty........................................ 11
-------------------
9. USE................................................................... 11
a. Permitted Use/Compliance with Laws......................... 11
----------------------------------
b. Hazardous Materials........................................ 11
-------------------
10. ASSIGNMENT AND SUBLETTING............................................. 12
a. Assignment or Sublease..................................... 12
----------------------
b. Consent.................................................... 12
-------
c. Additional Compensation.................................... 13
-----------------------
d. Continued Liability........................................ 13
-------------------
e. Transfer of Controlling Interest........................... 13
--------------------------------
f. Landlord's Right to Recapture the Premises................. 13
------------------------------------------
g. Costs and Expenses......................................... 13
------------------
11. INSURANCE; WAIVERS; SUBROGATION; INDEMNITY............................ 13
a. Insurance.................................................. 13
---------
b. Waiver; No Subrogation..................................... 14
----------------------
c. Indemnity.................................................. 14
---------
<PAGE>
12. SUBORDINATION ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE.............. 14
a. Subordination.............................................. 14
-------------
b. Attornment................................................. 14
----------
c. Notice to Landlord's Mortgagee............................. 15
------------------------------
d. Certificates Requested by Landlord's Mortgagee............. 15
----------------------------------------------
13. RULES AND REGULATIONS................................................. 15
14. CONDEMNATION.......................................................... 15
15. FIRE OR OTHER CASUALTY................................................ 15
a. Repair Estimate............................................ 15
---------------
b. Landlord's and Tenant's Rights............................. 16
------------------------------
c. Landlord's Rights.......................................... 16
-----------------
d. Repair Obligation.......................................... 16
-----------------
16. TAXES................................................................. 16
17. EVENTS OF DEFAULT..................................................... 16
18. REMEDIES.............................................................. 17
19. PAYMENT BY TENANT; NON-WAIVER......................................... 18
a. Payment by Tenant.......................................... 18
-----------------
b. No Waiver.................................................. 18
---------
20. SURRENDER OF PREMISES................................................. 18
21. HOLDING OVER.......................................................... 19
22. CERTAIN RIGHTS RESERVED BY LANDLORD................................... 19
23. MISCELLANEOUS......................................................... 20
a. Landlord Transfer.......................................... 20
-----------------
b. Landlord's Default and Liability........................... 20
--------------------------------
c. Force Majeure.............................................. 21
-------------
d. Criminal Acts of Third Parties............................. 21
------------------------------
e. Brokerage.................................................. 21
---------
f. Estoppel Certificates...................................... 21
---------------------
g. Notices.................................................... 21
-------
h. Severability............................................... 22
------------
i. Amendments; and Binding Effect............................. 22
------------------------------
j. Quiet Enjoyment............................................ 22
---------------
k. Joint and Several Liability................................ 22
---------------------------
l. Captions................................................... 22
--------
m. No Merger.................................................. 22
---------
n. No Offer................................................... 22
--------
o. No Rights to Use of Building Name.......................... 22
---------------------------------
p. Time of Essence............................................ 23
---------------
q. Authority of Parties....................................... 23
--------------------
r. Governing Law.............................................. 23
-------------
s. Right of First Offer....................................... 23
--------------------
t. Option to Terminate........................................ 23
-------------------
u. Signage.................................................... 24
-------
v. Satellite Dish............................................. 24
--------------
w. Exhibits................................................... 24
--------
<PAGE>
24. SPECIAL PROVISIONS.................................................... 24
a. Condition ................................................. 24
---------
3
<PAGE>
OFFICE BUILDING LEASE AGREEMENT
THIS OFFICE BUILDING LEASE AGREEMENT ("the
Lease") is entered into as of June 11, 1999 between
-----
SOVRAN LIMITED COMPANY, a Virginia corporation
("Landlord") and LifeMinders.com Inc., a Maryland
--------
corporation ("Tenant").
------
DEFINITIONS AND 1. a. Basic Lease Information. The
BASIC -----------------------
PROVISIONS definitions and basic provisions set forth in the
Basic Lease Information (the "Basic Lease
-----------
Information") executed by Landlord and Tenant
-----------
contemporaneously herewith are incorporated herein
by reference for all purposes.
b. Rentable Area. All provisions
-------------
included in this Lease relating to the Rentable
Area of the Premises, including, but not limited
to, Basic Rental and Tenant's Proportionate Share,
shall be adjusted to reflect the actual number of
rentable square feet in the Premises. The
calculation of the Rentable Area shall be made by
Landlord in accordance with the method of measuring
rentable square feet described by the Washington,
D.C. Board of Realtors Standard Method of
Measurement. If an adjustment to the Rentable Area
is made after this Lease is executed by Landlord
and Tenant, the Basic Rental and Tenant's
Proportionate Share shall be adjusted accordingly.
c. Service Areas. "Service Areas"
------------- -------------
means the square footage of the areas within (and
measured from the mid-point of the walls enclosing)
the Building stairs, fire towers, elevator shafts,
flues, vents, stacks, pipe shafts, vertical ducts
and other vertical penetrations. Areas for the
specific use of a tenant and installed at the
request of a tenant such as special stairs or
elevators are not included within the definition of
Service Areas, and such areas will be included in
the Rentable Area of the space being measured.
d. Building-Shared Areas.
---------------------
"Building-Shared Areas" means the square footage of
---------------------
the areas within (and measured from the mid-point
of the walls enclosing) the Building elevator
machine rooms, main mechanical and electrical
rooms, public lobbies, and other areas not leased
or held for lease within the Building and not
included in Service Areas or Floor-Shared Areas,
but which are necessary or desirable for the proper
utilization of the Building or to provide customary
services to the Building.
e. Floor-Shared Areas. "Floor-
------------------ -----
Shared Areas" means the square footage of the areas
------------
within (and measured from the mid-point of the
walls enclosing) public corridors, elevator foyers,
rest rooms, mechanical rooms, janitor closets,
telephone and equipment rooms, and other similar
facilities for the use of all tenants on the floor
on which the Premises are located and which are not
included in Service Areas or Rentable Area of a
Particular tenant.
f. Stipulations as to Area.
-----------------------
Landlord and tenant hereby agree that the Rentable
Area of the Premises has been calculated on the
basis of the feregoing definitions to be the number
of square feet of Rentable Area for the Premises
set forth in the Basic Lease Information.
LEASE GRANT 2. Subject to the terms of this Lease,
Landlord leases to Tenant, and Tenant leases from
Landlord, the Premises. In addition, Tenant shall
have the non-exclusive right, along with Landlord
and all other tenants in the Building and their
invitees, to use areas designated by Landlord to be
the common areas in the Building and the
Appurienant Facilities, except any portions thereof
designated for the use of specific tenants.
<PAGE>
TERM 3. If the Commencement Date is not the first day of a calendar
month, then the Term shall be extended by the time between the
Commencement Date and the first day of the next month. In the
event Tenant occupies the Premises prior to the scheduled
Commencement Date, the Commencement Date shall be defined as the
date such occupancy commences. If this Lease is executed before
the Premises become vacant or otherwise available and ready for
occupancy by Tenant, or if any present occupant of the Premises
holds over and Landlord cannot acquire possession of the
Premises before the Commencement Date, then (a) Tenant's
obligation to pay Rent hereunder shall be waived until Landlord
tenders possession of the Premises to Tenant, (b) the Term shall
be extended by the time between the scheduled Commencement Date
and the date on which Landlord tenders possession of the Premises
to Tenant (which date will then be defined as the Commencement
Date), (c) Landlord shall not be in default hereunder or be
liable for damages therefor, and (d) Tenant shall accept
possession of the Premises when Landlord tenders possession
thereof to Tenant. By occupying the Premises, Tenant shall be
deemed to have accepted the Premises in their condition as of the
date of such occupancy, subject to the performance of punch-list
items that remain to be performed by Landlord, if any. By
occupying the Premises, Tenant shall be deemed to have accepted
the Premises in their condition as of the date of such
occupancy, subject to the performance of punch-list items that
remain to be performed by Landlord, if any. Landlord shall have
the right, but not the obligation, to deliver to Tenant a letter
(the "Confirmation Letter") confirming (i) the Commencement Date,
------------ ------
(ii) that Tenant has accepted the Premises, and (iii) that
Landlord has performed all of its obligations, if any, with
respect to the condition of the Premises (except for punch-list
items specified in such Confirmation Letter). All information set
forth in the Confirmation Letter shall be deemed correct and
binding on both Landlord and Tenant, unless Tenant objects to any
such information in writing to Landlord within thirty (30) days
of Tenant's receipt of the Confirmation Letter. If requested by
Landlord, Tenant shall execute and deliver to Landlord, within
ten (10) business days after Landlord has requested same, a copy
of the Confirmation Letter, although Tenant's failure to execute
or deliver the same shall not limit the binding nature thereof if
Tenant fails to object in writing to any information set forth
therein within the time period provided in this Section 3.
RENT 4. a. Payment. Tenant shall timely pay to Landlord the Basic
-------
Rental and all additional sums to be paid by Tenant to Landlord
under this Lease, including the amounts set forth in Section 4b.,
without notice, demand, counterclaim, set-off or abatement, at
Landlord's Address (or such other address as Landlord may from
time to time designate in writing to Tenant). Basic Rental,
adjusted as herein provided, shall be payable monthly in advance
except as otherwise provided in this Lease, The first monthly
installment of Basic Rental shall be payable contemporaneously
with the execution of this Lease, the second installment, to
cover the rent of the time between three months after the
Commencement Date and the first day of the fourth full calendar
month, shall be made three months after the Commencement Date,
the third installment of one month rent shall be due on the first
day of fourth full calendar month and a like monthly installment
of Basic Rental shall be due on the first day of the fifth full
calendar month of the Term and continuing thereafter on the first
day of each succeeding calendar month during the Term. Basic
Rental for any fractional month at the beginning of the Term
shall be prorated and shall be due on the Commencement Date. In
addition to Basic Rental, all other payments to be made by Tenant
pursuant to this Lease shall be deemed to be and shall become
additional rent hereunder, whether or not the same be designated
as such, and shall be subject to the
2
<PAGE>
same terms and provisions as the Basic Rental, and
Landlord shall have the same remedies for failure
to pay the same as for nonpayment of Basic Rental.
b. Operating and Building Expense
------------------------------
Escalator. Starting on September 1, 2000, Tenant
---------
shall pay an amount equal to the excess ("Excess
------
Operating and Building Expense") of Tenant's
------------------------------
Proportionate Share of the Operating and Building
Expenses for each calendar year or part thereof
during the Term, over the Operating and Building
Expenses for the year 1999. Until September 1,
2000, however, Tenant shall not be responsible for
Excess Operating and Building Expense. Landlord
will make a good faith estimate of the Excess
Operating and Building Expenses to be due by Tenant
for any calendar year or part thereof during the
Term, and, unless Landlord delivers to Tenant a
revision of the estimated Excess Operating and
Building Expenses, Tenant shall pay to Landlord, on
September 1, 2000 and on the first day of each
calendar month thereafter, an amount equal to the
estimated Excess Operating and Building Expenses
for such calendar year or part thereof divided by
the number of months in such calendar year during
the Term. From time to time during any calendar
year, Landlord may estimate and re-estimate the
Excess Operating and Building Expenses to be due by
Tenant for that calendar year and deliver a copy of
the estimate or re-estimate to Tenant. Thereafter,
the monthly installments of Excess Operating and
Building Expenses payable by Tenant shall be
appropriately adjusted in accordance with the
estimations so that, by the end of the calendar
year in question, Tenant shall have paid all of the
Excess Operating and Building Expenses as estimated
by Landlord. Any amounts paid based on such an
estimate shall be subject to adjustment pursuant to
Section 4e, when actual Operating and Building
Expenses are available for each calendar year.
c. Operating Expenses. For the purposes
------------------
of this Section 4, the term "Operating Expenses"
------------------
shall mean all expenses and disbursements of every
kind (subject to the limitations set forth below)
which Landlord incurs, pays or becomes obligated to
pay in connection with the ownership, operation,
and maintenance of the Shopping Center (exclusive
of Building Expenses), determined in accordance
with generally accepted federal income tax basis
accounting principles consistently applied,
including but not limited to the following:
(i) Management fees as well as wages and
salaries of all employees engaged in the
operation, repair, replacement, maintenance,
and security of the Shopping Center, including
taxes, insurance and benefits relating thereto;
(ii) All tools, equipment, supplies and
materials used in the operation, maintenance,
repair, replacement, and security of the
Shopping Center;
(iii) Annual cost of all capital
improvements made to the Shopping Center --
excluding interest except when the funds
required for such improvements were borrowed by
Landlord from a bank or financial institution
-- which can reasonably be expected to reduce
the normal operating costs of the Shopping
Center, as well as all capital improvements
made in order to comply with any law hereafter
promulgated by any governmental authority
relating to energy, conservation, public safety
or security, as amortized over the useful
economic life of such improvements as
determined by Landlord in its reasonable
discretion (without regard to the period over
which such improvements may be depreciated or
amortized for
3
<PAGE>
federal income tax purposes);
(iv) Cost of all utilities for the
Shopping Center, including the cost of water,
sewer and power for lighting those portions of
the Shopping Center that are exterior to the
Building, and other buildings in the Shopping
Center,
(v) Cost of any insurance or insurance
related expense applicable to the Shopping
Center, including the Building, and the other
buildings in the Shopping Center, and
Landlord's personal property used in connection
therewith, except increase in insurance cost
solely caused by the activities of another
occupant of the Shopping Center.
(vi) All taxes and assessments and
governmental charges whether federal, state,
county or municipal, and whether they be by
taxing districts or authorities presently
taxing or by others, subsequently created or
otherwise, and any other taxes and assessments
attributable to the Shopping Center, including
the Building, and other buildings in the
Shopping Center and the land comprising the
Shopping Center (or the operation or leasing
thereof), including, without limitation, any
gross revenue tax, sales tax, value-added tax,
or similar tax; excluding, however, Direct
Taxes (as defined in Paragraph 4g. hereof),
federal and state taxes on income
(collectively, "Taxes"); if the present method
of taxation charges so that in lieu of the
whole or any part of any Taxes levied on the
Shopping Center, there is levied on Landlord a
capital tax directly on the rents received
therefrom or a franchise tax, assessments, or
charge based, in whole or in part, upon such
rents for the Shopping Center, then all such
taxes, assessments, or charges, or the part
thereof so based, shall be deemed to be
included within the term "Taxes" for the
purposes hereof;
(vii) Cost of repairs, replacements, and
general maintenance of the Shopping Center,
exclusive of such of those costs which are
attributable solely to the Building or the
other buildings in the Shopping Center; and
(viii) Cost of the service or maintenance
contracts with independent contractors for the
operation, maintenance, repair, replacement, or
security of the Shopping Center (including
without limitation, landscaping, trash removal,
snow removal, and cleaning, striping and
maintenance of parking areas), but exclusive of
such of those costs which are attributable
solely to the Building or the other buildings
in the Shopping Center,
There are specifically excluded from the definition
of the term "Operating Expenses" costs (1) for
capital improvements made to the Shopping Center,
other than capital improvements described in
subparagraph (iii) above and except for items
which, though capital for accounting purposes, are
properly considered maintenance and repair items,
such as painting of common areas, replacement of
carpet in elevator lobbies, and the like; (2) for
repair, replacements and general maintenance paid
by proceeds of insurance or by Tenant or other
third parties, and alterations attributable solely
to tenants of the Shopping Center other than
Tenant; (3) for interest, amortization or other
payments on loans to Landlord; (4) for depreciation
of the Shopping Center; (5) for leasing
commissions; (6) for legal expenses other than
those incurred for the purpose of reducing
Operating Expenses (e.g., legal fees incurred in
contesting the assessment of Taxes); (7) for
4
<PAGE>
replacement, or security of the building
(including, without limitation, alarm service,
window cleaning, and elevator maintenance).
There are specifically excluded from the definition
of the term "Building Expenses" costs: (1) for
capital improvements made to the Building, other
than capital improvements described in subparagraph
(iii)above and except for items which, though
capital for accounting purposes, are properly
considered maintenance and repair items, such as
painting of common areas, replacement of carpet in
elevator lobbies, and the like; (2) for repair,
replacements and general maintenance paid by
proceeds of insurance or by Tenant or other third
parties, and alterations attributable solely to
tenants of the Building other than Tenant; (3) for
interest, amortization or other payments on loans
to Landlord; (4) for depreciation of the Building;
(5) for leasing commissions; (6) for legal expenses
other than those incurred for the purpose of
reducing Operating Expenses (e.g., legal fees
incurred in contesting the assessment of Taxes);
(7) for renovation or otherwise improving space for
occupants of the Building or vacant space in the
Building; (8) for correcting defects in the
construction of the Building; (9) for federal
income taxes imposed on or measured by the income
of Landlord from the operation of the Building;
(10) occasioned by the act, omission or violation
of any Law by Landlord or any other occupant of the
Building, or their respective agents, contractors;
(11) occasioned by condemnation, (12) to correct
any construction defect in the Building or to
comply with any law applicable to the Building on
the Commencement Date, (13) of any renovation,
improvement, painting or redecoration of any
portion of the Building not made available for
Tenant's use or benefit; (14) incurred in
connection with marketing or any occupant of the
Building (other then Tenant) of the terms and
conditions of any lease or other agreements; (15)
incurred in connection with the presence of any
Hazardous Material which may exist in the Building
on the Commencement Date except to the extent
caused by the release or emission of the Hazardous
Materials in question by Tenant and (16) executives
salaries.
e. Adjustment. The annual cost
statement shall include a statement of Landlord's
actual Operating and Building Expenses for the
previous year adjusted as provided in Sections 4c
and 4d. If the annual cost statement reveals that
Tenant paid more for Operating and Building
Expenses than the actual Excess Operating and
Building Expenses in the year for which such
statement was prepared, then Landlord shall credit
against the next Operating and Building Expenses
payment due or reimburse Tenant for such excess;
likewise, if Tenant paid less than the actual
Excess Operating and Building Expenses, then Tenant
shall pay Landlord such deficiency within sixty
(60) days after delivery of such annual cost
statement. Within sixty (60) days after the receipt
of Landlord's annual cost statement, Tenant shall
have the right to request copies of a statement of
"Operating and Building Expenses of the Building"
prepared by the Landlord in accordance with a
method of accounting consistently applied from year
to year, which shall be supplied to the Tenant
within a reasonable time after Tenant's written
request, but no such request shall extend the time
for payment as set forth herein. Unless Tenant
asserts specific error(s) within thirty (30) days
after Landlord has complied with Tenant's request,
the statement submitted by Landlord shall be deemed
to be correct. Provided Tenant timely asserts such
specific errors, and is current in obligations to
Landlord for the payment of all sums due to
Landlord as Rent under this Lease, and has not
otherwise defaulted in its obligations to Landlord
under this Lease, Tenant shall have the right,
exercisable no more than once per Lease Year, to
cause Landlord's books
6
<PAGE>
and records showing Taxes and Operating Expenses for the prior
Lease Year to be examined by a Certified Public Accountant,
engaged by Tenant, upon no less than thirty (30) days prior
written notice and during normal business hours at any time
within one hundred and eighty (180) days following the expiration
of the prior Lease Year. No such Certified Public Accountant may
be engaged on a contingent fee basis. Such examination shall, at
Landlord's option, occur at the offices of the Landlord's
management agent, and shall not take more than thirty (30) days
to complete. Any information obtained by Tenant from such
examination will be treated as confidential unless and until such
information has been publicly disclosed by Landlord; provided,
however, that nothing herein contained shall limit or impair the
right or obligation of Tenant to disclose such information when
required to do so by law or to appropriate regulatory authorities
having jurisdiction over its affairs, or to use the same in
connection with the enforcement of the terms and conditions of
the Lease. As a condition of such examination, Landlord may
require any party reviewing or having access to Landlord's
records to execute and deliver to Landlord a confidentiality
agreement in a form reasonably satisfactory to Landlord. In the
event that such examination reveals that Building or Operating
Expenses have been overstated by five percent (5%) or more,
Landlord shall afford a credit to Tenant against the next monthly
payments of estimated Operating Costs due as contemplated by
this Paragraph 4(e) for any overpayments previously made by
Tenant; similarly, if such examination reveals that Operating or
Building Expenses for any Lease Year have been understated,
Tenant shall pay to Landlord, within thirty (30) days of
completion of such examination, the amount by which Operating
Expenses and/or Building Expenses have been understated.
f. Gross-Up. With respect to any calendar year or partial
--------
calendar year in which the entire Rentable Area of the Building
is not occupied, the Building Expenses for such period that vary
with occupancy will, for the purposes hereof, be increased to the
amount which would have been incurred had ninety-five percent
(95%) of the Rentable Area of the Building been occupied, based
on good faith estimates made by Landlord and the management
company managing the Building.
g. Direct Taxes. At the same time and in the same manner
------------
as the payment of Basic Rental hereunder, Tenant shall pay any
gross revenue tax, sales tax, excise tax, value-added tax,
privilege tax, or similar tax imposed by any government or
governmental agency upon Tenant or Landlord on account of the
Lease or the payment of Rent hereunder ("Direct Taxes").
------------
h. Survivability of Obligations. All obligations of Tenant
----------------------------
to pay Rent accrued prior to termination of this Lease shall
survive such termination.
DELINQUENT 5. a. All Rent to be paid by Tenant to Landlord shall be in
PAYMENT lawful money of the United States of America and shall be paid
CHARGES without deduction or offset, prior notice or demand, at the
address set forth in the Basic Lease Information, or at such
other places as may be designated from time to time by Landlord.
In the event a check is submitted by Tenant for payment, and is
returned for insufficient funds, a $25 handling fee will be
assessed by Landlord. If thereafter a second check is returned
for insufficient funds, another handling fee in the amount of
$50 will be assessed, and all future payments thereafter must be
made in cash or by cashier's or certified check. In the event any
Rent is not received within ten (10) days after its due date for
any reason whatsoever, then in addition to the past due amount
Tenant shall pay to Landlord one of the following
7
<PAGE>
(the choice to be at the sole option of Landlord
unless one of the choices is improper under
applicable law, in which event the other
alternative will automatically be deemed to have
been selected): (a) a late charge in an amount
equal to five percent (5%) of the Rent then past
due, in order to compensate Landlord for its
administrative and other overhead expenses; and (b)
interest on the Rent then past due at a rate equal
to the lesser of (i) fifteen percent (15%) per
annum, or (ii) the maximum contractual rate which
could legally be charged in the event of a loan of
such Rent to Tenant, such interest to accrue
continuously on any unpaid balance due to Landlord
by Tenant during the period commencing with the
Rent due date and terminating with the date on
which Tenant makes full payment of all amounts
owing to Landlord at the time of said payment. Any
such late charge or interest payment shall be
payable as additional Rent under this Lease and
shall be payable immediately on demand. In no
event, however, shall the charges permitted under
this Section 5 or elsewhere in this Lease, to the
extent the same are considered to be interest under
applicable law, exceed the maximum lawful contract
rate of interest.
SECURITY 6. a. Contemporaneously with the execution
DEPOSIT of this Lease, the sum of one hundred thousand
Dollars ($100,000.00) shall be delivered to
Landlord as a Security Deposit (the "Security
Deposit") pursuant to this Lease shall be security
for the payment and performance by Tenant of all
Tenant's obligations, covenants, conditions and
agreements under this Lease. Such sum shall be
either in cash, or in a letter of credit ("Letter
of Credit"). Upon the expiration of the Term
hereof, or any extension or renewal thereof,
Landlord shall, if Tenant is not in default, return
such Security Deposit to Tenant, less portion
thereof as Landlord shall have appropriated to make
good any default by Tenant with respect to Tenant's
obligations within ninety (90) days of such
expiration. If Tenant makes any default during the
term of this Lease, Landlord shall have the right,
but not the obligation, to apply all or any portion
of the Security Deposit to remedy such default, in
which event Tenant shall promptly deposit with
Landlord the amount necessary to restore the
Security Deposit to its original amount. The
Security Deposit shall not be deemed liquidated
damages, and Landlord application of said Security
Deposit to reduce its damages shall not preclude
recovery from Tenant of any additional damages
incurred by Landlord. If the Landlord sells or
transfers its interest in the Building, Landlord
shall transfer the Security Deposit, and the
Landlord shall be released from all liability to
Tenant for the return of such Security Deposit.
b. Landlord agrees to accept a Letter of Credit
as and for the Security Deposit, provided that such
Letter of Credit shall be (i) unconditional; (ii)
irrevocable; (iii) issued by a financial
institution approved by Landlord in Landlord's
discretion, which financial institution must be a
member bank of the Federal Reserve; (iv) in a form
permitting partial and multiple drawings; (v) for
either multiple terms of at least one (1) year in
each duration, which are automatically renewed
unless notice is given to Landlord at least sixty
(60) days prior to the expiration thereof,
extending until the date which is ninety (90) days
after the expiration of the Lease Term, as such
Lease Term may be extended pursuant to the
provisions of the Lease, or at Tenant's option for
a single term extending until the date which is
ninety (90) days after the expiration of the Lease
Term, as such Lease Term may be extended pursuant
to the provisions of the Lease and (vi) be in a
form and substance acceptable to the Landlord, in
its sole discretion, substantially in conformity
with the provisions of Exhibit C hereto. If a
partial drawing occurs under the Letter of Credit,
the Tenant shall, upon demand but not more than
five (5) days after such partial drawing, cause the
financial institution to reissue the Letter of
8
<PAGE>
Credit in the amount then currently required under the terms of
this Lease. Notwithstanding the foregoing, the Landlord shall be
entitled to draw down the entire amount of the Letter of Credit,
without any notice, at any time on or after the earlier of (i)
the Occurrence of an Event of Default by Tenant under the Lease;
or (ii) at any time after the sixtieth (60th) day preceding the
expiration date of the Letter of Credit in the event that the
issuer of the Letter of Credit gives notice to Landlord that it
will not renew the Letter of Credit as contemplated hereby.
LANDLORD'S 7. a. Services. Provided no Event of Default exists, Landlord
OBLIGATION --------
shall use reasonable efforts to furnish to Tenant (i) water (hot
and cold) at those points of supply provided for general use of
tenants of the Building; (ii) heated and refrigerated air
conditioning as appropriate, at such temperatures and in such
amounts as are reasonably considered by Landlord to be standard;
(iii) replacement of Building standard light bulbs and
fluorescent tubes, provided that Landlord's standard charge for
such bulbs and tubes replaced in the Premises shall be paid by
Tenant; and (iv) electrical current during normal business hours.
b. Utility charges. Landlord shall install submeters to
---------------
enable Tenant to run the air conditioning units of the Premises
and to use electrical current at such hours as Tenant may select
at its own cost. Landlord shall notify Tenant monthly of such
utility charges and Tenant shall pay to Landlord the cost of such
service within ten (10) days after Landlord has delivered to
Tenant an invoice therefor.
e. Discontinuance. Landlord's obligation to furnish
--------------
utility services under Section 7a. shall be subject to the rules
and regulations of the supplier of such services and
governmental rules and regulations. Landlord may, upon not less
than 30-days' prior written notice to Tenant, discontinue any
such service to the Premises, provided Landlord first arranges
for a direct connection thereof through the supplier of such
service. Tenant shall, however, be responsible for contracting
with the supplier of such service and for paying all deposits
for, and costs relating to, such service.
d. Restoration of Services; Abatement. Landlord shall use
----------------------------------
reasonable efforts to restore any service that becomes
unavailable; however, such unavailability shall not render
Landlord liable for any damages caused thereby, be a constructive
eviction of Tenant, constitute a breach of any implied warranty,
or entitle Tenant to any abatement of Tenant's obligations
hereunder, including but not limited to Tenant's obligation to
pay Rent.
IMPROVEMENTS; 8. a. Improvements; Alterations. Except as otherwise
ALTERATIONS; -------------------------
REPAIRS; specified in this Lease or in any Exhibit hereto, improvements
MAINTENANCE to the Premises as well as installation of sinage and satellite
dish provided for in Sections 23u and 23v below, shall be
installed at the expense of Tenant only in accordance with
plans and specifications which have been previously submitted
to and approved in writing by Landlord, After the initial Tenant
improvements are made (if any), no alterations or physical
additions in or to the Premises may be made without Landlord's
prior written consent. Tenant shall not paint or install
lighting or decorations, signs, window or door lettering, or
advertising media of any type on or about the Premises without
the prior written consent of Landlord. All alterations,
additions, or improvements (whether temporary or permanent in
character, and including without limitation all air conditioning
equipment and all other equipment that is in any manner connected
to the Building's plumbing system) made in or upon the Premises,
either by Landlord or
9
<PAGE>
Tenant, except the initial Tenant Improvement paid for by
Landlord, shall at Landlord's option, either be removed by
Tenant, shall become Landlord's property at the end of the Term
and shall remain on the Premises without compensation to Tenant;
provided, however, that if tenant is not then in default
hereunder and Tenant repairs any damage caused by such removal,
Tenant may remove its trade fixtures at the end of the Term.
Approval by Landlord of any of Tenant's drawings and plans and
specifications prepared in connection with any improvements,
alterations or additions in the Premises as well as signage and
satellite dish shall not constitute a representation or warranty
of Landlord as to the adequacy or sufficiency of such drawings,
plans and specifications, or the improvements to which they
relate, for any use, purpose, or condition, but such approval
shall merely be the consent of Landlord as required hereunder.
Notwithstanding the above provision, Landlord shall, at Tenant's
written request, notify Tenant at time of alteration if
alteration will have to be removed upon termination of Lease.
b. Repairs: Maintenance. Tenant shall maintain the Premises
--------------------
in a clean, safe, operable, attractive condition, and shall not
permit or allow to remain any waste or damage to any portion of
the Premises. Landlord shall, at its own expense (but subject to
Landlord's right to reimbursement for maintenance expenses
constituting Operating Expenses), maintain the exterior walls and
the structure, electrical, plumbing and mechanical systems of the
Building provided that Tenant shall repair or replace, subject to
Landlord's direction and supervision, any damage to the Building
or any of its systems caused by Tenant or Tenant's agents,
contractors, or invitees. If Tenant fails to make such repairs or
replacements within fifteen (15) days after the occurrence of
such damage, then Landlord may make the same at Tenant's cost,
which cost shall include an additional fee equal to 15% of the
cost for Landlord's overhead expense, and shall be payable to
Landlord within ten (10) days after Landlord has delivered to
Tenant an invoice therefor.
c. Performance of Work. All work described in this Section 8
-------------------
shall be performed only by Landlord or by contractors and
subcontractors approved in writing by Landlord. With respect to
the initial Tenant Improvements, however, Tenant shall have the
right to select the general contractor from at least (3) bids
submitted by general contractors whose qualification have been
reasonably approved by the Landlord. Tenant shall cause all
contractors and subcontractors to procure and maintain insurance
coverage against such risks, in such amounts, and with such
companies as Landlord may reasonably require, and to procure
payment and performance bonds reasonably satisfactory to Landlord
covering the cost of the work. All such work shall be performed
in accordance with all legal requirements and in a good and
workmanlike manner so as not to damage the Premises, the primary
structure or structural qualities of the Building, or plumbing,
electrical lines, or other utility transmission facility.
d. Mechanic's Liens. Tenant shall not permit any mechanic's
----------------
liens to be filed against the Premises or the Building for any
work performed, materials furnished, or obligation incurred by or
at the request of Tenant. If such a lien is filed, then `Tenant
shall, within ten (10) days after Landlord has delivered notice
of the filing to Tenant, either pay the amount of the lien or
diligently contest such lien and deliver to Landlord a bond or
other security reasonably satisfactory to Landlord. If Tenant
elects to contest such lien and if a statutory proceeding exists
for the release of the lien by the posing of a bond, Tenant shall
immediately proceed to obtain a release of said lien in
accordance with much statute. If
10
<PAGE>
permitted by Tenant and regardless of who shall have brought such
Hazardous Materials thereon. If Tenant permits any Hazardous Material
to be brought upon, kept or used in or about the Premises or Building
or Appurtenant Facilities or the Land, then Tenant shall take all
steps reasonably necessary to safeguard against their discharge and
Tenant shall indemnify, (defend and hold Landlord harmless from any
and all claims, judgments, damages, penalties, fines, costs,
liabilities or losses, including but not limited to, diminution in
value of the Premises or Building or Appurtenant Facilities or the
Land, damages for loss or restriction on use of rentable or usable
space or of any amenity in the Premises or Building or Appurtenant
Facilities or the Land, damages arising from any adverse impact on
marketing of the Premises or Building or Appurtenant Facilities or the
Land, and sums paid in settlement of claims, attorneys' fees,
consulting fees and expert fees, which arise during or after the Term
as a result of such contamination. This indemnification of Landlord by
Tenant includes but is not limited to costs incurred in connection
with any investigation of sight conditions or clean-up, remedial
removal or restoration work required by any federal, state or local
government agency or political subdivision because of Hazardous
Material present in the Premises or Building or Appurtenant Facilities
or the Land or the soil or ground water on which the Building is
located. Without limiting the foregoing, if the presence of any
Hazardous Material on the Premises or Building or Appurtenant
Facilities or the Land caused or permitted by Tenant results in any
contamination of the Premises or Building or Appurtenant Facilities or
the Land, Tenant shall, upon request by Landlord, promptly take all
actions at its sole expense that are necessary to return the Premises
or Building or Appurtenant Facilities or the Land to the condition
existing prior to the introduction or exposure of any Hazardous
Material in the Premises or Building or Appurtenant Facilities or the
Land. The indemnity provision set forth in this Section 9b. shall
survive termination or expiration of this Lease. To the best knowledge
of Landlord, (a) no Hazardous Material is present in the Premises or
in the Building or the soil, surface water or groundwater thereof, (b)
no underground storage tanks are present at the Building, and (c) no
action, proceeding or claim is pending or threatened regarding the
Building concerning any Hazardous Material or pursuant to any
environmental Law.
ASSIGN- 10. a. Assignment or Sublease. Tenant shall not voluntarily or
MENT AND -----------------------
SUBLET- by operation of law assign, transfer, mortgage, sublet, or otherwise
TING transfer or encumber all or any part of Tenant's interest in this
Lease or in the Premises without Landlord's prior written consent,
such consent shall not be unreasonably withheld, delayed or
conditioned. Notwithstanding the provisions hereof, Tenant may assign
or sublet the premises, or any portion thereof, without Landlord's
consent, to any corporation which controls, is controlled by or is
under common control with Tenant, or to any person or entity which
acquires all the assets of Tenant as a going concern of the business
that is being conducted on the premises, provided that said assignee
assumes, in full, the obligations of Tenant under this Lease.
assignment
b. Consent. The consent by Landlord to a particular
-------
assignment or sublease shall not be deemed a consent to any other
assignment or sublease. If Landlord consents to a proposed assignment
or sublease, then the proposed transferee shall deliver to Landlord a
written agreement whereby it expressly assumes the Tenant's
obligations hereunder; however, any tranferee of less than all of the
space in the Premises shall be liable only for obligations under this
Lease that are properly allocable to the space subject to the
assignment or sublease, and only to the extent of the rent it has
agreed to pay Tenant therefor.
12
<PAGE>
Tenant fails either to timely pay the lien amount or diligently
contest such lien and deliver the required bond or security, then
Landlord may pay the lien claim without inquiry as to the validity
thereof, and any amounts so paid, including expenses and interest,
shall be paid by Tenant to Landlord within ten (10) days after
Landlord has delivered to Tenant an invoice therefor. Tenant shall
indemnify and hold Landlord harmless from all costs and attorney fees
incurred by Landlord as the result of the assertion of any such lien
claim. Nothing contained in this Lease will be deemed the consent or
agreement of Landlord, nor shall Tenant be deemed to have any
authority, to subject Landlord's interest in the Premises or the
Building to the imposition of any lien, or otherwise to liability,
under any mechanics' or other lien law.
e. Landford's Warranty. Landlord warrants and represents
-------------------
that, as of the Commencement Date, (i) the Building, except for the
Tenant Improvements and the demised premises and premises occupied by
other tenants, complies with all Laws and is in a good operating
condition and repair and (ii) the roof of the Building is in good
condition and water tight. Landlord, within a reasonable time after
receipt of notice from Tenant, will remedy any non-compliance with
such warranty at Landlord's sole cost and expense.
USE
9. a. Permitted Use/Compliance with Laws. Tenant shall
----------------------------------
continuously occupy and use the Premises only for the Permitted Use
and shall comply with laws, orders, rules, and regulations relating to
the use, condition, and occupancy of the Premises. Tenant shall comply
with any direction of any governmental authority having jurisdiction
over the Premises, which shall by reason of the nature of Tenant's use
or occupancy of the Premises, impose any duty upon Tenant or Landlord
with respect to the Premises or the occupancy thereof. Tenant shall
not do or permit anything to be done which would invalidate or
increase the cost of any fire, extended coverage, or any other
insurance policy covering the Building. Notwithstanding the foregoing
and without limiting the remedies of Landlord for a violation of the
provisions of this Section 9a,, Tenant shall promptly, upon demand
reimburse Landlord for the full amount of any additional premium
charged for such policy by reason of Tenant's failure to comply with
the provisions of this Section 9a. Tenant shall not in any way
obstruct or interfere with the rights or other tenants or occupants of
the Building, or use or allow the Premises to be used for any
improper, immoral or objectionable purpose nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises.
b. Hazardous Materials. The Premises shall not be used for
-------------------
any use which is disreputable or creates extraordinary fire hazards or
results in an increased rate of insurance on the Building or its
contents or the storage of any Hazardous Materials (as defined below).
Without limiting the foregoing, Tenant shall not cause or permit any
Hazardous Material to be brought upon, kept or used in or about the
Premises or Building or Appurtenant Facilities or the Land by Tenant,
its employees, agents, contractors or invitees. As used herein, the
term "Hazardous Material" shall mean any hazardous or toxic substance,
------------------
material or waste, including but not limited to, those substances,
materials and wastes now or hereafter listed in the United States
Department of Transportation Hazardous Materials Table or by the
Environment Protection Agency as hazardous substances, or such
substances, materials and wastes that are to become regulated under
any applicable federal, state or local law. Tenant expressly covenants
that Tenant will advise Landlord immediately upon learning that any
Hazardous Materials has been brought upon the Premises or Building or
Appurtenant Facilities or the Land, whether or not caused or
11
<PAGE>
c. Additional Compensation. Tenant
-----------------------
shall pay Landlord, immediately upon receipt
thereof; fifty percent (50%) of all compensation
received by Tenant for an assignment or sublease
that exceeds the Rent allocable to the portion of
the Premises covered thereby.
d. Continued Liability. Tenant shall,
-------------------
despite any permitted assignment or sublease,
remain directly and primarily liable for the
performance of all of the covenants, duties, and
obligations of Tenant hereunder, and Landlord shall
be permitted to enforce the provisions of this
Lease against Tenant or any assignee or sublessee
without demand upon or proceeding in any way
against any other person.
e. Transfer of Controlling Interest. If
--------------------------------
Tenant is not a public company that is registered
on a national stock exchange or that is required to
register its stock with the Securities and Exchange
Commission under Section 12(g) of the Securities
and Exchange Act of 1934, then any change in a
majority of the voting rights or other controlling
rights or interests of Tenant shall be deemed an
assignment for the purposes hereof.
f. Landlord's Right to Recapture the
---------------------------------
Premises. If Tenant proposes to assign this Lease
--------
other than under the provisions of the second
sentence of paragraph lO.a above, Landlord may, at
its option, upon written notice to Tenant given
within thirty (30) days after its receipt of
Tenant's notice of proposed assignment, together
with all other necessary information, elect to
recapture the Premises and terminate this Lease.
g. Costs and Expenses. Tenant shall
------------------
reimburse Landlord, within thirty (30) days of
demand therefor, up to five hundred Dollars
($500.00), for all costs and expenses, including
attorneys fees, incurred by Landlord in connection
with any request by Tenant to assign this Lease, or
sublet all or any portion of the Premises, whether
or not the consent of the Landlord is required, or
given.
INSURANCE; 11. a. Insurance. Tenant shall at its
WAIVERS; ---------
SUBROGATION; expense procure and maintain throughout the Term
INDEMNITY the following insurance policies: (i)
other comprehensive general liability insurance in
amounts of not less than a combined single limit of
Two Million Dollars ($2,000,000.00) or such amounts
as Landlord may from time to time reasonably
require, insuring Tenant, Landlord, and Landlord's
agents against all liability for injury to or death
of a person or persons or damage to property
arising from the use and occupancy of the Premises,
Building, Appurtenant Facilities or Land, (ii)
contractual liability insurance coverage sufficient
to cover Tenant's indemnity obligations hereunder,
(iii) if Tenant operates owned, leased, hired or
non-owned vehicles on the Premises, comprehensive
automobile liability insurance at a limit of
liability not less than One Million Dollars
($1,000,000.00) combined bodily injury and property
damages, (iv) insurance covering the full value of
Tenant's property and improvements, and other
property (including property of others), in the
Premises, and (v) business interruption insurance.
Tenant's insurance shall provide primary coverage
to Landlord when any policy issued to Landlord
provides duplicate or similar coverage, and in such
circumstance Landlord's policy will be excess over
Tenant's policy. Tenant shall furnish certificates
of such insurance and such other evidence
satisfactory to landlord of the maintenance of all
insurance coverage required hereunder, and Tenant
shall obtain a written obligation on the part of
each insurance company to notify Landlord at least
30 days before cancellation or a material change of
any such insurance. All such insurance policies
shall be in form, and issued by companies,
satisfactory to Landlord. Tenant may carry such
insurance
13
<PAGE>
under a blanket policy, provided such insurance has
a landlord's protective liability endorsement
attached thereto. If Tenant fails to procure and
maintain said insurance, Landlord may, but shall
not be required to, procure and maintain same, but
at the expense of Tenant. No policy shall be
cancelable or subject to reduction of coverage
except after thirty (30) days prior written notice
to Landlord. Landlord shall, subject to Landlord's
right to reimbursement for expenses constituting
Operating Expenses, maintain insurance on the
Building equal to its full replacement value.
b. Waiver: No Subrogation. Landlord
----------------------
shall not be liable to Tenant or those claiming by,
through, or under Tenant for any injury to or death
of any person or persons or the damage to or theft,
destruction, loss, or loss of use of any property
(a "Loss") caused by casualty, theft, fire, or
----
third parties, or by any other matter beyond the
reasonable control of Landlord, or for any injury
or damage to persons or property or inconvenience
which may arise through repair or alteration of any
part of the Building, or failure to make repairs,
or from any other cause, except if such Loss is
caused by Landlord's gross negligence or willful
misconduct and Landlord shall indemnify Tenant
against and hold Tenant harmless from any such
loss, in which event Landlord shall be liable only
for direct damages and not for any incidental or
consequential damages. Notwithstanding the above,
Tenant waives any claim it might have against
Landlord for any injury or damage to or theft,
destruction, loss, or loss of use of any property,
to the extent the same is insured against under any
insurance policy that covers the Building, the
Premises, Landlord's or Tenant's fixtures, personal
property, leasehold improvements, or business, or
is required to be insured against under the terms
hereof, regardless of whether the negligence or
fault of the other party caused such loss. Tenant
shall cause its insurance carrier to endorse all
applicable policies waiving the carrier's rights of
recovery under subrogation or otherwise against the
Landlord.
c. Indemnity. Subject to Section llb.,
---------
Tenant shall defend, indemnify, and hold harmless
Landlord and its agents from and against all
claims, demands, liabilities, causes of action,
suits, judgments, and expenses (including
attorneys' fees) for any Loss arising from any
occurrence on the Premises, Building, Appurtenant
Facilities or Land, or from Tenant's failure to
perform its obligations under this Lease (other
than a Loss directly and mainly arising from the
sole or gross negligence or willful misconduct of
Landlord or its agents), even though caused or
alleged to be caused by the joint, comparative, or
concurrent negligence or fault of Landlord or its
agents, and even though any such claim, cause of
action, or suit is based upon or alleged to be
based upon the strict liability of Landlord or its
agents. This indemnity provision is intended to
indemnify Landlord and its agents against the
consequences of their own negligence or fault as
provided above when Landlord or its agents are
jointly, comparatively, or concurrently negligent
with Tenant. This indemnity provision shall survive
termination or expiration of this Lease.
SUBORDINATION 12. a. Subordination. This Lease shall be
ATTORNMENT; NOTICE TO -------------
LANDLORD'S and is hereby made subordinate to any deed of
MORTGAGEE trust, mortgage, or other security instrument (a
"Mortgage"), or any ground lease, master lease,
--------
or primary lease (a "Primary Lease"), that now or
-------------
hereafter covers all or any part of the Premises
(the mortgagee under any Mortgage or the lessor
under any Primary Lease is referred to herein as
"Landlord's Mortgagee").
--------------------
b. Attornment. Tenant shall attorn to
----------
any party succeeding to Landlord's interest in the
Premises, whether by purchase, foreclosure, deed in
lieu of foreclosure, power of sale, termination of
lease,
14
<PAGE>
or otherwise, upon such party's request, and shall
execute such agreements confirming such attornment
as such party may reasonably request provided that
in such agreement the succeeding party agrees not
to disturb Tenant's right to possession of the
Premises so long as Tenant is not in default
hereunder. ln the event of such request and upon
Tenant's attornment as aforesaid, Tenant will
automatically become the tenant of the successor to
Landlord's interest without change in the terms or
provisions of this Lease; provided, however, that
such successor to Landlord's interest shall not be
bound by (a) any payment of Rent for more than one
month in advance (except prepayments for security
deposits, if any), (b) any amendments or
modifications of this Lease made without the prior
written consent of Landlord's Mortgagee if Tenant
was advised on the interest of the same, or (c) any
credits, offsets, defenses or claims which Tenant
may have against Landlord.
c. Notice to Landlord's Mortgagee.
------------------------------
Tenant shall not seek to enforce any remedy it may
have for any default on the part of the Landlord
without first giving written notice by certified
mail, return receipt required, specifying the
default in reasonable detail, to any Landlord's
Mortgagee whose address has been given to Tenant,
and affording such Landlord's Mortgagee a
reasonable opportunity to perform Landlord's
obligations hereunder.
d. Certificates Requested by Landlord's
------------------------------------
Mortgagee. From time to time, Tenant shall furnish
---------
to any Landlord's Mortgagee, within ten (10) days
after a request therefor, such estoppel
certificates, non-disturbance and attornment
agreements, or other certificates as Landlord's
Mortgagee may reasonably request.
RULES AND 13. Tenant shall comply with the rules and
REGULATIONS regulations of the Building which are attached
hereto as Exhibit B. Landlord may, from time to
time, change such rules and regulations for the
safety, care, or cleanliness of the Building and
related facilities, provided that such changes will
not unreasonably interfere with Tenant's use of the
Premises. Tenant shall be responsible for the
compliance with such rules and regulations by its
employees, agents, and invitees. Landlord shall not
be responsible to Tenant for the failure or refusal
by any tenant or other person in the Building or
Appurtenant Facilities to comply with the rules and
regulations established by Landlord.
CONDEMNATION 14. If all or any part of the Premises or the
Building is taken by right of eminent domain or
conveyed in lieu thereof (a "Taking"), Landlord may
------
elect to terminate this Lease or to continue this
Lease in effect. If Landlord elects to terminate
this Lease, Rent shall be apportioned as of the
date of such Taking. If Landlord elects to continue
the Lease, the Basic Rental and Excess Operating
Expense shall be abated on a reasonable basis as to
that portion of the Premises rendered untenable by
the Taking, and Landlord shall repair any damage to
the Premises or the Building resulting from such
Taking. All sums awarded or agreed upon between
Landlord and the condemning authority for the
taking of the interest of Landlord or Tenant,
whether as damages or as compensation, shall be the
property of Landlord.
FIRE OR OTHER 15. a. Repair Estimate. If the Premises
CASUALTY ---------------
or the Building are damaged by fire or other
casualty (a "Casualty"), Landlord shall, within
--------
sixty (60) days after such Casualty, deliver to
Tenant a good faith estimate (the "Damage Notice")
-------------
of the time needed to repair the damage caused by
such Casualty.
15
<PAGE>
b. Landlord's and Tenant's Rights. If a
------------------------------
material portion of the Premises or the Building is
damaged by Casualty such that Tenant is prevented
from conducting its business in the Premises in a
manner reasonably comparable to that conducted
immediately before such Casualty and Landlord
estimates that the damage caused thereby cannot be
repaired within one hundred eighty (180) days
after the commencement of repair, then Tenant may
terminate this Lease by delivering written notice
to Landlord of its election to terminate within
thirty (30) days after the Damage Notice has been
delivered to Tenant. If Tenant does not terminate
this Lease, then (subject to Landlord's rights
under Section 15c.) Landlord shall repair the
Building or the Premises, as the case may be, as
provided below, and Basic Rental and Excess
Operating Expense for the portion of the Premises
rendered untenable by the damage shall be abated on
a reasonable basis from the date of damage until
the completion of the repair, unless Tenant caused
such damage, in which case, Tenant shall continue
to pay Rent without abatement.
c. Landlord's Rights. If a Casualty
-----------------
damages a material portion of the Building, and
Landlord makes a good faith determination that
restoring the Premises would be uneconomical, or if
Landlord is required to pay any insurance proceeds
arising out of the Casualty to Landlord's
Mortgagee, then Landlord may terminate this Lease
by giving written notice of its election to
terminate within thirty (30) days after the Damage
Notice has been delivered to Tenant, and Basic
Rental and Excess Operating Expense hereunder shall
be abated as of the date of the Casualty.
d. Repair Obligation. If neither party
-----------------
elects to terminate this Lease following a
Casualty, then Landlord shall, within a reasonable
time after such Casualty, commence to repair the
Building and the Premises and shall proceed with
reasonable diligence to restore the Building and
Premises to substantially the same condition as
they existed immediately before such Casualty;
however, Landlord shall not be required to repair
or replace any part of the furniture, equipment,
fixtures, and other improvements which may have
been placed by, or at the request of, Tenant or
other occupants in the Building or the Premises,
and Landlord's obligation to repair or restore the
Building or Premises shall be limited to the extent
of the insurance proceeds actually received by
Landlord for the Casualty in question.
TAXES 16. Tenant shall be liable for all taxes levied
or assessed against the property, furniture, or
fixtures, on above Building standard tenant
improvements, placed by Tenant in the Premises and
all taxes relating to the operation of Tenant's
business in the Premises including, without
limitation, all withholding taxes and sales and use
taxes. If any taxes for which Tenant is liable are
levied or assessed against Landlord or Landlord's
property and Landlord elects to pay the same, or if
the assessed value of Landlord's property is
increased by inclusion of such personal property,
furniture or fixtures, or above Building standard
tenant improvements, and Landlord elects to pay the
taxes based on such increase, then Tenant shall pay
to Landlord, upon demand, that part of such taxes
for which Tenant is primarily liable hereunder.
EVENTS OF l7. Each of the following occurrences shall
DEFAULT constitute an ("Event of Default"):
----------------
a. Tenant's failure to pay Rent from
Tenant to Landlord under the Lease when due,
provided that Landlord shall not exercise any
remedies with respect to such Event of Default
unless the same remains uncured for a period of
five (5) days after Landlord has
16
<PAGE>
issued written notice thereof, provided further, however, that
Landlord may exercise any such remedies without any obligation of
Landlord to issue any notice if Landlord has issued Tenant
written notice under Section l7a. on more than two (2) occasions
during the 12-month interval preceding such failure by Tenant.
b. Tenant's failure to perform, comply with, or observe
any other agreement or obligation of Tenant under this Lease;
provided that Landlord shall not exercise any remedies with
respect to such Event of Default unless the same remains uncured
for a period of fifteen (15) days after Landlord delivers to
Tenant written notice thereof;
c. The filing of a petition by or against Tenant (the term
"Tenant" shall include, for the purpose of this Section l7c, any
guarantor of the Tenant's obligations hereunder) (i) in any
bankruptcy or other insolvency proceeding; (ii) seeking any
relief under any state or federal debtor relief law; (iii) for
the appointment of a liquidator or receiver for all or
substantially all of Tenant's property or for Tenant's interest
in this Lease; or (iv) for the reorganization or modification of
Tenant's capital structure; provided, however, if such petition
is filed against Tenant, then such filing shall not be an Event
of Default unless Tenant fails to have the proceedings initiated
by such petition dismissed within sixty (60) days after the
filing thereof; and provided further, however, that an event
described in this Section 17c. shall not constitute an Event of
Default if applicable law provides that such event cannot be the
basis of a default hereunder;
d. Tenant shall vacate or abandon any portion of the
Premises.
e. The admission by Tenant that it cannot meet its
obligations as they become due or the making by Tenant of an
assignment for the benefit of its creditors; or
f. Any representation or warranty made by Tenant, or made
by any guarantor of Tenant's obligations hereunder, was
materially false or inaccurate when made.
g. If Tenant vacates Demised Premises and attempts to
sublease while paying rent, such occurrence will not be an Event
of Default.
REMEDIES 18. Upon any Event of Default, Landlord may, in addition to
all other rights and remedies afforded Landlord hereunder or by
law or equity, take any of the following actions:
a. Terminate this Lease by giving Tenant written notice
thereof, in which event, Tenant shall pay to Landlord the sum of
(i) all Rent accrued hereunder through the date of termination,
(ii) all amounts due under Section 19a, and (iii) an amount equal
to (A) the total Rent that Tenant would have been required to pay
for the remainder of the Term discounted to present value at a
per annum rate equal to the "Prime Rate" as published on the date
this Lease is terminated by the Wall Street Journal in its
-------------------
listing of "Money Rates", minus (B) the then present value of the
amount of such total Rent that Tenant proves could have been
reasonably avoided, similarly discounted, but in no event shall
the amount determined pursuant to this item (iii) operate to
reduce the sum of item (i) and (ii) above; or,
b. Terminate Tenant's right to possession of the
17
<PAGE>
Premises without terminating this Lease by giving
notice thereof to Tenant, in which event Tenant
shall pay to Landlord (i) all Rent and other
amounts accrued hereunder to the date of
termination of possession, (ii) all amounts due
from time to time under Section 19a., and (iii) all
Rent and other sums required hereunder to be paid
by Tenant during the remainder of the Term,
diminished by any net sums thereafter received by
Landlord through reletting the Premises during such
period. Landlord shall not be liable for, nor shall
Tenant's obligations hereunder be diminished
because of, Landlord's failure to relet the
Premises or to collect rent due for such reletting.
Tenant shall not be entitled to the excess of any
consideration obtained by reletting over the Rent
due hereunder. Reentry by Landlord in the Premises
shall not affect Tenant's obligations hereunder for
the unexpired Term; rather, Landlord may, from time
to time, bring action against Tenant to collect
amounts due by Tenant, without the necessity of
Landlord's waiting until the expiration of the
Term. Unless Landlord delivers written notice to
Tenant expressly stating that it has elected to
terminate this Lease, all actions taken by Landlord
to exclude or dispossess Tenant of the Premises
shall be deemed to be taken under this Section l8b.
If Landlord elects to proceed under this
Section 18b., it may at any time elect to terminate
this Lease under Section 18a.
c. Additionally, Landlord may, without
notice, enter upon the Premises and alter locks or
other security devices at the Premises to deprive
Tenant, its officers, employees, agents, invitees,
licensees and all other occupants, of access
thereto, and Landlord shall not be required to
provide a new key or right of access to Tenant.
PAYMENT BY l9. a. Payment by Tenant. Upon any Event of
TENANT; NON- -----------------
WAIVER Default, Tenant shall pay to Landlord all
reasonable costs incurred by Landlord (including
court costs at all trial and appellate levels and
attorney's fees and expenses, regardless of whether
suit is filed) in (i) obtaining possession of the
Premises, (ii) removing and storing Tenant's or any
other occupant's property, (iii) repairing,
restoring, altering, remodeling, or otherwise
putting the Premises into condition acceptable to
a new tenant, (iv) if Tenant is dispossessed of the
Premises and this Lease is not terminated, relating
all or any part of the Premises (including
brokerage commissions, cost of tenant finish work,
and other costs incidental to such reletting), (v)
performing Tenant's obligations which Tenant failed
to perform, and (vi) enforcing, or obtaining advice
of, its rights, remedies, and recourses arising out
of the Event of Default.
b. No Waiver. Landlord's acceptance of
---------
Rent following an Event of Default shall not waive
Landlord's rights regarding such Event of Default.
No waiver by either party of any violation or
breach of any of the items contained herein shall
waive either party's rights regarding any future
violation of such term or violation of any other
term,
SURRENDER OF 20. No act by Landlord shall be deemed an
PREMISES acceptance of a surrender of the Premises, and no
agreement to accept a surrender of the Premises
shall be valid unless the same is made in writing
and signed by Landlord. At the expiration or
termination of this Lease, Tenant shall deliver to
Landlord the Premises with all improvements located
thereon in good repair and condition, reasonable
wear and tear (and condemnation and fire or other
casualty damage not caused by Tenant, as to which
Sections 14 and 15 shall control) excepted, and
shall deliver to Landlord all keys to the Premises.
Provided that Tenant has performed all of its
obligations hereunder, Tenant may remove all trade
fixtures and all unattached furniture and personal
property placed in the Premises by Tenant (but
Tenant shall not remove any such item which was
paid for, in
18
<PAGE>
whole or in part, by Landlord), and shall remove
such alterations, additions, improvements, trade
fixtures, equipment, and furniture as Landlord may
request. Tenant shall repair all damage caused by
such removal. All items not so removed shall be
deemed to have been abandoned by Tenant and may be
appropriated, sold, stored, destroyed, or otherwise
disposed of by Landlord without notice to Tenant
and without any obligation to account for such
items. The provisions of this Section 21 shall
survive the end of the Term.
HOLDING OVER 21. If Tenant fails to vacate the Premises at
the end of the Term, then Tenant shall be a tenant
at will and, in addition to all other damages and
remedies to which Landlord may be entitled for such
holding over, Tenant shall pay, in addition to the
other Rent, a daily Basic Rental equal to the
greater of (a) 150% of the daily Basic Rental
payable during the last month of the Term, or (b)
the prevailing rental rate in the Building for
similar space. In the event of any unauthorized
holding over, Tenant shall be liable to Landlord
for all damages which Landlord suffers as a result
thereof and Tenant shall indemnify Landlord against
all claims made by any other tenant or prospective
tenant against Landlord resulting from delay by
Landlord in delivering possession of the Premises
to such other tenant or prospective tenant.
CERTAIN RIGHTS 22. Landlord shall have the following rights:
RESERVED BY
LANDLORD a. To decorate and to make inspections,
repairs, alterations, additions, changes, or
improvements, whether structural or otherwise, in
and about the Building, or any part thereof, for
such purposes, to enter upon the Premises and,
during the continuance of any such work, to
temporarily close doors, entryways, public space,
and corridors in the Building; to interrupt or
temporarily suspend Building services and
facilities; and to change the arrangement and
location of entrances or passageways, doors, and
doorways, corridors, elevators, stairs, restrooms,
or other public parts of the Building provided,
however, that Landlord shall use reasonable effort
not to substantially interfere in the conduct of
Tenant's business;
b. To take such reasonable measures as
Landlord deems advisable for the security of the
Building and its occupants, including without
limitation searching all persons entering or
leaving the Building; evacuating the Building for
cause, suspected cause, or for drill purposes,
temporarily denying access to the Building; and
closing the Building after normal business hours
and on Saturdays, Sundays, and holidays, subject,
however, to Tenant's right to enter when the
Building is closed after normal business hours
under such reasonable regulations as Landlord may
prescribe from time to time which may include by
way of example, but not of limitation, that persons
entering or leaving the Building, whether or not
during normal business hours, identify themselves
to a security officer by registration or otherwise
and that such persons establish their right to
enter or leave the Building provided, however, that
Landlord shall use reasonable effort not to
substantially interfere in the conduct of Tenant's
business;
c. To change the name by which the
Building is designated; and
d. To enter the Premises, upon
reasonable notice except in emergency, to inspect
same to assure Tenant's compliance with its
obligations hereunder or show the Premises to
prospective purchasers, lenders or tenants and to
perform all services, maintenance and repairs
19
<PAGE>
required to be performed by Landlord hereunder.
Except in case of emergencies, Landlord shall give
reasonable advance notice of need to enter the
Premises.
MISCELLANEOUS 23. a. Landlord Transfer. If any landlord
-----------------
hereunder transfers the Building or Shopping Center
or such landlord's interest therein, then such
landlord shall not be liable for any obligation or
liability based on or arising out of any event or
condition occurring after such transfer. Tenant
shall attorn to such transferee amid, within ten
(10) days after request, shall execute, acknowledge
and deliver any document submitted to Tenant
confirming such attornment.
b. Landlord's Default and Liability.
--------------------------------
Landlord, its employees and agents shall not be
liable to Tenant, any Invitee or any other person
or entity for any damage (including, without
limitation, indirect and consequential damage),
inquiry, loss or claim (including, without
limitation, claims for the interruption of or loss
to business) based on or arising out of any cause
whatsoever (except as otherwise specified in this
Section), including, without limitation, the
following: repair to any portion of the Premises or
the Building; interruption in the use of the
Premises or any equipment therein; any accident or
damage resulting from any use or operation (by
Landlord, Tenant or any other person or entity) of
elevators or heating, cooling, electrical,
sewerage, or plumbing or mechanical equipment or
apparatus; termination of this Lease by reason of
damage to the Premises or the Building; fire,
robbery, theft, vandalism, mysterious disappearance
or any other casualty; actions of any other tenant
of the Building or of any other person or entity;
failure or inability to furnish any service
specified in this Lease; and leakage in any part of
the Premises or the Building from water, rain, ice,
snow or other cause that may leak into, or flow
from, any part of the Premises or the Building or
the Land, or from drains, pipes or plumbing
fixtures in the Premises or the Building or the
Land. If any condition exists which may be the
basis of a claim of constructive eviction, then
Tenant shall give Landlord written notice thereof
and a reasonable opportunity to correct such
condition, and in the interim Tenant shall not
claim that it has been constructively evicted or is
entitled to a rent abatement. Any property placed
by Tenant or Invitees in or about the Premises, the
Building or the Land shall be at the sole risk of
Tenant, and Landlord shall not in any manner be
responsible therefor. If any employee of Landlord
receives any package or article delivered for
Tenant, then such employee shall be acting as
Tenant's agent for such purpose and not as
Landlord's agent. Notwithstanding, the foregoing
provisions of this Section, Landlord shall not be
released from liability to Tenant for any physical
injury to any natural person caused by Landlord's
willful misconduct or gross negligence to the
extent such injury is not covered by insurance (a)
carried by Tenant or such person, or (b) required
by this Lease to be carried by Tenant. Tenant shall
reimburse Landlord for, and shall indemnify, defend
upon request and hold Landlord, its employees and
agents harmless from and against, all costs,
damages, claims, liabilities, expenses (including
attorneys' fees), loss and court costs suffered by
or claimed against Landlord, directly or
indirectly, based on or arising out of, in whole or
in part, (a) use and occupancy of the Premises or
the business conducted therein, (b) any act or
omission of Tenant or any Invitee, (c) any breach
of Tenant's obligations under this Lease,
including failure to surrender the Premises upon
the expiration or earlier termination of the Lease
Term, or (d) any entry by Tenant or any Invitee
upon the Land prior to the Lease Commencement Date,
Tenant shall not have the right to offset or deduct
any amount allegedly owed to Tenant pursuant to any
claim against Landlord from any rent or other sum
payable to Landlord, Tenant's solo remedy for
recovering upon such claim shall he to institute an
20
<PAGE>
independent action against Landlord. If Tenant or
any Invitee is awarded a money judgment against
Landlord, then recourse for satisfaction of such
judgment shall be limited to execution against
Landlord's estate and interest in the Building and
the Land. No other asset of Landlord, any partner,
director, member, or officer of Landlord
(collectively, "Officer") or any other person or
entity shall be available to satisfy or subject to
such judgment, nor shall any Officer or other
person or entity have personal liability for
satisfaction of any claim or judgment against
Landlord or any Officer.
c. Force Majeure. Other than for
-------------
Tenant's monetary obligations under this Lease,
whenever a period of time is herein prescribed for
action to be taken by either party hereto, such
party shall not be liable or responsible for, and
there shall be excluded from the computation for
any such period of time, any delays due to strikes,
riots, acts of God, shortages of labor or
materials, war, governmental laws, regulations, or
restrictions, or any other causes of any kind
whatsoever which are beyond the control of such
party. Any elimination or shutting off of light,
air, or view by any structure which may be erected
on lands adjacent to the Building shall in no way
affect this Lease or impose any liability on
Landlord.
d. Criminal Acts of Third Parties. Any
------------------------------
security guards or security services provided by
Landlord for the Building, Appurtenant Facilities
or Land are provided for the protection of
Landlord's property. Tenant shall be responsible
for the protection of Tenant and Tenant's
employees, agents, contractors; invitees and
licensees and their property against criminal acts
of third parties. Landlord shall not be liable to
Tenant or any other party for criminal acts of
third parties whether or not such acts are
foreseeable. Tenant shall contact the local police
and rely on the local police for protection against
criminal acts.
e. Brokerage. Landlord and Tenant each
---------
warrant to the other that it has not dealt with any
broker or agent in connection with the negotiation
or execution of this Lease other than the Broker
(if any). Tenant and Landlord shall each indemnify
the other against all costs, expenses, attorneys'
fees and other liability for commissions or other
compensation claimed by any broker or agent other
than the Broker (if any) claiming the same by,
through, or under the indemnifying party.
f. Estoppel Certificates. From time to
---------------------
time, Tenant shall furnish to any party designated
by Landlord, within ten (10) days after Landlord
has made a request therefor, a certificate signed
by Tenant confirming and containing such factual
certifications and representations as to this Lease
as Landlord may reasonably request.
g. Notices. All notices and other
-------
communications given pursuant to this Lease shall
be in writing and shall be (i) mailed by first
class, United States Mail (or Canada Mail, as
appropriate), postage prepaid, certified, with
return receipt requested, and addressed to the
parties hereto at the address specified in the
Basic Lease Information, (ii) hand delivered to the
intended address, or (iii) sent by prepaid
telegram, cable, facsimile transmission, or telex
followed by a confirmatory letter. Notice sent by
certified mail, postage prepaid, shall be effective
three (3) business days after being deposited in
the United States Mail (or Canada mail, as
appropriate); all other notices shall be effective
upon delivery to the address of the addressee. The
parties hereto may change their addresses by giving
notice thereof to the other in conformity with this
provision.
21
<PAGE>
h. Severability. If any clause or
------------
provisions of this Lease is illegal, invalid, or
unenforceable under present or future laws, then
the remainder of this Lease shall not be affected
thereby and in lieu of such clause or provision,
there shall be added as a part of this Lease a
clause or provision as similar in terms to such
illegal, invalid, or unenforceable clause or
provisions as may be possible and be legal, valid,
and enforceable.
i. Amendments; and Binding Effect. This
------------------------------
Lease (including all Exhibits hereto) constitutes
the entire agreement between Landlord and Tenant
and supersedes all prior discussions and agreements
of the parties relating to the Premises and the
Building. This Lease may not be amended except by
instrument in writing signed by Landlord and
Tenant. Whenever any approval or consent of the
Landlord is required, such approval or consent
shall not be binding on Landlord unless expressed
in writing and executed by an authorized
representative of Landlord. No provision of this
Lease shall be deemed to have been waived by
Landlord unless such waiver is in writing signed by
Landlord, and no custom or practice which may
evolve between the parties in the administration of
the terms hereof shall waive or diminish the right
of Landlord to insist upon the performance by
Tenant in strict accordance with the terms hereof.
The terms and conditions contained in this Lease
shall inure to the benefit of and be binding upon
the parties hereto, and upon their respective
successors in interest and legal representatives,
except as otherwise herein expressly provided. This
Lease is for the sole benefit of Landlord and
Tenant, and, other than Landlord's Mortgagee, no
third party shall be deemed a third party
beneficiary hereof;
j. Quiet Enjoyment. Provided Tenant has
---------------
performed all of the terms and conditions of this
Lease to be performed by Tenant, tenant shall
peaceably and quietly hold and enjoy the Premises
for the Term, without hindrance from Landlord or
any party claiming by, through, or under Landlord,
subject to the terms and conditions of this Lease.
k. Joint and Several Liability. If
---------------------------
there is more than one Tenant, then the obligations
hereunder imposed upon Tenant shall be joint and
several. If there is a guarantor of Tenant's
obligations hereunder, then the obligations
hereunder imposed upon Tenant shall be the joint
and several obligations of Tenant and such
guarantor, and Landlord need not first proceed
against Tenant before proceeding against such
guarantor nor shall any such guarantor be released
from its guaranty for any reason whatsoever.
l. Captions. The captions contained in
--------
this Lease are for convenience of reference only,
and do not limit or enlarge the terms and
conditions of this Lease.
m. No Merger. There shall be no merger
---------
of the leasehold estate hereby created with the fee
estate in the Premises or any part thereof if the
same person acquires or holds, directly or
indirectly, this Lease or any, interest in this
Lease and the fee estate in the leasehold Premises
or any interest in such fee estate.
n. No Offer. The submission of this
--------
Lease to Tenant shall not be construed as an offer,
nor shall Tenant have any rights under this Lease
unless Landlord executes a copy of this Lease and
delivers it to Tenant.
o. No Rights to Use of Building Name.
---------------------------------
Tenant shall have no interest in, or rights to the
name of the Building. Landlord will
22
<PAGE>
have the right, exercisable upon written notice and
without liability to any tenant, to change the name
and street address of the Building. Tenant shall
not engage in any advertising mentioning the
Building without the prior written consent of
Landlord. Landlord shall have the right to prohibit
any advertising by Tenant mentioning the Building
that, in Landlord's opinion tends to impair the
reputation of the Building or its desirability as a
building for offices, and upon written notice from
Landlord, Tenant will refrain from or discontinue
such advertising.
p. Time of Essence. Except as provided
---------------
in Section 23c. hereof, time is of the essence of
this Lease and each and all of its provisions in
which performance is a factor.
q. Authority of Parties. If Tenant is a
--------------------
corporation, limited partnership, partnership,
trust or other entity, each person executing this
Lease on behalf of said entity represents and
warrants to Landlord that such person is duly
authorized to execute and deliver this Lease on
behalf of said entity in accordance with all laws
and documents which determine and limit the
operation of such entity and that this Lease is
binding upon said entity in accordance with its
terms.
r. Governing Law. This Lease shall be
-------------
governed by the laws of the state in which the
Premises are located.
s. Right of First Offer. Landlord
--------------------
agrees that, in the event the tenant of the second
floor of the Building does not exercise its option
to renew its lease and this Lease shall then be in
full force and effect, free from any default on the
part of Tenant, Landlord will notify Tenant of
Landlord's intent to lease the second floor and
will for a period of fifteen (15) days first
negotiate in good faith with Tenant of this Lease
upon terms and conditions mutually agreeable to the
parties hereto. In the event the parties hereto
shall not reach as to such terms and conditions
prior to the expiration of such fifteen (15) day
period, Landlord shall have no further liability or
obligation to Tenant in respect of this section and
Landlord shall have the right to lease all or any
part of the second floor to such other person(s)
and upon such terms and conditions as shall be
satisfactory to Landlord, in its sole and absolute
discretion, without regard to whether such terms
are more favorable to such tenant(s) than those
offered by Tenant during the foregoing period of
negotiation. Tenant shall have the above right of
first offer only for one time and shall not have
any other right in the future. Tenant's rights
under this section shall terminate if (i) this
Lease or Tenant's right to possession of the
Premises is terminated, or (ii) Tenant assign any
of its interest in this Lease or sublets any
portion of the Premises.
t. Option to Terminate. If (i) this
-------------------
Lease shall then be in full force and effect, and
(ii) Tenant shall not then be in default
thereunder, Tenant shall have the option to (a)
terminate this Lease effective at the end of the
thirty eighth (38th) month by providing Landlord
with at least nine (9) months prior written notice
and payment of penalty equal to six (6) months rent
of the period immediately after the effective date
of termination or (b) terminate this Lease at the
end of the fiftieth (50th) month by providing
Landlord with at least six (6) months prior written
notice and payment of a penalty equal to three (3)
months rent of the period immediately after the
effective date of termination. Payment of penalty
shall be made on or before the effective date of
termination otherwise Landlord shall have an option
to ignore the termination notice and consider this
Lease as being in effect as long as he wishes until
the term of this Lease expires.
23
<PAGE>
u. Signage. Tenant will be recognized
-------
as a building tenant on the sign board in the main
lobby. Suite entry signage shall be included in the
cost of Tenant Improvements. Furthermore, subject
to applicable law, the approval of Architectural
Review Board of Town of Herndon, and the Landlord's
prior written approval as to plan, specifications
and location, Tenant may erect, as its sole cost,
an exterior wall sign, not to exceed 15.00 square
feet, on the side of the Building facing Herndon
parkway which would refer to Tenant's name. Such
sign shall be installed by a contractor approved by
Landlord and shall be considered as a Tenant
improvement/alteration provided for in Paragraph 8
above.
v. Satellite Dish. Subject to
--------------
applicable law, the approval of appropriate city
and county authorities, and the Landlord's prior
written approval as to plan, specifications and
location, Tenant may erect, as its sole cost, a
satellite dish on the roof of the Building. Such
satellite dish shall be installed by a contractor
approved by Landlord and shall be considered as a
Tenant improvement/alteration provided for in
Paragraph 8 above. Tenant shall be responsible for
all the cost and risks and liability of operation
of such Satellite as well as buying adequate
insurance policy for it.
w. Exhibits. All exhibit and
--------
attachments attached hereto are incorporated herein
by this reference.
Exhibit A - Outline of Premises
Exhibit B - Building Rules and Regulations
Exhibit C - Form of Letter of Credit
Exhibit D - Option to Renew
SPECIAL 24. a. Condition. Tenant accepts the
PROVISIONS Premises in their "as is" condition on the date
this Lease is executed, except for the Tenant
Improvement to be carried on by Landlord.
LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES
ARE SUITABLE FOR TENANT'S INTENDED COMMERCIAL PURPOSE. TENANT'S OBLIGATION TO
PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE
PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT
ABATEMENT, SETOFF, DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS
DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.
EXECUTED effective as of the Lease Date set forth in the Basic Lease
Information.
LANDLORD:
Date of Execution: SOVRAN LIMITED COMPANY
6/14/99 By /s/ Mahmound Katirai
- ------------------ ---------------------------
Name: Mahmound Katirai
Title: President
TENANT:
Date of Execution: LIFEMINDERS.COM INC.
6/14/99 By /s/ SIGNATURE APPEARS HERE (SEAL)
- ------------------ ---------------------------
Name:
24
<PAGE>
TRUSTe License Agreement Rev 4.3
This agreement (the "Agreement"), once signed below by both parties ("Effective
Date") represents the agreement between Trusted Universal Standards in
Electronic Transactions ("TRUSTe") and (Lifeminders.com)(the "Licensee") with
-----------------
respect to Licensee's participation in the TRUSTe Program and use of the
TRUSTe/SM/ service mark (the "Mark") and the use of the TRUSTe "children's seal
mark" (the "Children's Mark"). For purposes of Sections 2, 3, 4, 5, 6, 9, and
10, the term "Mark" shall include both the Mark and Children's Mark. By signing
this Agreement Licensee agrees to the terms, conditions and program requirements
set forth herein (the "Program Requirements"). The Program Requirements, as
defined in Section 1, may be amended from time to time by TRUSTe at its
reasonable discretion with 30 days prior written or electronic notice, at which
time Licensee has the right to terminate this Agreement and receive a prorated
amount of the license fees paid hereunder. For the purposes of this Agreement,
the term "Recorded Notice" shall include both written notice and electronic
notice that are received.
1. Program Requirements. The TRUSTe program (the "Program") is intended to
--------------------
promote fair information practices with regard to the collection of
Personally Identifiable Information at Web Sites in order to promote the
Internet as a trustworthy environment for conducting business, education,
communication and entertainment activities. "Personally Identifiable
Information" refers to any information that can be used to identify,
contact, or locate a person. This includes information that is used in a
way that is personally identifiable, including linking it with
identifiable information from other sources, or from which other
personally identifiable information can easily be derived, including but
not limited to name, address, phone number, fax number, email address,
personal profiles, personal preferences, financial profiles, social
security number, credit card information, and IP addresses. Personally
Identifiable Information does not include information that is collected
anonymously (i.e., without identification of the individual user) or
demographic information. TRUSTe agrees to name an account representative
for Licensee within 30 days of the effective date. Licensee agrees to the
following program requirements.
A. Site Coordinator. Name a coordinator for the Site (defined in
----------------
Section 2 below) (the "Site Coordinator"). All notices between
TRUSTe and Licensee shall be directed to the designated Site
Coordinator and designated TRUSTe account representative, which
either party may change upon Recorded Notice to the other.
B. The Mark. Licensee shall display the Mark on Licensee's Web site
--------
in a location subject to TRUSTe's reasonable approval, such as the
home page or where information is collected, and link the Mark to
Licensee's Privacy Statement. Licensee must provide TRUSTe with
the URL(s) of the Mark(s) and must provide TRUSTe five calendar
days prior Recorded Notice of changing the URL(s).
C. Privacy Statement(s). Licensee shall maintain and abide by a
--------------------
privacy statement that is written by Licensee, approved by TRUSTe,
and is easily accessible at Licensee's Site ("Privacy Statement").
a. Privacy Statements must include a statement explaining
that the Web site is a licensee of the TRUSTe program.
This statement shall include how users can contact the
Site as well as TRUSTe for concerns regarding the Site's
Privacy Statement. The Privacy Statement must display the
TRUSTe "click to verify seal" html display, and link the
seal to the appropriate verification page located on
TRUSTe's secure server. The verification page will confirm
the Site's participation in the TRUSTe program as
specified in Appendix A.
b. Privacy Statements must reside on Licensee's server (or
that of third party with whom
<PAGE>
Licensee has contracted for use of a server for the Site) unless
otherwise agreed to in writing or email by TRUSTe and Licensee.
Licensee must provide TRUSTe with the URL(s) of the Privacy
Statement(s) and must provide TRUSTe Recorded Notice five calendar
days prior to changing the URL(s).
D. Coordinator's Site. Licensee Shall provide TRUSTe with the contact
------------------
information for the Site Coordinator, contact information for at least
one individual that can provide contact information of other individuals
that have access to or control of information being collected and used:
URL(s) of the Site's Privacy Statement(s); and URL(s) of the Mark(s)
using TRUSTe's Coordinator's Site (TRUSTe's licensees only area located
on TRUSTe's Web site).
E. Collection and Use Practices. Licensee shall disclose the Site's
----------------------------
Information collection and use practices prior to or at the time of
collection via its Privacy Statement(s), including each of the
following:
a. What personally identifiable information is collected.
b. The organization collecting the information.
c. How the information may be used.
d. With whom the information may be shared, if at all.
e. What choices are available regarding collection, use and
distribution of the information.
f. What kinds of security procedures are in place to protect the loss,
misuse or alteration of information in organization's possession or
control.
g. Whether users are offered access to their information and how they
may have inaccuracies corrected.
F. Choice (Opt-out). Licensee shall offer the user the opportunity to
----------------
exercise choice (opt-out) regarding how Personally Identifiable
Information collected from users may be used or distributed when such
use or distribution is unrelated to the purpose for which the
information was collected except to the extent required by law, court
order, or as requested by other government or law enforcement authority.
Licensee shall offer the user the opportunity to opt-out regarding (1)
how Personally Identifiable Information collected from such users may be
used when such use is unrelated to the purpose for which the information
was collected; and (2) how Personally Identifiable Information collected
from such users may be distributed to third parties when such
distribution is unrelated to the purpose for which the information was
collected. If Licensee does not offer the user such a choice to opt out
upon the execution of this Agreement, Licensee agrees to implement such
a mechanism no later than June 30, 1999.
G. Security. Licensee must implement reasonable procedures to protect
--------
Personally Indentifiable Information within its control from loss,
misuse or unauthorized alteration. If Licensee collects, uses, or
disseminates information, such as credit card numbers or social security
numbers, it shall utilize commercially accepted protocols, such as
encryption, to protect information sent over the internet.
H. Data Quality and Access. Licensee shall take reasonable steps when
-----------------------
creating, maintaining, using or disseminating Personally Identifiable
Information, to assure that the data are accurate, complete and timely
for the purposes for which they are to be used. If not already in place
at the execution of this Agreement, Licensee agrees to implement no
later that June 30, 1999 appropriate processes or mechanisms to allow
users to correct inaccuracies in material Personally Identifiable
Information, such as account or contact information. These processes and
mechanisms must be simple and easy to use, and shall confirm to users
assurances that inaccuracies have been corrected.
I. Children's Program. If in TRUSTe's reasonable judgement, the Site is
------------------
directed at children under the age of 13 or at users whose ages are
known to be under the age of 13. Licensee of that Site shall also abide
by the requirements of TRUSTe's Children Seal Program attached as
Appendix B.
J. Displaying Personally Identifiable Information. Licensee shall not make
----------------------------------------------
Personally Identifiable
<PAGE>
information available to the general public in any form (including, on-line
directories and customer lists) without the prior written or electronic
consent of the individual identified unless (a) the information is already
publicly available; (b) required by law, court order, or as requested by
other government or law enforcement authority; (c) the information is posted
by the user to an on-line bulletin board, chat room, new groups, or other
public forum. Licensees who offer on-line directories must delete information
from the Site upon the user's request even if the information is publicly
available. Publicly available information includes information about an
individual that is available to the general public from non-governmental
sources such as telephone directories, classified ads, newspaper reports,
publications, or other forms of information.
K. Use of Personally Identifiable Information. Licensee shall treat all
------------------------------------------
Personally Identifiable Information gathered on the Site in accordance with
the Site's Privacy Statement(s). If Licensee wishes to change its use of
Personally Identifiable Information. Licensee shall first notify TRUSTe of
changes and shall first take reasonable measures to obtain the consent of the
user to whom it pertains, such as obtaining written or electronic consent of
the user. With prior written approval by TRUSTe, Licensee may post prominent
notices on the Site about the change of such policy and leave such notices
posted for at least thirty days prior to implementation of the new use and
description of how to notify Licensee to not permit such use. Licensee shall
specify in their Privacy Statement how users will be notified of changes in
the use of Personally Identifiable Information.
L. Reviews. Licensee shall cooperate with TRUSTe to ensure compliance with the
-------
Program, Program Requirements and Privacy Statement. TRUSTe may, itself or
through an independent third party designated by TRUSTe, review the Privacy
Statement(s) and the Web Site periodically, to assess the level of
consistency and quality of use of the Mark on the Site and the consistency
and quality of the Site's Privacy Statement(s) and related privacy practices,
and Licensee's conformance with the Program Requirements throughout the term
of the Agreement. Such reviews may consist of Web Site reviews (initial and
periodic reviews) conducted at TRUSTe's offices, tracking unique identifiers
in the Site's database (seeding), and monitoring changes in Licensee's
Privacy Statement(s). On-Site privacy compliance reviews may be used as part
of TRUSTe's oversight process should TRUSTe have reason to believe Licensee
is in non-compliance with this Agreement. To comply with this paragraph 1(L),
Licensee agrees to:
a. At no change to TRUSTe or its representatives, provide full access to
the Site (i.e., including password access to premium or members only
areas) and reasonable access to Licensee's records for the purpose of
conducting reviews to ensure that Licensee's stated privacy practices
are consistent with actual practices. At Licensee's discretion, TRUSTe
may be required to sign a confidentiality agreement prior to reviewing
materials required under this Section.
b. Be subject to an on-site compliance review in response to complaints
from end users or TRUSTe. If Licensee has breached this Agreement,
Licensee agrees to reimburse TRUSTe for the reasonable cost of any such
review and promptly rectify the practice to TRUSTe's reasonable
satisfaction. TRUSTe shall provide, at a minimum, ten days written
notice to Licensee prior to initiation of an on-site review and perform
its review during Licensee's normal business hours. TRUSTe shall use its
reasonable effort to accommodate Licensee's schedule and shall perform
its review in such a manner as to not unreasonably interfere with
Licensee's operations.
c. Respond within five business days to all reasonable TRUSTe inquiries
about Licensee's implementation of the Program at the Site and its
conformance with the Privacy Statement.
d. Review and update the contact information for Licensee's representative
assigned to provide TRUSTe contact information of individuals that have
access to or control of information being gathered and/or tracked. Such
information shall not be disclosed by TRUSTe to third parties and shall
only be used by TRUSTe, or an independent party designated by TRUSTe,
solely for the purpose of verifying Licensee's compliance with
<PAGE>
this Agreement.
e. Provide, upon TRUSTe's reasonable request, information regarding
how information gathered and/or tracked is used. Such information
shall not be disclosed to third parties and shall only be used by
TRUSTe, or an independent party designated by TRUSTe. solely for
the purpose of verifying Licensee's compliance with this
Agreement.
M. User Complaints. Licensee shall provide users with reasonable
---------------
appropriate means, which may include a variety of mechanisms, to
ensure that users have a simple and effective way to submit concerns
regarding Licensee's privacy practices. Licensee shall respond to all
reasonable user inquires within five business days. Licensee shall
also reasonably cooperate with TRUSTe's efforts to resolve questions
aid concerns on behalf of the user.
N. Under investigation. Licensee warrants at the time of entering this
-------------------
Agreement that they are not currently under formal investigation, of
which they have been notified, relating to the use of Personally
Identifiable information by any known governmental agency in any
country, including without limitation the United States Federal Trade
Commission or any European Community privacy ombudsman. If an existing
Licensee becomes the subject of any such investigation or a defendant
in an action by any of the aforementioned authorities, it shall
provide the name of the agency, the purpose of the investigation and
the status of the investigation to TRUSTe within thirty days of
learning of such investigation or action.
0. Notice of Investigation. Promptly give notice to TRUSTe upon the
-----------------------
notice or commencement of any investigation of the type described in
paragraph 1(N). The course of action taken by TRUSTe will be on a
case-by-case basis depending on the purpose of the investigation.
2. License Grant. Subject to the terms and conditions of this Agreement,
-------------
TRUSTe grants to Licensee a non-exclusive, royalty-free, worldwide,
non-transferable license to use, reproduce, and publicly display copies of
the Mark in the form provided by TRUSTe to Licensee on the following single
Web Site (the "Site"): http:// lifeminders.com Licensee may not use or
---------------
reproduce the Mark in any manner other than as described in this Agreement.
Licensee's use of the Mark is limited to the Site only, and no license is
provided to use the Mark on any other Site or on any products or materials
of any kind produced by Licensee. Licensee may not sublicense the use of
the Mark, except as necessary to a third party who provides the hosting
service for Licensee's Site in order to allow the display of the Mark on
the Site.
3. Ownership of the Mark: Quality Control.
--------------------------------------
A. Acknowledgment: Nonassistance. Licensee acknowledges that TRUSTe (or
-----------------------------
its licensor) is the sole and exclusive owner of all trademarks,
service marks, copyrights and other intellectual property rights of
any kind In the Mark (including its use as a "Pending Mark", A Pending
Mark is defined as the Mark or Children's Mark with a notice stating
that TRUSTe's review of the Site is pending.) Licensee agrees that:
(a) it shall do nothing inconsistent with such ownership either during
the term of the Agreement or afterwards; (b) it shall use the Mark in
a manner that does not deviate from TRUSTe's rights in the Mark; (c)
it shall take no action that shall interfere with or diminish TRUSTe's
right in the Mark; and (d) it shall use the Mark so as to create a
separate and distinct impression from any other service Mark or
trademark that may be used.
B. Formalities. In order to comply with the requirements of certain
-----------
foreign trademark laws, TRUSTe may need to know if the Site's server
is located in a particular country or countries and other information
regarding such use. Licensee shall supply such information upon
TRUSTe's reasonable request, and shall reasonably cooperate with
TRUSTe to allow It to comply with the formalities of local laws,
including but not limited to by executing applications for
registration as a registered user, executing additional license
agreements suitable for recording with appropriate authorities, by
providing proof of use of the Mark, or by providing or executing other
applicable documents.
C. Non-Alteration. The Mark shall reside on Licensee's server, however,
--------------
Licensee shall not alter
<PAGE>
the Mark in any form, change the data contained within the image, change
the file name of the image, or artificially change the size or shape of
the image(s). If the Mark resides on a server other than Licensee's own
server because a party provides service to Licensee with regard to the
Site. Licensee shall ensure that any such third party conforms to the
requirements of this Agreement with regard to the Mark.
4. Warranty and Disclaimer Licensee Indemnification. The Mark is licensed "AS
------------------------------------------------
IS" with no warranty of any kind. Licensee shall defend, indemnify and hold
TRUSTe harmless from any third party claims against TRUSTe, its officers,
directors, employees or representatives, arising from or relating to the
Site. Licensee's use of the Mark (except for claims that the Mark or use of
the Mark infringes any rights of third parties) or Licensee's compliance with
the Privacy Statement(s).
5. Term. Unless terminated earlier or extended by the parties in writing, this
----
Agreement shall terminate (a) one year from the date that TRUSTe notifies
Licensee that its Privacy Statement has been approved and that it is
authorized to display the Mark on the Site, or (b) one year and thirty days
from the date this Agreement is executed by TRUSTe, whichever is earlier.
Licensee shall need to re-apply and re-qualify for a TRUSTe license upon
termination of this Agreement if it wishes to continue to use the Mark and
participate in the Program.
6. Termination.
-----------
A. Termination for Material Breach. TRUSTe may terminate this Agreement
-------------------------------
upon fourteen calendar days prior written notice to Licensee of a
material breach of this Agreement, unless the breach is corrected to
TRUSTe's reasonable satisfaction within the fourteen calendar day
period. Material breaches include but are not limited to: (a) Licensee's
use of the Mark on the site in a manner inconsistent with the license
granted under this Agreement, any use of the Mark on products or
materials (unless expressly approved in writing as provided below), or
any use otherwise contrary to the provisions of this Agreement; (b)
Licensee's challenge to TRUSTe's ownership of the Mark or the validity
of the Mark; (c) Licensee's failure to adhere to the policies set forth
in Licensee's Privacy Statement, or(d) Licensee's failure to permit or
cooperate with a review of the Privacy Statement or the Site and related
records.
B. Partial Termination/Modification of Mark. Upon ten business days prior
----------------------------------------
to written notice, TRUSTe may terminate Licensee's right to use the Mark
on a server in a particular country in which TRUSTe reasonably
determines that the continued use of the Mark in such country may impose
potential liability on TRUSTe or seriously threaten TRUSTe's ownership
of the Mark. In addition, if TRUSTe's use of the Mark is challenged by a
third party or TRUSTe becomes aware of a significant risk of such a
challenge, TRUSTe may at its option uniformly provide its licensees with
a replacement trademark for the Mark which shall become the Mark for all
purposes under this Agreement.
C. Termination for No Cause. Either party may terminate this Agreement at
------------------------
any time upon thirty calendar days prior written notice for any reason,
with or without cause.
D. Effect of Termination. Upon termination of this Agreement, Licensee
---------------------
shall immediately cease all use of the Mark. In maintaining a trusting
relationship with its users, Licensee acknowledges it should continue to
treat Personally Identifiable Information received during the term of
the Agreement, prior to the effective date of the termination in
accordance with the Privacy Statement.
7. Fees. Licensee shall pay TRUSTe a one time annual fee in the amount
----
determined by the invoice generator available on TRUSTe's Site in effect on
the day that the invoice is generated by Licensee. Fees are based on
Licensee's annual corporate revenue ("Fees"); the annual corporate revenue
for the last fiscal year was:
<PAGE>
[X] $0 - $1 million [_] $25 - $50 million
[_] $1 - $5 million [_] $50 - $75 million
[_] $5 - $10 million [_] $75 million and over
[_] $10 - $25 million
Fees are to be submitted to TRUSTe together with two original copies of this
Agreement executed by Licensee and submitted to TRUSTe for review and
acceptance in TRUSTe's sole discretion. If TRUSTe determines that it does not
wish to enter into this Agreement with Licensee, it shall so notify Licensee
and shall refund the Fees within ten business days of its receipt of this
Agreement and all Fees from Licensee. Otherwise the Fees are non-refundable
unless this Agreement is terminated without cause by TRUSTe, in which case
TRUSTe shall promptly refund a prorated portion of the Fees of the remaining
term.
8. Consequential Damages Waiver. NEITHER PARTY SHALL BE LIABLE TO THE OTHER OR
----------------------------
ANY THIRD PARTY FOR ANY INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OR
DAMAGES FROM LOST PROFITS OR LOST USE, EVEN IF THE PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
9. Liability Limitation. Except as stated in Section 1.L(b) and Section 4,
--------------------
neither party shall be liable to the other on any claim arising under or
relating to this Agreement, the Program or the Mark for any amount greater
than the amount of fees actually paid by Licensee to TRUSTe under this
Agreement.
10. Right of Publicity. Licensee hereby grants TRUSTe a nonexclusive, royalty-
------------------
free, worldwide license, during the term of this Agreement, to use and
distribute Licensee's name and URL in TRUSTe's Current List of Licensees
located on TRUSTe's publicly accessible Web site and corporate brochures.
TRUSTe will provide Licensee the option of participating in third party
listings and directories such as, TRUSTe's Licensee Directory hosted by
WorldPages (http://www.truste.com); and Alexa Internet identifying TRUSTe
licensees as meta data. Upon termination or expiration of this Agreement,
TRUSTe will immediately remove the Licensee from TRUSTe's Current List of
Licensees located on TRUSTe's publicly accessible Web site. All other such
uses and distributions authorized by TRUSTe prior to the termination or
expiration of this Agreement may continue for thirty days after any such
termination or expiration. Licensee agrees to allow TRUSTe to use its name
and URL on other advertisements, promotional materials and related
collateral ("Marketing Uses"), during the term of this Agreement, with the
prior written or electronic consent of Licensee. If Licensee wishes to use
the Mark for any advertising, promotional or other purposes outside the
scope of the Agreement, it may do so only with the prior written or
electronic consent of TRUSTe as to each such use.
11. Miscellaneous.
-------------
A. Governing Law; Jurisdiction; Attorney's Fees. This Agreement shall be
--------------------------------------------
construed in accordance with, and governed by, the laws of the State of
California. In any action to interpret or enforce this Agreement, the
prevailing party shall be awarded all court costs and reasonable
attorneys' fees incurred.
B. Entire Agreement; Waiver; Relationship of the Parties. There are no
-----------------------------------------------------
promises, covenants, or undertakings between the parties other than
those expressly set forth in this Agreement and the exhibits hereto.
Licensee has read, understood and accepted this Agreement. No waiver of
any provision of this Agreement shall be deemed, or shall constitute, a
waiver of any other provision, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing
by the parties. Nothing contained in the Agreement shall be construed as
creating a joint venture, partnership, agency or employment relationship
between the parties, and neither party shall have any right to bind the
other or incur any obligation on the other's behalf without the other's
prior written consent. This Agreement and the exhibits hereto
constitutes the entire Agreement between the parties as to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
representations and understandings between them. This
<PAGE>
Agreement shall not be changed, modified, or amended except by a writing signed
by both parties. This Agreement is not for the benefit of any third party but
nothing in this Agreement shall prevent or interfere with a user of Licensee's
site bringing an action against Licensee for violation of its Privacy Statement.
C. Receipt of Confidential Information
-----------------------------------
a. Definition of Licensee Confidential Information. "Licensee Confidential
------------------------------------------------Information" means
valuable information concerning Licensee's business and not generally
known to the public which is disclosed to TRUSTe. Licensee Confidential
Information may include, but need not be limited to, trade secrets, know-
how, inventions, techniques, processes, algorithms, software programs,
schematics, software source documents, contracts, customer lists,
financial information, sales and marketing and information and business
plans.
b. Confidentiality. TRUSTe agrees to maintain in strict confidence Licensee
----------------
Confidential Information and not to disclose such information to any
person except its officers, employees or consultants to whom it is
necessary for the purposes of operation of the TRUSTe program, and
evaluating the commercial potential of a business relationship with
Licensee or any other purpose which Licensee may hereafter authorize in
writing. TRUSTe represents that all such consultants shall be bound by
the terms of this confidentiality agreement or a similar agreement with
terms no less protective of Licensee's Confidential Information than this
Agreement. TRUSTe shall take reasonable measures to maintain the
confidentiality of Licensee Confidential Information, but not less than
the measures it uses for its own confidential information or similar
type. These obligations shall not apply to the extent that Licensee
Confidential Information includes information which (a) is already known
to TRUSTe at the time of disclosure, which knowledge TRUSTe shall have
the burden of proving; (b) is, or, through no act or failure to act of
TRUSTe, become publicly known; (c) is legally received by TRUSTe from a
third party without restriction on disclosure; (d) is independently
developed by TRUSTe without reference to the Confidential Information of
Licensee; (e) is approved for release by written authorization of
Licensee. This paragraph shall survive any expiration or earlier
expiration of this Agreement.
c. Materials. Unless otherwise agreed to in writing, all materials
---------
including, without limitation, documents, drawings, models,
apparatus, sketches, designs and lists furnished to TRUSTe by Licensee
which contain Licensee Confidential Information shall remain the property
of Licensee. TRUSTe shall return to Licensee or destroy such materials
and all copies thereof upon the termination of this Agreement or upon the
written request of Licensee.
D. Licensee Contract Information
-----------------------------
Designated Site Coordinator: Jeff Johnson
---------------------------
Site Coordinator's Email: [email protected]
---------------------------
Site Coordinator's Telephone: (703) 707-8261 ext. 234
---------------------------
----------------
The authorized officers of the parties have executed this Agreement below.
Please verify the information required in the opening paragraph and Sections 2
and 7 has been provided.
Accepted and Agreed by TRUSTe Accepted and Agreed by Licensee
<PAGE>
- --------------------------------------------------------------------------------
By Susan Scott By [illegible]
Name Susan Scott Name [illegible]
- --------------------------------------------------------------------------------
Title Executive Director Title President & C.E.O.
Date 3-12-99 Date 3/10/99
- --------------------------------------------------------------------------------
Telephone (703)707-8261 ext. 232
Email [email protected]
- --------------------------------------------------------------------------------
Company Name: LifeMinders.com
- --------------------------------------------------------------------------------
Address: 694 Spring Street
Herndon, VA 20170
- --------------------------------------------------------------------------------
Telephone: (703)707-8261
- --------------------------------------------------------------------------------
--------------------
Appendix A: TRUSTe Verification Page
1. The following verification page shall be used for sites that are not
directed to children under 13 or which the age of the user is known to be
13 or older.
(Name of Company) is a licensee of the TRUSTe Privacy Program. This
statement discloses the privacy practices for (name of the Web Site).
TRUSTe is an independent, non-profit initiative whose mission is to build
users' trust and confidence in the Internet by promoting the principles of
disclosure and informed consent. Because this site wants to demonstrate its
commitment to your privacy, it has agreed to disclose its information
practices and reviewed for compliance by TRUSTe. By displaying the TRUSTe
mark, this Web site has agreed to notify you of:
. What personally identifiable information of yours is collected
. What organization is collecting the information
. How the information is used
. With whom the information may be shared
. What choices are available to you regarding collection, use and
distribution of the information
. What kind of security procedures that are in place to protect the loss,
misuse or alteration of information under the company's control
. How you can correct any inaccuracies in the information.
If you have questions or concerns regarding the site's privacy statement,
you should first contact the company at (enter email address, phone number,
mailing address, etc.). If you do not receive acknowledgment of your
inquiry or your inquiry has not been satisfactorily addressed, you should
then contact TRUSTe (http://www.truste.org/users/users_watchdog.html).
To return to the Site, please use the "Back" button on your browser.
<PAGE>
2. The following verification page shall be used as notice to parents for sites
that are directed to children under 13 or which the age of the user is known to
be under 13.
(Name of Company) is a licensee of the TRUSTe Privacy Program. This statement
discloses the privacy practices for (name of the Web Site).
TRUSTe is an independent, non-profit initiative whose mission is to build users'
trust and confidence in the Internet by promoting the principles of disclosure
and informed consent. Because this site wants to demonstrate its commitment to
your privacy, it has agreed to disclose its information practices and have its
privacy practices reviewed for compliance by TRUSTe. By displaying the TRUSTe
mark, this Web site has agreed to notify you of:
. What personally identifiable information of yours is collected
. What organization is collecting the information
. How the information is used
. With whom the information may be shared
. What choices are available to you regarding collection, use and
distribution of the information
. What kind of security procedures that are in place to protect the loss,
misuse or alteration of information under the company's control
. How you can correct any inaccuracies in the information.
The site has also agreed to the following Children's requirements when a visitor
is under 13 years old. The site will:
1. NOT collect online contact information without prior parental consent or
parental notification, which will include an opportunity for the parent
to prevent use of the information and participation in the activity.
Without prior parental consent, online information will only be used to
respond directly to the child's request and will not be used for other
purposes without prior parental consent.
2. NOT collect personally identifiable offline contact information without
prior parental consent.
3. NOT distribute to third parties any personally identifiable information
without prior parental consent.
4. NOT give the ability to publicly post or otherwise distribute personally
identifiable contact information without prior parental consent.
5. NOT entice by the prospect of a special game, prize or other activity,
to divulge more information than is needed to participate the activity.
If you have questions or concerns regarding the site's privacy statement, you
should first contact the company at (enter email address, phone number, mailing
address, etc.). If you do not receive acknowledgment of your inquiry or your
inquiry has not been satisfactorily addressed, you should then contact TRUSTe
(http://www.truste.org/users/users_watchdog.html).
To return to the Site, please use the "Back" button on your browser.
--------------------
Appendix B: TRUSTe's Children's Seal Program
TRUSTe recognizes the special privacy protection that needs to be afforded to
children. Licensees whose online activities are directed at children must
display TRUSTe's Children Mark and must abide by the Children's Seal
Requirements. If Licensee's online activities are not directed at children,
however the age of the visitors is known to be under 13. Licensee is not
required to display the TRUSTe's Children's Mark, however Licensee must abide by
the Children's Seal Requirements.
Children's Seal Requirements.
<PAGE>
1. If a Licensee's Site is directed at children under 13 or if the age of
visitors is known to be under the age of 13, Licensee agrees at that Site it
will NOT:
A. Collect online contact information from a child under 13 without prior
parental consent or direct parental notification of the nature and
intended use of this information, which shall include an opportunity
for the parent to prevent use of the information and participation in
the activity. Where prior parental consent is not obtained, online
contact information shall only be used to directly respond to the
child's request and shall not be used to re-contact the child for
other purposes.
B. Collect personally identifiable offline contact information from
children under 13 without prior parental consent.
C. Distribute to third parties any Personally identifiable information
collected from a child under 13 without prior parental consent.
D. Give the ability to children under 13 to publicly post or otherwise
distribute personally identifiable contact information without prior
parental consent, and will make best efforts to prohibit a child from
posting any contact information.
E. Entice a child under 13 by the prospect of a special game, prize or
other activity, to divulge more information than is needed to
participate in such activity.
2. Licensee shall place prominent notice where personally identifiable
information is collected, requesting the child to ask a parent for
permission to answer the questions.
<PAGE>
IMPERIAL BANK
- ---------------------------
Innovative Business Banking
Member FDIC
STARTER KIT LOAN AND SECURITY AGREEMENT
Borrower: MinderSoft, Inc. Address: 694 Spring Street
---------------- -----------------
Date: November 10, 1998 Herndon, VA 20170
----------------- -----------------
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made and entered into on the
above date between IMPERIAL BANK ("Bank"), whose address is 226 Airport Parkway,
-------------------
San Jose, California 95110 and the party(ies) named above (jointly and
- --------------------------
severally, "Borrower"), whose chief executive office is located at the above
address ("Borrower's Address").
1. Loans. Bank will make loans to Borrower (the "Loans") in amounts determined
by Bank in its reasonable business judgment up to the amount (the "Credit
Limit") shown on the Schedule to this Agreement (the "Schedule"), provided
no Event of Default and no event which, with notice or passage of time or
both, would constitute an Event of Default is occurring or has occurred.
All Loans and other monetary Obligations will bear interest at the rate
shown on the Schedule. Interest will be payable monthly, on the date shown
on the monthly billing from Bank. Bank may, in its discretion, charge
Borrower's deposit accounts maintained with Bank for any amounts coming due
under this Agreement.
2. Security Interest. As security for all present and future indebtedness,
guarantees, liabilities, and other obligations, of Borrower to Bank
(collectively, the "Obligations"), Borrower hereby grants Bank a continuing
security interest in all of Borrower's right title and interest in and to
any property now or hereafter described in an security agreement executed
by Borrower to Bank as well as the following types of property, whether now
owned or hereafter acquired, and wherever located (collectively, the
"Collateral"): All "accounts", "general intangibles," "chattel paper, "
"documents," "letters of credit," "instruments," "deposit accounts,"
"inventory," "farm products," "fixtures" and "equipment," as such terms
are defined in Division 9 of the California Uniform Commercial Code in
effect on the date hereof, and all products, proceeds and insurance
proceeds of the foregoing.
3. Representations and Agreements of Borrower. Borrower represents to Bank as
follows, and Borrower agrees that the following representations will
continue to be true, and that Borrower will comply with all of the
following agreements throughout the term of this Agreement:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and will
continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The execution,
delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby have been duly and validly authorized, and do
not violate any law or any provision of and are not grounds for
acceleration under, any agreement or instrument which is binding upon
Borrower.
3.2 Name: Places of Business. The name of Borrower set forth in this Agreement
is its correct name. Borrower shall give Bank 15 days' prior written notice
before changing its name. The address set forth in the heading to this
Agreement is Borrower's chief executive office. In addition, Borrower has
places of business and Collateral is located only at the locations set
forth on the Schedule. Borrower will give Bank at least 15 days prior
written notice before changing its chief executive office or locating the
Collateral at any other location.
3.3 Collateral. Bank has and will at all times continue to have a first-
priority perfected security interest in all of the Collateral other than
specific equipment identified in existing filed or to be filed Financial
Statements. Borrower will immediately advise Bank in writing of any
material loss or damage to the Collateral.
3.4 Financial Condition and Statements. All financial statements now or in the
future delivered to Bank have been, and will be prepared in conformity with
generally accepted accounting principles. Since the last date covered by
any such statement, there has been no material adverse change in the
financial condition or business of Borrower. Borrower will provide Bank:
(i) within 30 days after the end of each month, a monthly financial
statement and Compliance Certificate prepared by Borrower, and such other
information as Bank shall reasonably request:
(ii) within 90 days following the end of Borrower's fiscal year beginning
December 31, 1998, complete annual financial statements, certified by
independent certified public accountants acceptable to Bank and
<PAGE>
accompanied by the unqualified report thereon by said independent certified
public accountants: and (iii) other financial information reasonably
requested by Bank from time to time.
3.5 Taxes: Compliance with Law. Borrower has filed, and will file, when due,
all tax returns and reports required by applicable law, and Borrower has
paid, and will pay, when due, all taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower has complied,
and will comply, in all material respects, with all applicable laws, rules
and regulations.
3.6 Insurance. Borrower will at all times adequately insure all of the
tangible personal property Collateral and carry such other business
insurance as is customary in Borrower's industry. Bank will be designated
as Loss Payee on all such insurance.
3.7 Access to Collateral and Books and Records. Prior to any disbursement, Bank
to perform collateral audit of company books and records with results
satisfactory to Bank. At reasonable times, on one business day's notice,
Bank, or its agents, shall have the right to inspect the Collateral, and
the right to audit and copy Borrower's books and records.
3.8 Banking Relationship and Operating Accounts. Borrower shall maintain its
primary operating deposit accounts with Bank. Borrower shall at all times
maintain its primary banking relationship with Bank.
3.9 Additional Agreements. Borrower shall not, without Bank's prior written
consent, do any of the following: (i) enter into any transaction outside
the ordinary course of business except for the sale of capital stock to
venture investors, provided that Borrower promptly delivers written
notification to Bank of any such stock sale; (ii) sell or transfer any
Collateral, except in the ordinary course of business; (iii) pay or declare
any dividends on Borrower's stock (except for dividends payable solely in
stock of Borrower); or (iv) redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of Borrower's stock other than the repurchase
of up to five percent (5%) of Borrower's then issued stock in any fiscal
year from Borrower's employees or directors pursuant to written agreements
with Borrower.
3.10 Year 2000 Compliance. (i) Borrower affirmatively covenants that it will
perform all acts reasonably necessary to ensure that (a) Borrower and any
business in which Borrower holds a substantial interest, and (b) all
customers, suppliers and vendors that are material to Borrower's business,
become Year 2000 Compliant in a timely manner. Such acts shall include,
without limitation, performing a comprehensive review and assessment of all
Borrower's systems and adopting a detailed plan, with itemized budget, for
the remediation, monitoring and testing of such systems. As used in this
paragraph, "Year 2000 Compliant" shall mean, in regard to any entity, that
all software, hardware, firmware, equipment, goods or systems utilized by
or material to the business operations or financial condition of such
entity, will properly perform date sensitive functions before, during and
after the year 2000. Borrower shall, immediately upon request, provide to
the Bank such certifications or other evidence of Borrower's compliance
with the terms to this paragraph as Bank may from time to time require.
(ii) Borrower and its subsidiaries, as applicable, represent and warrant
that they have reviewed the areas within their operations and business
which could be adversely affected by, and have developed or are developing
a program to address on a timely basis, the Year 2000 Problem and have made
related appropriate inquiry of material suppliers and vendors, and based on
such review and program, the Year 2000 Problem will not have a material
adverse effect upon their financial condition, operations or business as
now conducted. "Year 2000 Problem" means the possibility that any computer
applications or equipment used by Borrower may be unable to recognize and
properly perform date sensitive functions involving certain dates prior to
and any dates on or after December 31, 1999.
4. Term. This Agreement shall continue in effect until the maturity date set
forth on the Schedule (the "Maturity Date"). This Agreement may be
terminated, without penalty, prior to the Maturity Date as follows: (i) by
Borrower, effective three business days after written notice of termination
is given to Bank; or (ii) by Bank at any time after the occurrence of an
Event of Default, without notice, effective immediately. On the Maturity
Date or on any earlier effective date of termination, Borrower shall pay
all Obligations in full, whether or not such Obligations are otherwise then
due and payable. No termination shall in any way affect or impair any
security interest or other right or remedy of Bank, nor shall any such
termination relieve Borrower of any Obligation to Bank, until all of the
Obligations have been paid and performed in full.
5. Covenants. On a monthly basis, the company is to maintain a minimum quick
ratio of 1.00:1. For purposes of this credit facility, the quick ratio
shall be calculated as cash plus accounts receivable divided by total
current liabilities, with all debt issued under this facility included in
the calculation as a current liability.
<PAGE>
The Company will be eligible to take a one time "covenant holiday", during
which period the financial covenants will not apply, to begin at the
Company's discretion and upon qualification, for a 90 day period or until the
Company has received a minimum of $2,000,000 in a Series B round from
institutional venture capital investor(s) acceptable to Bank, whichever is
sooner. Once one of the previous two events has occurred, the Company must
maintain the minimum quick ratio of 1.00:1.
To qualify for the 90 day "covenant holiday", one of the following must
occur:
A) The Company must have received and accepted signed terms sheets for
minimum of $2,000,000 in a Series B round from institutional
venture capital investor(s) acceptable to Bank.
B) The Bank has completed satisfactory due diligence with acceptable
institutional venture capital investor(s) and is satisfied that
the additional funding will be made available within the 90 day
period.
The availability of the "covenant holiday" option will expire once the
Company has received the minimum of $2,000,000 in new equity. Therefore, in
the event that the Company receives the new equity prior to ever having
exercised the "covenant holiday" option, the "covenant holiday" option will
be considered expired and the Company must maintain the 1.00:1 quick ratio.
6. Events of Default and Remedies. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement: (a) Any
representation, statement, report or certificate given to Bank by Borrower or
any of its officers, employees or agents, now or in the future, is untrue or
misleading in a material respect; or (b) Borrower fails to pay when due any
Loan or any interest thereon or any other monetary Obligation; or (c) the
total Obligations outstanding at any time exceed the Credit Limit; or (d)
Borrower fails to perform any other non-monetary Obligation, which failure is
not cured within 5 business days after the date due; or (e) Dissolution,
termination of existence, insolvency or business failure of Borrower or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement
of any proceeding by or against Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in
effect; or (f) a material adverse change in the business, operations, or
financial or other condition of Borrower. If an Event of Default occurs,
Bank, shall have the right to accelerate and declare all of the Obligations
to be immediately due and payable, increase the interest rate by an
additional five percent per annum, and exercise all rights and remedies
recorded by applicable law. If any interest payment, principal payment or
principal balance payment due from Borrower is delinquent ten or more days,
Borrower agrees to pay Bank a late charge in the amount of 5% of the payment
so due and unpaid, in addition to the payment; but nothing in this provision
is to be construed as any obligation on the part of Bank to accept payment of
any payment past due or less than the total unpaid principal balance after
maturity. All payments shall be applied first to any late charges owing, then
to interest and the remainder, if any, to principal.
7. General. If any provision of this Agreement is held to be unenforceable, the
remainder of this Agreement shall still continue in full force and effect.
This Agreement and any other written agreements, documents and instruments
executed in connection herewith are the complete agreement between Borrower
and Bank and supersede all prior and contemporaneous negotiations and oral
representations and agreements, all of which are merged and integrated in
this Agreement. There are no oral understandings, representations or
agreements between the parties which are not in this Agreement or in other
written agreements signed by the parties in connection this Agreement. The
failure of Bank at any time to require Borrower to comply strictly with any
of the provisions of this Agreement shall not waive Bank's right later to
demand and receive strict compliance. Any waiver of a default shall not waive
any other default. None of the provisions of this Agreement may be waived
except by a specific written waiver signed by an officer of Bank and
delivered to Borrower. The provisions of this Agreement may not be amended,
except in a writing signed by Borrower and Bank. Borrower shall reimburse
Bank for all reasonable attorney's fees and all other reasonable costs
incurred by Bank, in connection with this Agreement (whether or not a lawsuit
is filed) including any post petition bankruptcy activities. If Bank or
Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party shall be entitled to recover its reasonable
costs and attorney's fees from the non-prevailing party. Borrower may not
assign any rights under this Agreement without Bank's prior written consent.
This Agreement shall be governed by the laws of the State of California to
the jurisdiction of whose courts Borrower hereby agrees to submit.
8. Mutual Waiver of Jury Trial. BORROWER AND BANK EACH HEREBY WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO, THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF BANK
OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS
OR AFFILIATES.
<PAGE>
[ILLEGIBLE] Controversy, dispute or claim ("Claim between the parties
arising out of or relating to this Agreement, which is not settled in writing
within ten days after the "Claim Date" (defined as the date on which a party
gives written notice to all other parties that a controversy, dispute or claim
exists), will be settled by a reference proceeding in Los Angeles, California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any Claim, including whether such Claim
is subject to the reference proceeding and the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court of Los Angeles (the "Court"). The referee shall be
a retired Judge selected by mutual agreement of the parties, and if they cannot
so agree within thirty days after the Claim Date, the referee shall be selected
by the Presiding Judge of the Court. The referee shall be appointed to sit as a
temporary judge, as authorized by law. The referee shall (a) be requested to set
the matter for hearing within sixy (60) days after the Claim Date and (b) try
any and all issues of law or fact and report a statement of decision upon them,
if possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and judgment shall entered
pursuant to CCP 644 in the Court. All discovery permitted by this Agreement
shall be completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and, request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties.
b. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The
rules of evidence applicable to proceedings at law in the State of
California will be applicable to the reference proceeding. The referee
shall be empowered to enter equitable as well as legal relief, to provide
all temporary and/or provisional remedies and to enter equitable orders
that will be binding upon the parties. The referee shall issue a single
jugement at the close of the reference proceeding which shall dispose of
all of the claims of the parties that are the subject of the reference. The
parties hereto expressly reserve the right to contest or appeal from the
final judgment or any appealable order or appealable judgment entered by
the referee. The parties expressly reserve the right to findings of fact,
conclusions of law, a written statement of decision, and the right to move
for a new trial or a different judgment, which new trial, if granted, is
also to be a reference proceeding under this provision.
Borrower: MinderSoft, Inc.
By: /s/ Stephen R. Chapin, Jr.
-----------------------------------------
Stephen R. Chapin, Jr., President and CEO
Bank: IMPERIAL BANK
By:
-----------------------------------------
Bradley Steele, Assistance Vice President
<PAGE>
IMPERIAL BANK
- ---------------------------
Innovative Business Banking
Member FDIC
Master Schedule to Starter Kit Loan and Security Agreement
BORROWER: LifeMinders.com, Inc.
---------------------
DATE: November 10, 1998
------------------
This Schedule is Incorporated into and an integral part of the Starter Kit
Loan and Security Agreement between Imperial Bank ("Bank") and the above-named
Borrower of even date.
Credit Limit (Aggregate)
(Section 1): $1,000,000.00, including a $150,000 Business Bankcard Sublimit,
-------------
StarterKit Loan Facility ("Loan"), limited to $600,000 until receipt by Borrower
of a minimum of $1,000,000 in new equity from institutional venture capital
investor(s) acceptable to Bank.
Interest Rate (Section 1): The rate equal to Bank's Prime Rate plus 1.00% in
effect from time to time per year. Interest shall
be calculated on the basis of a 360 day year for
the actual number of days elapsed. The Prime Rate
shall be the rate announced from time to time by
Bank as its "Prime Rate;" as a base rate upon which
other rates charged by Bank are based, and it is
not necessarily the best rate available at Bank.
The interest rate applicable to the Obligations
shall change on each date there is a change in the
Prime Rate
Maturity Date (Section 4); November 10, 1999 for working capital loans.
-------------------------------------------
Other Locations and Addresses
(Section 3.2):
--------------------------------------------------
--------------------------------------------------
Other Agreements: 1. Loan Fee. Borrower shall concurrently pay Bank a
non-refundable Loan Fee in the amount of
$2,000.00.
2. $2,000 for initial $600,000. Additional fee of
$2,000 payable prior to borrowings exceeding
$600,000.
3. In addition to fee and upon exercise of
"covenant holiday" described below, the Company
will provide warrants, with an exercise price at
price of most recent equity round, equal to 5%
of $600,000 ($30,000). Warrant documents
attached.
LifeMinders.com, Inc. IMPERIAL BANK
By: /s/ Stephen R. Chapin, Jr. By: /s/ Bradley H. Steele
--------------------------- -------------------------
Name: Stephen R. Chapin, Jr. Name: Bradley H. Steele
------------------------- -----------------------
Title: President and CEO Title: AVP
------------------------ ----------------------
<PAGE>
IMPERIAL BANK
- ---------------------------
Innovative Business Banking
Member FDIC
Master Schedule to Starter Kit Loan and Security Agreement
BORROWER: MinderSoft, Inc.
----------------
DATE: November 10, 1998
-----------------
This Schedule is incorporated into and an integral part of the Starter Kit
Loan and Security Agreement between Imperial Bank ("Bank") and the above-named
Borrower of even date.
Credit Limit (Aggregate)
(Section 1): $1,000,000.00 StarterKit Loan Facility ("Loan"), limited
-------------
to $600,000 until receipt by Borrower of a minimum of
$1,000,000 in new equity from institutional venture
capital investor(s) acceptable to Bank.
Interest Rate (Section 1): The rate equal to Bank's Prime Rate plus 1.00% in
effect from time to time per year. Interest shall
be calculated on the basis of a 360 day year for
the actual number of days elapsed. The Prime Rate
shall be the rate announced from time to time by
Bank as its "Prime Rate;" as a base rate upon
which other rates charged by Bank are based, and
it is not necessarily the best rate available at
Bank. The interest rate applicable to the
Obligations shall change on each date there is a
change in the Prime Rate.
Maturity Date (Section 4): November 10, 1999 for working capital loans.
--------------------------------------------
Other Locations and Addresses
(Section 3.2): ________________________________________________
________________________________________________
________________________________________________
________________________________________________
Other Agreements: 1. Loan Fee. Borrower shall concurrently pay Bank
a non-refundable Loan Fee in the amount of
$2,000.00.
2. $2,000 for initial $600,000. Additional fee of
$2,000 payable prior to borrowings exceeding
$600,000.
3. In addition to fee and upon exercise of
"covenant holiday" described below, the
Company will provide warrants, with an
exercise price at price of most recent equity
round, equal to 5% of $600,000 ($30,000).
Warrant documents attached.
MinderSoft, Inc. IMPERIAL BANK
By: /s/ Stephen P. Chapin, Jr. By:
-------------------------------- ----------------------------------------
Stephen P. Chapin, Jr. Bradley Steele, Assistant Vice President
President & CEO
<PAGE>
IMPERIAL BANK
Member FDIC
March 09,1999
226 Airport Parkway
San Jose, CA 95110
Borrower: LifeMinders.com, Inc.
Subject: Credit Terms and Conditions
("Agreement")
Gentlemen:
To induce you to make loans to the undersigned (herein called "Borrower"), and
in consideration of any loan or loans you, in your sole discretion, may make to
Borrower, Borrower warrants and agrees as follows:
A. Borrower represents and warrants that:
1. Existence and Rights.
Borrower is a Maryland corporation.
Borrower us duly organized and existing and in good standing under the laws of
the State of Maryland and is authorized and in good standing to do business in
the State of Virginia. Borrower has powers and adequate authority, rights and
franchises to own its property and to carry on its business as now conducted,
and is duly qualified and in good standing in each State in which the character
of the properties owned by it therein or the conduct of its business makes such
qualification necessary, and Borrower has the power and adequate authority to
make and carry out this Agreement. Borrower has no investment in any other
business entity.
2. Agreement Authorized. The execution, delivery, and performance of this
Agreement are duly authorized and do not require the consent or approval of any
governmental body or other regulatory authority; are not in contravention of or
in conflict with any law or regulation or any term or provision of Borrower's
articles or incorporation, by-laws, or Articles or Association, as the case may
be, and this Agreement is the valid, binding and legally enforceable obligation
of Borrower in accordance with its terms.
3. No Conflict. The execution, delivery and performance of this Agreement are
not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower is a party or by which it or any or its property
may be bound or affected, and do not cause any lien, charge or other encumbrance
to be created or imposed upon any such property by reason thereof.
4. Litigation. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority.
5. Financial Condition. The balance sheet of Borrower as of December 31,
1998, and the related profit and loss statement for the 12 months ended on that
date, a copy of which has heretofore been delivered to you by Borrower, and all
other statements and data submitted in writing by Borrower to you in connection
with this request for credit are true and correct, and said balance sheet and
profit and loss statement truly present the financial condition of Borrower as
of the date thereof and the results of the operations of Borrower for the period
covered thereby, and have been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date there
have been no materially adverse changes in the financial condition or business
of Borrower. Borrower has no knowledge of any liabilities, contingent or
otherwise, at such date not reflected in said balance sheet, and Borrower has
not entered into any special commitments or substantial contracts which are not
reflected in said balance sheet, other than in the ordinary and normal course of
its business, which may have a materially adverse effect upon its financial
condition, operations or business as now conducted.
6. Title to Assets. Borrower has good title to its assets, and the same are
not subject to any liens or encumbrances other than those permitted by Section
C.3 hereof.
7. Tax Status. Borrower has no liability for any delinquent state, local or
federal taxes, and if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
8. Trademarks, Patents. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated without any known conflict with
the valid trademarks, trade names, copyrights, patents and license rights of
others.
9. Regulation U. The proceeds of this loan shall not be used to purchase or
carry margin stock (as defined with Regulation U of the Board of Governors of
the Federal Reserve System).
10. Year 2000 Compliance. Borrower has reviewed the areas within their
operations and business which could be adversely affected by, and have developed
or are developing a program to address on a timely basis, the Year 2000 Problem
and have made related appropriate inquiry of material suppliers and vendors, and
based on such review and program, the Year 2000 Problem will not have a material
adverse effect upon its financial condition, operations or business as now
conducted. "Year 2000 Problem" means the risk that any computer applications
used by Borrower may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any dates on or after December
31, 1999.
B. Borrower agrees that so long as it is indebted to you, it will, unless you
shall otherwise consent in writing:
1. Rights and Facilities. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. Insurance. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses.
3. Taxes and Other Liabilities. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate proceedings in
such manners as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder, and
(b) it shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it adequate with
respect thereto.
4. Records and Reports. Maintain a standard and modern system of accounting
in accordance with generally accepted accounting principles on a basis
consistently maintained; permit your representatives to have access to, and to
examine its properties, books and records at all reasonable times; and furnish
you:
(a) As soon as available, and in any event within 30 days after the close of
each month for each fiscal year of Borrower, commencing with the month next
ending, a balance sheet, profit and loss statement and reconciliation of
Borrower's capital accounts as of the close of such period and covering
operations for the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower and certified by an appropriate officer of
Borrower, subject, however, to year-end audit adjustments;
(b) As soon as available, and in any event within 90 days after the close of
each fiscal year of Borrower, a report of audited annual statements of Company
as of the close of and for such fiscal year, all in reasonable detail and
stating in comparative form the figures as of the close of and for the previous
fiscal year, with the unqualified opinion of accountants satisfactory to you.
(c) Within 30 days after the close of each month of each fiscal year of
Borrower, a certificate by chief financial officer or partner of Borrower,
stating that Borrower has performed and observed each and every covenant
<PAGE>
contained in this Letter of Inducement to formed by it and that no event has
occurred and no condition then exists constitutes an event of default hereunder
or would constitute such an event of default upon the lapse of time or upon the
giving of notice and the lapse of time specified herein, or, if any such event
has occurred or any such condition exists, specifying the nature thereof;
(d) Promptly after the receipt thereof by Borrower, copies of any detailed
audit reports submitted to Borrower by independent accountants in connection
with each annual or interim audit of the accounts of Borrower made by such
accountants;
(e) Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower shall send to its stockholders, if
any, and copies of all reports which Borrower may file with the Securities and
Exchange Commission or any governmental authority at any time substituted
therefor; and
(f) Such other information relating to the affairs of Borrower as you
reasonably may request from time to time.
(g) Notice of Default. Promptly notify the Bank in writing of the occurrence of
any event of default hereunder or any event which upon notice and lapse of time
would be an event of default.
5. Year 2000 Compliance. Borrower shall perform all acts reasonably necessary
to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors that are
material to Borrower's business, become Year 2000 Compliant in a timely manner.
Such acts shall include, without limitation, performing a comprehensive review
and assessment of all Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems.
As used in this paragraph, "Year 2000 Compliant" shall mean, in regard to any
entity, that all software, hardware, firmware, equipment, goods or systems
utilized by or material to the business operations or financial condition of
such entity will properly perform date sensitive functions before, during and
after the year 2000. Borrower shall, immediately upon request, provide to Agent
such certifications or other evidence of Borrower's compliance with the terms of
this paragraph as Bank may from time to time require.
C. Borrower agrees that so long as it is indebted to you, it will not, without
your written consent:
1. Type of Business; Management. Make any substantial change in the
character of its business; or make any change in its executive
management.
2. Outside Indebtedness. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than loans from you except
obligations now existing as shown in financial statement date December
31, 1998, excluding those being refinanced by your bank; or sell or
transfer, either with or without recourse, any accounts or notes
receivable or any moneys due to become due.
3. Liens and Encumbrances. Create, incur, or assume any mortgage, pledge
encumbrances, lien or charge of any kind (including the charge upon
property at any time purchased or acquired under conditional sale or
other title retention agreement) upon any asset now owned or hereafter
acquired by it including but not limited to intellectual property, other
than liens for taxes not delinquent and liens in your favor.
4. Loans, Investments, Secondary Liabilities. Make any loans or advances
to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in
securities other than United States Government Treasuries or Agencies,
Imperial Bank sponsored paper, or the Monarch Money Market Funds; or
guarantee or otherwise become liable upon the obligation of any person
or other entity, except by endorsement of negotiable instruments for
deposit or collection in the ordinary and normal course of its business.
5. Acquisition or Sale of Business; Merger or Consolidation. Purchase or
otherwise acquire the assets or business of any person or other entity;
or liquidate, dissolve, merge or consolidate, or commence any
proceedings therefor; or sell any assets except in the ordinary and
normal course of its business as now conducted; or sell, lease, assign,
or transfer any substantial part of its business or fixed assets, or any
property or other assets necessary for the continuance of its business
as now conducted including without limitation the selling of any
property or other asset accompanied by the leasing back of the same.
6. Dividends, Stock Payments. If a corporation, declare or pay any dividend
(other than dividends payable in common stock of Borrower) or make any
other distribution on any of its capital stock now outstanding or
hereafter issued or purchase, redeem or retire any of such stock.
D. The occurrer any one of the following events of default shall, at your
option, terminate your commitment to lend and make all sums of principal and
interest then remaining unpaid on all Borrower's indebtedness to you immediately
due and payable, all without demand, presentment or notice, all of which are
hereby expressly waived.
1. Failure to Pay. Failure to pay any installment of principal or of
interest on any indebtedness or Borrower to you.
2. Breach of Covenant. Failure of Borrower to perform any other terms or
conditions of this Agreement or any other agreement, including but not
limited to that Starter Kit Loan and Security Agreement dated November
1998 ("Starter Kit") between Borrower and Bank binding upon Borrower.
3. Breach of Warranty. Any of Borrower's representations or warranties made
herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading
in any material respect.
4. Insolvency; Receiver or Trustee. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an
assignment for the benefit of creditors; or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part
of its property or business.
5. Judgments, Attachments. Any money judgement, write or warrant of
attachment, or similar process shall be entered or filed against
Borrower or any of its assets and shall remain unvacated unbonded or
unstayed for a period of 10 days or in any event later than five days
prior to the date of any proposed sale thereunder.
6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or
any law for the relief of debtors shall be instituted by or against
Borrower and, if instituted against it shall consented to.
E. Miscellaneous Provisions.
1. Failure or indulgence Not Waiver. No failure or delay on the part of
your Bank or any holder of Notes issued hereunder, in the exercise of
any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or any
other right, power or privilege. All rights and remedies existing under
this agreement or any note issued in connection with a loan that your
Bank may make hereunder, are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
2. Mutual Waiver of Jury Trial. BORROWER AND BANK EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY CONDUCT, ACT OR
OMISSION OF BANK OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR AFFILIATES.
3. Reference Proceedings. Each controversy, dispute or claim ("Claim")
between the parties arising out of or relating to this Agreement shall
be settled in accordance with the Reference Proceedings contained in the
Starter Kit.
4. Conflict. In the event of a conflict between this Agreement and the
Starter Kit, the terms in the starter Kit shall take precedence. The
Commitment Letter dated March 1, 1999, and all amends thereto and
replacements therefor, is attached hereto and incorporated herein by
this reference for additional terms. In the event of a conflict between
this Agreement and the Letter, the terms in the Letter shall take
precedence.
LifeMinders.com, Inc.
By/s/
-------------------------------
(Authorized Signature)
/s/Stephen R. Chapin, JR.
By-------------------------------
(Print Name)
/s/
By------------------------------
(Title)
<PAGE>
Borrower: LIFEMINDERS.COM, INC., A MARYLAND
CORPORATION
694 SPRING STREET
HERNDON, VA 20170
Lender: Imperial Bank
Mid Atlantic Regional Office
226 Airport Parkway
San Jose, CA 95110-1024
THIS COMMERCIAL SECURITY AGREEMENT is entered into between LIFEMINDERS.COM,
INC., A MARYLAND CORPORATION (referred to below as "Grantor"); and Imperial Bank
(referred to below as "Lender"). For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All personal property of Obligor (herein referred to as "Obligor" or
"Debtor") whether presently existing or hereafter created, written,
produced or acquired, including, but not limited to: (i) all accounts
receivable, accounts, chattel paper, contract rights (including,
without limitation, royalty agreements, license agreements and
distribution agreements), documents, instruments, money, deposit
accounts and general intangibles including, without limitation,
returns, repossessions, books and records relating thereto, and
equipment containing said books and records, all investment property
including securities and securities entitlements (ii) all software,
computer source codes and other computer programs (collectively, the
"Software Products"), and all common law and statutory copyrights and
copyright registrations, applications for registration, now existing
or hereafter arising, United States of America and foreign, obtained
or to be obtained on or in connection with the Software Products, or
any parts thereof or any underlying or component elements of the
Software Products together with the right to copyright and all rights
to renew or extend such copyrights and the right (but not the
obligation) of Bank (herein referred to as "Bank" or "Secured Party")
to sue in its own name and/or in the name of the Debtor for past,
present and future infringements of copyright, (iii) all goods
including, without limitation, equipment and inventory (including,
without limitation, all export inventory), (iv) all guarantees and
other security therefor, (v) all trademarks, service marks, trade
names and service names and the goodwill associated therewith, (vi)
(a) all patents and patent applications filed in the United States
Patent and Trademark Office or any similar Office of any foreign
jurisdiction, and interests under patent license agreements,
including, without limitation, the inventions and improvements
described and claimed therein, (b) licenses pertaining to any patent
whether Debtor is licensor or licensee, (c) all income, royalties,
damages, payments, accounts and accounts receivable now or hereafter
due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future
infringements thereof, (d) the right (but not the obligation) to sue
for past, present and future infringements thereof, (e) all rights
corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (f) the
reissues, divisions, continuations, renewals, extensions and
continuations-in-part with any of the foregoing (all of the
foregoing patents and applications and interests under patent license
agreements, together with the items described in clauses (a) through
(f) in this paragraph are sometimes herein individually and
collectively referred to as the "Patents"), and (vii) all products and
proceeds including, without limitation, insurance proceeds, of any of
the foregoing
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral
Section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the properly
described in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor" means LIFEMINDERS.COM, INC., A MARYLAND
CORPORATION, Its successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness and their personal representatives,
successors and assigns.
Indebtedness. The word "indebtedness" means the indebtedness evidenced by
the Note, including all principal, interest, and Fees, costs, and expenses,
if any, together with all modifications of and renewals, replacements and
substitutions for any of the foregoing. "Indebtedness" also includes all
other present and future liabilities and obligations of Grantor to Lender,
whether direct or indirect, matured or unmatured, and whether absolute or
contingent, joint, several or joint and several, and no matter how the same
may be evidenced or shall arise. (Initial Here illegible)
---------
Lender. The word "Lender" means Imperial Bank, its successors and assigns.
Note. The word "Note" means the note or credit agreement dated March 9,
1999, in the principal amount of $200,000.00 from LIFEMINDERS.COM, INC., A
MARYLAND CORPORATION to Lender, together with all modifications of and
renewals, replacements and substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual security interest in
and hereby assigns, conveys, delivers, pledges, and transfers all of Grantor's
right, title and interest in and to Grantor's accounts with Lender (whether
checking, savings, or some other account), including all accounts held jointly
with someone else and all accounts Grantor may open in the future, excluding,
however, all IRA and Keogh accounts, and all trust accounts for which the grant
of a security interest would be prohibited by law. Grantor authorizes Lender, to
the extent permitted by applicable law, to charge or setoff all indebtedness
against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Organization. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Maryland.
Authorization. The execution, delivery, and performance of this Agreement
by Grantor have been duly authorized by all necessary action by Grantor and
do not conflict with, result in a violation of, or constitute a default
under (a) any provision of its articles of incorporation or
<PAGE>
organization, or bylaws, or any agreement or other instrument binding upon
Grantor or (b) any law, governmental regulation, court decree, or order
applicable to Grantor.
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of Grantor.
This is a continuing Security Agreement and will continue in effect even though
all or any part of the indebtedness is paid in full and even though for a period
of time Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, the Collateral is enforceable in
accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral.
Location of the Collateral. Grantor, upon request of Lender, will deliver to
Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d) all
other properties where Collateral is or may be located. Except in the ordinary
course of its business, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the Commonwealth
of Virginia, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor
is not in default under this Agreement, Grantor may sell inventory, but only in
the ordinary course of its business and only to buyers who qualify as a buyer in
the ordinary course of business. A sale in the ordinary course of Grantor's
business does not include a transfer in partial or total satisfaction of a debt
or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest, encumbrance,
or charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under this Agreement.
Unless waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement shall not
constitute consent by Lender to any sale or other disposition. Upon receipt,
Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Collateral Schedules and Locations. Insofar as the Collateral consists of
inventory, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other
charges that could accrue as a result of foreclosure or sale of the Collateral.
In any contest Grantor shall defend itself and Lender and shall satisfy any
final adverse judgment before enforcement against the Collateral. Grantor shall
name Lender as an additional obligee under any surety bond furnished in the
contest proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral. Grantor may contest in good faith any such law, ordinance
or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in Lender's
opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and substances.
Grantor hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis acceptable to Lender and
issued by a company or companies acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least thirty (30) days' prior
written notice to Lender and not including any disclaimer of the insurer's
liability for failure to give such a notice. Each insurance policy also shall
include an endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Grantor or any other
person. In connection with all policies covering assets in which Lender holds
or is offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. In no event shall the
insurance be in an amount less than the amount agreed upon in the Agreement to
Provide Insurance. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not be
obligated to) obtain such insurance as Lender deems appropriate, including if it
so chooses "single interest insurance," which will cover only Lender's interest
in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualy. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (a) the name of the insurer;
(b) the risks insured; (c) the amount of the policy; (d) the property insured;
(e) the then current value on the basis of which insurance has been obtained and
the manner of determining that value; and (f) the expiration date of the policy.
In addition, Grantor shall upon request by Lender (however not more often than
annually)
<PAGE>
have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the
tangible personal property end beneficial use of all the Collateral and may use
it in any lawful manner not Inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security Interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due on
the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained In this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (Including failure of any collateral
documents to create a valid and perfected security interest or lien) at any
time end for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or such Guarantor dies or
becomes incompetent. Lender, at its option, may, but shall not be required
to, permit the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in
doing so, cure the Event of Default.
Adverse Change. A material adverse change occurs In Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of the
same provision of this Agreement, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such default, (a) cures the default within ten (10) days; or (b),
if the cure requires more than ten (10) days, immediately Initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Virginia Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time
of repossession, Grantor agrees Lender may take such other goods, provided
that Lender makes reasonable efforts to return them to Grantor after
repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name
or that of Grantor. Lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, Lender will give
Grantor reasonable notice of the time after which any private sale or any
other intended disposition of the Collateral is to be made. The
requirements of reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale
and selling the Collateral, shall become a part of the indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver; (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become part
of the indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure until
repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the indebtedness or apply it to payment of the indebtedness in
such order of preference as Lender may determine. Insofar as the Collateral
consists of accounts, general intangibles, insurance policies, instruments,
chattel paper, chooses in action, or similar property, Lender may demand,
collect, receipt for, settle, compromise, adjust, sue for, foreclose, or
realize on the Collateral as Lender may determine, whether or not
Indebtedness or Collateral is then due. For these purposes, Lender may, on
behalf of and in the name of Grantor, receive, open and dispose of mail
addressed to Grantor; change any address to which mail and payments are to
be sent; and endorse notes, checks, drafts, money orders, documents of
title, instruments and items pertaining to payment, shipment, or storage of
any Collateral. To facilitate collection, Lender may notify account debtors
and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a Judgment against Grantor for any deficiency, remaining
on the indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement.
Grantor shall be liable for a deficiency even if the transaction described
in this subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall
be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to
exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by
<PAGE>
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the party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there Is a lawsuit, Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of Los
Angeles County. the State of California. Lender and Grantor hereby waive
the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lander or Grantor against the other. (initial Here
[ILLEGIBLE SIGNATURE APPEARS HERE]) This Agreement shall be governed by and
construed In accordance with the laws of the State of California.
Attorney's Fees; Expenses. Grantor agrees that if Lender hires an attorney
to help enforce this Agreement or to collect any sums owing under this
Agreement, Grantor will pay, subject to any limits under applicable law,
Lender's attorneys' fees, and all of Lender's other collection expenses,
whether or not there is a lawsuit and including without limitation
additional legal expenses for bankruptcy proceedings.
Caption Headings. Caption headings In this Agreement are for convenience
purposes only and are not to be used to Interpret or define the provisions
of this Agreement,
Multiple Parties; Corporate Authority. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be
given In writing, may be sent by telefacsimile (unless otherwise required
by law), and shall be effective when actually delivered if hand delivered
or when deposited with a nationally recognized overnight courier or
deposited as certified or registered mall in the Untied States mail, first
class, postage prepaid, addressed to the party to whom the notice Is to be
given at the address shown above. Any party may change Its address for
notices under thIs Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, it there is more than
one Grantor, notice to any Grantor will constitute notice to all Grantors.
For notice purposes, Grantor will keep Lender informed at all times of
Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover
all sums of money or other property which may now or hereafter become due,
owing or payable from the Collateral: (b) to execute, sign and endorse any
and all claims, Instruments, receipts, checks, drafts or warrants issued In
payment for the Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of Grantor, to
execute and deliver its release and settlement for the claim; and (d) to
file any claim or claims or to take any action or Institute or take part In
any proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable. This power is given as security for the indebtedness, and the
authority hereby conferred is and shall be irrevocable and shall remain in
full force and effect until renounced by Lender.
Severability. If a court of competent Jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision Invalid or
unenforceable as to any other persons or circumstances, If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity: however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit et the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lander is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent Is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
INTELLECTUAL PROPERTY. To the extent that Obliger acquires any trademarks,
service marks, trade names and service names and/or the goodwill associated
therewith, copyrights, patents and/or patent applications (collectively
"Intellectual Property"), Obliger shall give prompt notice thereof to Bank and
shall take any and all actions reasonably requested from time to time by Bank to
perfect Obliger's interest in such Intellectual Property and to perfect Bank's
first priority security interest therein. Without limiting the generality of the
foregoing, the Obliger further agrees as follows: Upon Obliger creating,
writing, producing or requiring any material software, computer source codes or
ether computer programs (collectively, the "Software"), Obliger shall promptly
register such Software with the U.S. Copyright Office before selling or
licensing the Software, and to the extent Obliger's rights therein are acquired
from any third party, Obliger shall promptly upon such acquisition file with the
U.S. Copyright Office any and all documents necessary to perfect Obligor's
fights therein. Upon Obliger creating, writing, producing or otherwise acquiring
any material Software, Obligor shall give prompt notice thereof to Bank. Obliger
shall execute and deliver to Bank any and all copyright mortgages, UCO financing
statements and other documents and Instruments which Bank may request in
connection with the Bank perfecting it's first priority security Interest In
such Software.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. This AGREEMENT IS DATED MARCH 9,
1999.
GRANTOR:
LIFEMINDERS.COM, INC., A MARYLAND CORPORATION
X [ILLEGIBLE SIGNATURE APPEARS HERE]
---------------------------------------
Authorized Officer
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CORPORATE RESOLUTION TO BORROW
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$1,350,000.00 08-18-1999 11-10-1999 739000013 629815 425
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References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
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</TABLE>
Borrower: LIFEMINDERS.COM, INC., A MARYLAND Lender: Imperial Bank
CORPORATION Mid Atlantic Regional Office
1110 HERNDON PARKWAY, SUITE 300 226 Airport Parkway
HERNDON, VA 20170 San Jose, CA 95110-1024
================================================================================
I, the undersigned Secretary or Assistant Secretary of LIFEMINDERS.COM, INC., A
MARYLAND CORPORATION (the "Corporation"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of Maryland
as a corporation for profit, with its principal office at 1110 HERNDON PARKWAY,
SUITE 300, HERNDON, VA 20170.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held on Aug. 19, 1999, at which quorum was present and voting, or by
other duly authorized corporate action in lieu of a meeting, the following
resolutions were adopted:
BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
- ----- --------- -----------------
STEPHEN R. CHAPIN, JR. PRESIDENT & CEO /s/ STEPHEN R. CHAPIN JR.
JOHN CHAPIN SR. VICE PRESIDENT
& SECRETARY /s/ JOHN CHAPIN
JAMES M. ZINN CFO /s/ JAMES M. ZINN
acting for and on behalf of the Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Imperial Bank ("Lender"), on
such terms as may be agreed upon between the Corporation and Lender, such sum
or sums of money as in their judgment should be borrowed; however, not
exceeding at any one time the amount of One Million Five Hundred Fifty
Thousand & 00/100 Dollars ($1,550,000.00), in addition to such sum or sums of
money as may be currently borrowed by the Corporation from Lender.
Execute Notes. To execute and deliver to Lender the promissory note or notes,
or other evidence of credit accommodations of the Corporation, on Lender's
forms, at such rates of interest and on such terms as may be agreed upon,
evidencing the sums of money so borrowed or any indebtedness of the
Corporation to Lender, and also to execute and deliver to Lender one or more
renewals, extensions, modifications, refinancings, consolidations, or
substitutions for one or more of the notes, any portion of the notes, or any
other evidence of credit accommodations.
Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the payment of any
loans or credit accommodations so obtained, any promissory notes so executed
(including any amendments to or modifications, renewals, and extensions of
such promissory notes), or any other or further indebtedness of the
Corporation to Lender at any time owing, however the same may be evidenced,
any property now or hereafter belonging to the Corporation or in which the
Corporation now or hereafter may have an interest, including without
limitation all real property and all personal property (tangible or
intangible) of the Corporation. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated, or encumbered at the time such loans are
obtained or such indebtedness is incurred, or at any other time or times, and
may be either in addition to or in lieu of any property theretofore
mortgaged, pledged, transferred, endorsed, hypothecated, or encumbered.
Execute Security Documents. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which may be required by Lender,
and which shall evidence the terms and conditions under and pursuant to which
such liens and encumbrances, or any of them, are given; and also to execute
and deliver to Lender any other written instruments, any chattel paper, or
any other collateral, of any kind or nature, which Lender may deem necessary
or proper in connection with or pertaining to the giving of the liens and
encumbrances.
Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to
or belonging to the Corporation in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds
to be credited to the account of the Corporation with Lender, or to cause
such other disposition of the proceeds derived therefrom as they may deem
advisable.
Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements, including agreements waiving the right to a trial by jury, as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions. The following person
or persons currently are authorized to request advances and authorize
payments under the line of credit until Lender receives written notice of
revocation of their authority: STEPHEN R. CHAPIN, JR., PRESIDENT & CEO; JOHN
CHAPIN, SR. VICE PRESIDENT & SECRETARY; and JAMES M. ZINN, CFO.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these Resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Lender may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Lender. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
BE IT FURTHER RESOLVED, that the Corporation will notify Lenders in writing at
Lender's address shown above (or such other addresses as Lender may designate
from time to time) prior to any (a) change in the name of the Corporation, (b)
change in the assumed business name(s) of the Corporation, (c) change in the
management of the Corporation, (d) change in the authorized signer(s), (e)
conversion of the Corporation to a new or different type of business entity, or
(f) change in any other aspect of the Corporation that directly or indirectly
relates to any agreements between the Corporation and Lender. No change in the
name of the Corporation will take effect until after Lender has been notified.
SIGNATURE AUTHORIZATION. An exhibit, titled "SIGNATURE AUTHORIZATION," is
attached to this Resolution and by this reference is made a part of this
Resolution just as if all the provisions, terms and conditions of the Exhibit
had been fully set forth in this Resolution.
I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set opposite their respective names; that the foregoing
Resolutions now stand of record on the books of the Corporation; and that the
Resolutions are in full force and effect and have not been modified or revoked
in any manner whatsoever. The Corporation has no corporate seal, and therefore,
no seal is affixed to this certificate.
IN TESTIMONY WHEREOF, I have hereunto set my hand on August 18, 1999 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
/s/ John Chapin
---------------------------------------
---------------------------------------
NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, it is advisable to have
this certificate signed by a second Officer or Director of the Corporation.
<PAGE>
[LOGO OF IMPERIAL BANK APPEARS HERE]
PROMISSORRY NOTE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C> [Initials
$200,000.00 03-09-1999 11-09-2001 739000013 629815 425 appear here]
- -----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
Borrower: LIFEMINDERS.COM INC., A MARYLAND Lender: Imperial Bank
CORPORATION Mid Atlantic Regional Office
694 SPRING STREET 226 Airport Parkway
HERNDON, VA 20170 San Jose, CA 95110-1024
<CAPTION>
=======================================================================================================================
<S> <C> <C>
Principal Amount: $200,000.00 Initial Rate: 8.750% Date of Note: March 9, 1999
</TABLE>
PROMISE TO PAY. LIFEMINDERS.COM, INC., A MARYLAND CORPORATION ("Borrower")
promises to pay to Imperial Bank ("Lender"), or order, in lawful money of the
United States of America, the principal amount of Two Hundred Thousand & 00/100
Dollars ($200,000.00) or so much as may be outstanding, together with interest
on the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule:
Advances under the Note shall be available through November 10, 1999
("Draw Period"). During the draw period, interest only shall be due
monthly beginning April 10, 1999. On November 10, 1999, the outstanding
principal balance of the advances under the Note shall be payable monthly
in 24 equal payments of principal based on an amortization period of 24
months plus accrued interest beginning December 10, 1999. All principal
and accrued but unpaid interest shall in any event be due and payable on
or before November 9, 2001.
The annual interest rate for this Note is computed on a 365/360 basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to any unpaid collection costs and any late charges, then to any
unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the Imperial Bank Prime Rate
(the "Index"). The Prime Rate is the rate announced by Lender as its Prime Rate
of Interest from time to time. Lender will tell Borrower the current index rate
upon Borrower's request. Borrower understands that Lender may make loans based
on other rates as well. The interest rate change will not occur more often than
each day. The index currently is 7.750%. The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate of 1.000 percentage
point over the index, resulting in an initial rate of 8.750%. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $250.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower falls to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note. (g) A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within ten (10) days; or (b) if the
cure requires more than ten (10) days, immediately initiates steps which Lender
deems in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay
upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 6.000 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until at the rate provided in this Note (including any increased
rate). Lender may hire or pay someone else to help collect this Note if Borrower
does not pay. Borrower also will pay Lender that amount. This includes, subject
to any limits under applicable law, Lender's attorney's fees and Lender's legal
expenses whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Borrower also will pay any court costs, in addition to all
other sums provided by law. This Note has been delivered to Lender and accepted
by Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of Los Angeles
County, the State of California. Lender and Borrower hereby waive the right to
any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other. (Initial Here Initials Appear Here) This
--------------------
Note shall be governed by and construed in accordance with the laws of the State
of California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(wether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested orally by Borrower or by an
authorized person. All oral requests shall be confirmed in writing on the day of
the request. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: STEPHEN R. CHAPIN, JR.,
PRESIDENT & CEO; and JOHN CHAPIN, SR. VICE PRESIDENT & SECRETARY. Borrower
agrees to be liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation to
advance funds under this Note if: (a) Borrower or any guarantor is in default
under the terms of this Note or any agreement that Borrower or any guarantor has
with Lender, including any agreement made in connection with the signing of this
Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (d)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Note or any other agreement between Lender and Borrower.
<PAGE>
PROMISSORY NOTE Page 2
(Continued)
================================================================================
CREDIT TERMS AND CONDITIONS AGREEMENT. This Note is subject to the provisions of
the Credit Terms and Conditions Agreement dated March 9, 1999, and all
amendments thereto and replacements therefor.
YEAR 2000 COMPLIANCE. Borrower affirmatively covenants that it will perform all
acts reasonably necessary to ensure that (a) Borrower and any business in which
Borrower holds a substantial interest, and (b) all customers, suppliers and
vendors that are material to Borrower's business, become Year 2000 Compliant in
a timely manner. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all Borrower's systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and testing
of such systems. As used in this paragraph, "Year 2000 Compliant" shall mean, in
regard to any entity, that all software, hardware, firmware, equipment, goods or
systems utilized by or material to the business operations or financial
condition of such entity, will properly perform date sensitive functions before,
during and after the year 2000. Borrower shall, immediately upon request,
provide to Bank such certifications or other evidence of Borrower's compliance
with the terms of this paragraph as Bank may from time to time require.
REPRESENTAION REGARDING YEAR 2000 COMPLIANCE. Borrower and its subsidiaries, as
applicable, represent and warrant that they have reviewed the areas within their
operations and business which could be adversely affected by, and have developed
or are developing a program to address on a timely basis, the Year 2000 Problem
and have made related appropriate inquiry of material suppliers and vendors, and
based on such review and program, the Year 2000 Problem will not have a material
adverse effect upon their financial condition, operations or business as now
conducted. "Year 2000 Problem" means the possibility that any computer
applications or equipment used by Borrower may be unable to recognize and
properly perform date sensitive functions involving certain dates prior to and
any dates on or after December 31, 1999.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
LIFEMINDERS.COM, INC., A MARYLAND CORPORATION
X [SIGNATURE APPEARS HERE]
- -------------------------------------
Authorized Officer
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
STANDBY LETTER OF CREDIT AND SECURITY AGREEMENT
The undersigned ("Customer") applies to Imperial Bank ("Bank") for a loan (the
"Loan") in the principal amount of *****************ONE HUNDRED THOUSAND DOLLARS
---------------------------------------------
AND NO/100******************************** DOLLARS ($100,000.00 ) subject
- ------------------------------------------ -----------------
to the following terms and conditions: (If the standby letter of credit is
issued in a foreign currency, the principal of the Loan will be the U.S. Dollar
equivalent of the foreign currency amount, converted at the rate of exchange on
the date of drawing.)
1. The Loan shall be disbursed only by means of drawings under the Letter
of Credit, for which application appears on the reverse hereof.
2. If Customer has not executed and delivered a promissory note to Bank
for said Loan, each advance which is disbursed as provided in Paragraph 1 shall
be payable on demand and bear interest payable monthly at a rate per year (based
on a three hundred sixty (360) day year and actual days elapsed 0.00 percent
--------
(0.00 %) in excess of the rate that Bank has announced to be its
- -----------
prime rate ("Prime Rate") and shall vary concurrently with any change in the
Prime Rate.
3. Customer shall pay to Bank its commission, payable in advance,
computed from the date hereof at the rate of Two percent (2.00 %) per
------------- ---------
year (based on a three hundred sixty (360) day year and actual days elapsed) for
the entire life of the Letter of Credit. There shall be no refund of any portion
of the commission in the event the Letter of Credit commitment expires, is
reduced, terminated or otherwise modified.
4. Customer agrees to pay to Bank, on demand, its commissions and fees in
such amounts as Bank determines to be proper and all charges and expenses paid
or incurred by Bank in connection with the Letter of Credit or the Loan, and
interest at the rate set forth herein or, if no rate is set forth, 5% over
Bank's Prime Rate as it may vary from time to time.
5. Bank is hereby granted a security interest in (a) all property
including, without limitation, deposit accounts (i) delivered to Bank by
Customer, (ii) which shall be in Bank's possession or control in any matter or
for any purpose, (iii) now owned or hereafter acquired by Customer of the type
or class described in any financing statement filed by Bank and executed by or
on behalf of Customer, (b) the proceeds, increase and products of such property,
all accessions thereto, and all property which Customer may receive on account
of such collateral which Customer will immediately deliver to Bank, to secure
the performance of all of Customer's present or future debts or obligations to
Bank, whether absolute or contingent. Unless otherwise defined, words used
herein have the meanings given them in the California Uniform Commercial Code.
6. Upon default, at Bank's option without formal demand or notice, all
or any part of the Loan shall immediately become due. Bank shall have all rights
given by law, and may sell, in one or more sales, collateral in any county
where Bank has an office (or any place Bank deems appropriate). Bank may
purchase at such sale. Sales for cash or on credit to a wholesaler, retailer or
user of the collateral, or at public or private auction, are all to be
considered commercially reasonable. Bank may require Customer to assemble the
collateral and make it available to Bank at the entrance to the location of the
collateral, or a place designated by Bank. Defaults shall include: (a)
Customer's failure to pay or perform this or any agreement with Bank or breach
of any warranty herein, or Customer's failure to pay or perform any agreement
with Bank; (b) Any change in Customer's financial condition which in Bank's
judgment impairs the prospect of payment or performance; (c) Any actual or
reasonable anticipated deterioration of the collateral or in the market price
thereof which causes it in Bank's judgment to become unsatisfactory as security;
(d) Any levy or seizure against Customer or any of the collateral; (e) Death,
termination of business, assignment for creditors, insolvency, appointment of
receiver or the filing of any petition under bankruptcy or debtor's relief laws
of, by or against Customer or any of the collateral; and (f) Any warranty or
representation is false or is believed in good faith by Bank to be false, if at
the time of any such event there remains any portion of the Loan undisbursed
(that is, if the Letter of Credit is still in effect and has not been completely
drawn against) Customer shall, upon Bank's demand, pay to Bank for application
to drawings under the Letter of Credit the entire principal amount which has not
been drawn. Any amount so paid which has not been drawn of the expiry date of
the Letter of Credit shall be repaid to Customer without interest.
7. Neither Bank nor its correspondents shall be in any way responsible
for performance by any beneficiary of its obligations to Customer, nor for the
form, sufficiency, correctness, genuineness, authority of person signing,
falsification or legal effect of any documents called for under the Letter of
Credit if such documents on their face appear to be in order.
8. Subject to the law and customs and practice of the trade, existing in
the area where the beneficiary is located, said Letter of Credit shall be
subject to, and performance by Bank, its correspondent and the beneficiary
thereunder shall be governed by the "Uniform Customs and Practice for
Documentary Credits" fixed by The International Chamber of Commerce, in effect
on the date of issuance of the Letter of Credit.
9. It is agreed that all directions and correspondence relating to said
Letter of Credit are to be sent at Customer's risk and that Bank does not
assume any responsibility for any inaccuracy, interruption, error or delay in
transmission or delivery by post, telegraph or cable, or for any inaccuracy of
translation.
10. If this Agreement is signed by two or more parties, it shall be the
joint and several agreement of such parties.
- --------------------------------------------------------------------------------
- ------------------------------------ -----------------------------------------
INTERNATIONAL USE ONLY BANKING OFFICE USE ONLY
- ------------------------------------ -----------------------------------------
Approved By Date Banking Office/Department Name Number
X Mid-Atlantic EGD 3905
- ------------------------------------ -----------------------------------------
Lending Officer Date
X B. Steele, AVP /s/ B. Steele 6/17/99
-----------------------------------------
<PAGE>
THIRD AMENDMENT
TO
STARTER KIT LOAN AND SECURITY AGREEMENT
AND WAIVER
This Third Amendment ("Amendment") and waiver is made as of August 18, 1999 by
and between LifeMinders.com, Inc. formerly known as MinderSoft, Inc.
("Borrower") and Imperial Bank, ("Bank") amends that Starter Kit Loan and
Security Agreement ("Agreement") dated as of November 10, 1998 by and between
Borrower and Bank and waives compliance with a certain provision of the
Agreement as follows:
1. The Master Schedule To Starter Kit Loan and Security Agreement is
amended in full by the attached Amended and Restated Schedule to Starter Kit
Loan and Security Agreement
2. The Schedule To Starter Kit Loan and Security Agreement is amended in
full by the attached Amended and Restated Schedule to Starter Kit.
3. Bank hereby waives compliance with the quick ratio requirement
contained in Section 5 of the Agreement. The above waiver is specific as to
content and time, and other than the waiver mentioned above this Amendment is
not a waiver of any other rights or remedies that the Bank may have pursuant to
any agreement or law as a result of any other violations past, present, or
future of any agreement between the Borrower and the Bank, and the Bank reserves
all rights, powers and remedies available to it.
4. Except as provided above, the Agreement remains unchanged.
5. This Amendment will be effective upon receipt by the Bank of the
following:
(a) A fee in amount of $50,000.
(b) One or more Intellectual Property Security Agreements, in form
and substance satisfactory to Bank.
LIFEMINDERS.COM, INC. IMPERIAL BANK
By: [SIGNATURE APPEARS HERE] By: [SIGNATURE APPEARS HERE]
---------------------- -----------------------
Name: [SIGNATURE APPEARS HERE] Name: [SIGNATURE APPEARS HERE]
-------------------- ---------------------
Title: [SIGNATURE APPEARS HERE] Title: [SIGNATURE APPEARS HERE]
------------------- -------------------
<PAGE>
WAIVER
TO
CREDIT TERMS AND CONDITIONS
This Waiver ("Waiver") is made as of August 18, 1999 by and between
LifeMinders.com, Inc. formerly known as MinderSoft, Inc. ("Borrower") and
Imperial Bank, ("Bank") waives compliance with a certain provision of that
Credit Terms and Conditions Agreement dated as of March 9, 1999 executed by
Borrower in favor of Bank, with the attached Commitment Letter dated March 1,
1999, as follows:
1. Bank hereby waives compliance with the quick ratio requirement
contained in the Financial Covenant Section of the Commitment Letter. The above
waiver is specific as to content and time, and other than the waiver mentioned
above this Waiver is not a waiver of any other rights or remedies that the Bank
may have pursuant to any agreement or law as a result of any other violations
past, present, or future of any agreement between the Borrower and the Bank, and
the Bank reserves all rights, powers and remedies available to it.
2. Except as provided above, the Agreement remains unchanged.
3. This Waiver will be effective upon receipt by the Bank of the
following:
(a) A fee in the amount of $50,000 required by that Amendment to
Starter Kit and Waiver dated the date hereof.
(b) One or more Intellectual Property Security Agreements, in
form and substance satisfactory to Bank.
LIFEMINDERS.COM, INC. IMPERIAL BANK
By: /s/ J M Zinn By: /s/ Brad Steele
----------------------- ------------------------
Name: J M ZINN Name: Brad Steele
--------------------- ----------------------
Title: VP & CFO Title: VP
-------------------- ---------------------
<PAGE>
[LOGO OF IMPERIAL BANK APPEARS HERE]
Amended and Restated
Master Schedule to Starter Kit Loan and Security Agreement
BORROWER: LifeMinders.com, Inc.
--------------------
DATE: August 18, 1998
---------------
This Schedule is incorporated into and an integral part of the Starter
Kit Loan and Security Agreement between Imperial Bank ("Bank") and the above-
named Borrower of even date.
Credit Limit (Aggregate)
(Section 1): $1,350,000.00, including a $250,000 Business
-------------
Bankcard Sublimit, StarterKit Loan Facility
("Loan").
Interest Rate (Section 1): The rate equal to Bank's Prime Rate plus 1.00% in
effect from time to time per year. Interest shall
be calculated on the basis of a 360 day year for
the actual number of days elapsed. The Prime Rate
shall be the rate announced from time to time by
Bank as its "Prime Rate;" as a base rate upon which
other rates charged by Bank are based, and it is
not necessarily the best rate available at Bank.
The interest rate applicable to the to the
Obligations shall change on each date there is a
change in the Prime Rate.
Maturity Date (Section 4): November 10, 1999 for working capital loans.
-------------------------------------------
Other Locations and Addresses
(Section 3.2):
---------------------------------------------------
---------------------------------------------------
Other Agreements: 1. Loan Fee. Borrower shall concurrently pay Bank
a non-refundable Loan Fee in the amount of
$50,000.
2. $2,000 for documentation fees payable at the
time of drawing the loan.
LifeMinders.com, Inc. IMPERIAL BANK
By: /s/ J.M. Zinn By: /s/ Brad Steele
------------------------------- ------------------------------
Name: J.M. Zinn Name: Brad Steele
----------------------------- ----------------------------
Title: VP + CFO Title: VP
---------------------------- ---------------------------
<PAGE>
INTELLECTUAL PROPERTY SECURITY AGREEMENT
----------------------------------------
This Intellectual Property Security Agreement (the "Agreement") is made
as of August 18, 1999, by and between LIFEMINDERS.COM, INC., formerly known as
MINDERSOFT, INC., a Maryland corporation ("Grantor"), and IMPERIAL BANK, a
California chartered bank ("Secured Party").
RECITALS
--------
A. Secured Party has agreed to make certain advances of money and to
extend certain financial accommodation to Grantor (the "Loans") in the amounts
and manner set forth in that certain Starter Kit Loan and Security Agreement by
and between Secured Party and Grantor dated as of November 10, 1998, as amended
by that First Amendment to Starter Kit Loan and Security Agreement dated as of
March 17, 1999, as amended by that Second Amendment to Starter Kit Loan and
Security Agreement dated as of June 11, 1999, as amended by that Third Amendment
to Starter Kit Loan and Security Agreement and Waiver, dated as of August 18,
1999, and that certain Credit Terms and Conditions dated as of March 9, 1999, as
amended by that Waiver to Credit Terms and Conditions, dated as of August 18,
1999, and that certain Promissory Note dated as of March 9, 1999, all as may be
amended from time to time (the "Loan Documents;" all capitalized terms used
herein without definition shall have the meanings ascribed to them in the Loan
Documents).
B. Secured Party is willing to make the Loans to Grantor, but only
upon the condition, among others, that Grantor shall grant to Secured Party a
security interest in all of Grantor's right title, and interest in, to and under
all of the Collateral whether presently existing or hereafter acquired.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Grant of Security Interest. As collateral security for the prompt
--------------------------
and complete payment and performance of all of Grantor's present or future
indebtedness, obligations and liabilities to Secured Party, Grantor hereby
grants a security interest and mortgage to Secured Party, as security, in and to
Grantor's entire right, title and interest in, to and under the following (all
of which shall collectively be called the "Collateral"):
(a) Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not
the same also constitutes a trade secret, now or hereafter existing, created,
acquired or held, including without limitation those set forth on Exhibit A
---------
attached hereto (collectively, the "Copyrights");
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Grantor
now or hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including without
limitation the patents and patent applications set forth on Exhibit B attached
---------
hereto (collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Grantor connected with
and symbolized by such trademarks, including without limitation those set forth
on Exhibit C attached hereto (collectively, the "Trademarks");
---------
<PAGE>
(f) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(g) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights; and
(h) All amendments, renewal and extensions of any of the
Copyrights, Trademarks or Patents; and
(i) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
2. Authorization and Request. Grantor authorizes and requests that the
-------------------------
Register of Copyrights and the Commissioner of Patents and Trademarks record
this security agreement.
3. Covenants and Warranties. Grantor represents, warrants, covenants and
------------------------
agrees as follows:
(a) Grantor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Grantor to its customers in the ordinary
course of business;
(b) Performance of this Agreement does not conflict with or result
in a breach of any agreement to which Grantor is party or by which Grantor is
bound, except to the extent that certain intellectual property agreements
prohibit the assignment of the rights thereunder to a third party without the
licensor's or other party's consent and this Agreement constitutes an
assignment;
(c) During the term of this Agreement, Grantor will not transfer or
otherwise encumber any interest in the Collateral, except for non-exclusive
licenses granted by Grantor in the ordinary course of business or as set forth
in this Agreement;
(d) To its knowledge, each of the Patents is valid and enforceable,
and no part of the Collateral has been judged invalid or unenforceable, in whole
or in part, and no claim has been made that any part of the Collateral violates
the rights of any third party;
(e) Grantor shall deliver to Secured Party within (30) days of the
last day of each fiscal quarter, a report signed by Grantor, in form reasonably
acceptable to Secured Party, listing any applications or registrations that
Grantor has made or filed in respect of any patents, copyrights or trademarks
and the status of any outstanding applications or registrations. Grantor shall
promptly advise Secured Party of any material change in the composition of the
Collateral, including but not limited to any subsequent ownership right of the
Grantor in or to any Trademark, Patent or Copyright not specified in this
Agreement;
(f) Grantor shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Secured Party in writing of material infringements detected and
(iii) not allow any Trademarks, Patents or Copyrights to be abandoned, forfeited
or dedicated to the public without the written consent of Secured Party, which
shall not be unreasonably withheld, unless Grantor determines that reasonable
business practices suggest that abandonment is appropriate;
(g) Grantor shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United Stated
Patent and Trademark Office or the United States Copyright Office, as
applicable: (i) those intellectual property rights listed on Exhibits A, B and C
hereto within thirty (30) days of the date of this Agreement, (ii) all
registerable intellectual property rights Grantor has developed as of the date
of this Agreement but heretofore failed to register, within thirty (30) days of
the date of this Agreement, and (iii) those additional intellectual property
rights developed or acquired by Grantor from time to time in connection with any
2
<PAGE>
product prior to the sale or licensing of such product to any third party and
prior to Grantor's use of such product (including without limitation major
revisions or additions to the intellectual property rights listed on such
Exhibits A, B and C). Grantor shall give Secured Party notice of all such
applications or registrations.
(h) This Agreement creates, and in the case of after acquired
Collateral, this Agreement will create at the time Grantor first has rights in
such after acquired Collateral, in favor of Secured Party a valid and perfected
first priority security interest in the Collateral in the United States securing
the payment and performance of the obligations evidenced by the Loan Documents
upon making the filings referred to in clause (i) below;
(i) To its knowledge, except for, and upon the filing with the
United States Patent and Trademark office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the Copyrights
necessary to perfect the security interests created hereunder, and except as has
been already made or obtained, no authorization, approval or other action by,
and no notice to or filing with, any United States governmental authority or
United States regulatory body is required either (i) for the grant by Grantor of
the security interest granted hereby or for the execution, delivery or
performance of this Agreement by Grantor in the United States or (ii) for the
perfection in the United States or the exercise by Secured Party of its rights
and remedies hereunder;
(j) All information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of Grantor with respect to the Collateral is
accurate and complete in all material respects;
(k) Grantor shall not enter into any agreement that would
materially impair or conflict with Grantor's obligations hereunder without
Secured Party's prior written consent, which consent shall not be unreasonably
withheld. Grantor shall not permit the inclusion in any material contract to
which it becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in Grantor's rights and interests in
any property included within the definition of the Collateral acquired under
such contracts; and
(l) Upon any executive officer of Grantor obtaining actual
knowledge thereof, Grantor will promptly notify Secured Party in writing of any
event that materially adversely affects the value of any Collateral, the ability
of Grantor to dispose of any Collateral or the rights and remedies of Secured
Party in relation thereto, including the levy of any legal process against any
of the Collateral.
4. Secured Party's Rights. Secured Party shall have the right, but not
----------------------
the obligation, to take, at Grantor's sole expense, any actions that Grantor is
required under this Agreement to take but which Grantor fails to take, after
fifteen (15) days' notice to Grantor. Grantor shall reimburse and indemnify
Secured Party for all reasonable costs and reasonable expenses incurred in the
exercise of its rights under this section 4.
5. Inspection Rights. Grantor hereby grants to Secured Party and its
-----------------
employees, representatives and agents the right to visit, during reasonable
hours upon prior reasonable written notice to Grantor, any of Grantor's plants
and facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Collateral, and to inspect the products and quality control records relating
thereto upon reasonable written notice to Grantor and as often as may reasonably
requested.
6. Further Assurance: Attorney in Fact.
------------------------------------
(a) On a continuing basis, Grantor will make, execute, acknowledge
and deliver, and file and record in the proper filing and recording places in
the United States, all such instruments, including appropriate financing and
continuation statements and collateral agreements and filings with the United
States Patent and Trademark Office and the Register of Copyrights, and take all
such actions as may reasonably be deemed necessary or advisable, or as requested
by Secured Party, to perfect Secured Party's security interest in all
Copyrights, Patents and Trademarks and otherwise to carry out the intent and
purposes of this Agreement, or for assuring and confirming to Secured Party the
grant or perfection of a security interest in all Collateral.
3
<PAGE>
(b) Grantor hereby irrevocably appoints Secured Party as
Grantor's attorney-in-fact, with full authority in the place and stead of
Grantor and in the name of Grantor, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including (i) to modify, in its sole discretion, this Agreement without first
obtaining Grantor's approval of or signature to such modification by amending
Exhibit A, Exhibit B and Exhibit C, thereof, as appropriate, to include
reference to any right, title or interest in any Copyrights, Patents or
Trademarks acquired by Grantor after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents or
Trademarks in which Grantor no longer has or claims any right, title or
interest, (ii) to file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Grantor where permitted by law and (iii)
after the occurrence of an Event of Default, to transfer the Collateral into the
name of Bank or a third party to the extent permitted under the California
Uniform Commercial Code.
7. Events of Default. The occurrence of any of the following shall
-----------------
constitute an Event of Default under the Agreement:
(a) An Event of Default occurs under the Loan Documents; or
(b) Grantor breaches any warranty or agreement made by Grantor
in this Agreement and, as to any breach that is capable of cure, Grantor fails
to cure such breach within five (5) days of the occurrence of such breach.
8. Remedies. Upon the occurrence and continuance of an Event of
--------
Default, Secured Party shall have the right to exercise all the remedies of a
secured party under the California Uniform Commercial Code, including without
limitation the right to require Grantor to assemble the Collateral and any
tangible property in which Secured Party has a security interest and to make it
available to Secured Party at a place designated by Secured Party. Secured Party
shall have a nonexclusive, royalty free license to use the Copyrights, Patents
and Trademarks to the extent reasonably necessary to permit Secured Party to
exercise its rights and remedies upon the occurrence of an Event of Default.
Grantor will pay any expenses (including reasonable attorneys' fees) incurred by
Secured Party in connection with the exercise of any of Secured Party's rights
hereunder, including without limitation any expense incurred in disposing of the
Collateral. All of Secured Party's rights and remedies with respect to the
Collateral shall be cumulative.
9. Indemnity. Grantor agrees to defend, indemnify and hold harmless
---------
Secured Party and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement, and
(b) all losses or expenses in any way suffered, incurred, or paid by Secured
Party as a result of or in any way arising out of, following or consequential to
transactions between Secured Party and Grantor, whether under this Agreement or
otherwise (including without limitation reasonable attorneys' fees and
reasonable expenses), except for losses arising from or out of Secured Party's
gross negligence or willful misconduct.
10. Course of Dealing. No course of dealing, nor any failure to
-----------------
exercise, nor any delay in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
11. Attorneys' Fees. If any action relating to this Agreement is
---------------
brought by either party hereto against the other party, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements.
12. Amendments. This Agreement may be amended only by a written
----------
instrument signed by both parties hereto.
13. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
4
<PAGE>
14. California Law and Jurisdiction; Jury Waiver. This Agreement shall
--------------------------------------------
be governed by the laws of the State of California, without regard for choice of
law provisions. Grantor and Secured Party consent to the exclusive jurisdiction
of any state or federal court located in Santa Clara County, California. GRANTOR
AND SECURED PARTY EACH WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LOAN DOCUMENTS, THIS
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
GRANTOR:
Address of Grantor: LIFEMINDERS.COM., INC.
1110 Herndon Parkway By: /s/ J.M. Zinn
Herndon, VA 20170 ----------------------------
Its: VP & CFO
---------------------------
Attn: J.M. Zinn
--------------
SECURED PARTY
Address of Secured Party: IMPERIAL BANK
226 Airport Parkway By: /s/ Bradley Steele
San Jose, CA 95110-1024 ----------------------------
Attn: Corporate Banking Center Its: VP
---------------------------
5
<PAGE>
EXHIBIT A
---------
Copyrights
Description Registration Number Registration Date
----------- ------------------- -----------------
6
<PAGE>
EXHIBIT B
---------
Patents
Description Registration/Serial Number Registration/Application
----------- -------------------------- Date
----
Computerized prompting 5,931,878 08/03/99
systems
7
<PAGE>
EXHIBIT C
---------
Trademarks
Description Registration/Application Registration/Application
----------- Number Date
------ ----
Mindersoft 75/497,386 06/04/98
Mindersoft 2,168,395 06/23/98
8
<PAGE>
FIRST AMENDMENT
TO
STARTER KIT LOAN AND SECURITY AGREEMENT
This First Amendment ("Amendment") is made as of March 17, 1999 by and between
LifeMinders.com, Inc. formerly known as MinderSoft, Inc. ("Borrower") and
Imperial Bank, ("Bank") amends that Starter Kit Loan and Security Agreement
dated as of November 10, 1998 by and between Borrower and Bank as follows:
1. Subsection 5 of the Agreement is amended by deleting the term
"1.00:1.0" therefrom and substituting the term "1.25:1.0" therefore.
2. The Master Schedule To Starter Kit Loan and Security Agreement is
amended in full by the attached Master Schedule To Starter Kit Loan
and Security Agreement
3. The Schedule To Starter Kit Loan and Security Agreement attached
hereto is hereby added to the Agreement.
4. The Borrower hereby acknowledges that it has changed its name from
MinderSoft, Inc. to LifeMinders.com, Inc. and wherever the MinderSoft,
Inc. or Borrower shall appear in the Agreement it shall mean
LifeMinders.com, Inc.
5. Except as provided above, the Agreement remains unchanged.
6. This Amendment is effective as of the date first written above and the
parties hereby confirm that the Agreement as amended is in full force
and effect.
LifeMinders.com, Inc. IMPERIAL BANK
By: /s/ Stephen R. Chapin, Jr. By: /s/ Bradley H. Steele
----------------------------- -----------------------------
Name: Stephen R. Chapin, Jr. Name: Bradley H. Steele
--------------------------- ---------------------------
Title: President and CEO Title: AVP
-------------------------- --------------------------
<PAGE>
IMPERIAL BANK
- ---------------------------
INNOVATIVE BUSINESS BANKING
Member FDIC
Schedule to Starter Kit Loan and Security Agreement (Merchant Services/Business
Bankcard Sublimit)
BORROWER: LifeMinders.com, inc.
DATE: March 17, 1999
This Schedule is an integral part of the Loan and Security Agreement
between Imperial Bank ("Bank") and the above-named Borrower dated November 10,
1998.
Merchant Services/
Business Bancard
Sublimit (Section 1): The aggregate Credit Limit Shall be reduced by an amount
equal to the sum of $150,000 (the "Business Bancard
Reserve"). Bank may, in its sole discretion, charge as
Loans, any amounts that may become due or owing to Bank
in connection with merchant credit card processing
services and/or business bankcard credit card services
furnished to Borrower by or through Bank, collectively,
the "Credit Card Services." Borrower shall execute all
standard form applications and agreements of Bank in
connection with the Credit Card Services and, without
limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and
charges of Bank in connection with the Credit Card
Services and, without limiting any of the terms of such
applications and agreements, Borrower will pay all
standard fees and charges of Bank in connection with the
Credit Card Services.
Maturity Date (Section 4): November 10, 1999
LifeMinders.com, Inc. IMPERIAL BANK
By: /s/ Stephen R. Chapin, Jr. By: /s/ Bradley Steele
--------------------------- ---------------------------
Name: Stephen R. Chapin, Jr. Name: Bradley Steele
------------------------- -------------------------
Title: President and CEO Title: AVP
------------------------ ------------------------
<PAGE>
IMPERIAL BANK
- ---------------------------
INNOVATIVE BUSINESS BANKING
Member FDIC
Amended and Restated
Schedule to Starter Kit Loan and Security Agreement (Merchant Services/Business
Bankcard Sublimit)
BORROWER: LifeMinders.com, Inc.
DATE: March 17, 1999
This Schedule is an integral part of the Loan and Security Agreement
between Imperial Bank ("Bank") and the above-named Borrower dated November 10,
1998.
Merchant Services/
Business Bancard
Sublimit (Section 1): The aggregate Credit Limit Shall be reduced by an amount
equal to the sum of $250,000 (the "Business Bancard
Reserve"). Bank may, in its sole discretion, charge as
Loans, any amounts that may become due or owing to Bank
in connection with merchant credit card processing
services and/or business bankcard credit card services
furnished to Borrower by or through Bank, collectively,
the "Credit Card Services." Borrower shall execute all
standard form applications and agreements of Bank in
connection with the Credit Card Services and, without
limiting any of the terms of such applications and
agreements; Borrower will pay all standard fees and
charges of Bank in connection with the Credit Card
Services and, without limiting any of the terms of such
applications and agreements, Borrower will pay all
standard fees and charges of Bank in connection with the
Credit Card Services.
Maturity Date (Section 4): November 10. 1999
LifeMinders.com , Inc. IMPERIAL BANK
By: /s/ J.M. Zinn By: /s/ Bradley Steele
--------------------------- ---------------------------
Name: J.M. Zinn Name: Bradley Steele
------------------------- -------------------------
Title: VP & CFO Title: VP
------------------------ ------------------------
<PAGE>
SECOND AMENDMENT
TO
STARTER KIT LOAN AND SECURITY AGREEMENT
This Second Amendment ("Amendment") is made as of June 11, 1999 by and between
LifeMinders.com, Inc. formerly known as MinderSoft, Inc. ("Borrower") and
Imperial Bank, ("Bank") amends that Starter Kit Loan and Security Agreement
dated as of November 10, 1998 and amended as of March 17, 1999, by and between
Borrower and Bank as follows:
1. The Schedule B to Starter Kit Loan and Security Agreement attached
hereto is hereby added to the Agreement.
2. Except as amended on March 17, 1999 and provided above, the Agreement
remains unchanged.
3. This Amendment is effective as of the date first written above and the
parties hereby confirm that the Agreement as amended is in full force
and effect.
Borrower: Bank:
LifeMinders.com, Inc. Imperial Bank
- -------------------------------
By: [SIGNATURE APPEARS HERE] By: /s/ Bradley Steele
---------------------------- ------------------------
<PAGE>
IMPERIAL BANK
- ---------------------------
INNOVATIVE BUSINESS BANKING
Member FDIC
Schedule B to Starter Kit Loan and Security Agreement (Standby Letter of Credit
Sublimit)
BORROWER: LifeMinders.com, Inc.
----------------------------
DATE: June 11, 1999
----------------------------
This Schedule is an integral part of the Loan and Security Agreement
between Imperial Bank ("Bank") and the above-named Borrower of even date.
Standby Letter
of Credit
Sublimit (Section 1): The aggregate Credit Limit shall be reduced by $100,000
(the "Letter of Credit Reserve"). Bank may, in its sole
discretion, charge as Loans, any amounts that may become
due or owing to Bank in connection with the Letter of
Credit furnished to Borrower by or through Bank,
collectively, the "Letters of Credit Services." Borrower
shall execute all standard form applications and
agreements of Bank in connection with the Letters of
Credit Services and, without limiting any of the terms of
such applications and agreements. Borrower will pay all
standard fees and charges of Bank in connection with the
Letters of Credit.
Maturity Date
(Section 4): In the event the Bank does not renew or otherwise extend
Borrower's Starter Kit Security and Loan Agreement,
Borrower shall, upon the Maturity Date thereof, deposit
with Bank cash collateral (or such other collateral as
Bank, in Its sole and absolute discretion, may approve) in
an amount sufficient to cover all undrawn amounts under
any Letter of Credit then outstanding but undrawn until
the expiration of the Letter of Credit.
Borrower: Bank:
LifeMinders.com, Inc. Imperial Bank
- -----------------------------
By: [SIGNATURE APPEARS HERE] By: /s/ Bradley Steele
-------------------------- -----------------------------
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of November 12,
1997, by and between MinderSoft, Inc. a Maryland corporation (the "Company"),
and Stephen R. Chapin, Jr. ("Employee") recites and provides as follows:
RECITALS:
1. The Company is a database marketing company which uses Internet push
technology (patent pending) to deliver highly personalized reminders based on a
user-provided profile and the company's proprietary content. National retailers
sponsor the reminder software appropriate for their industry and in turn
distribute it at no cost to their customers.
2. The Company desires to employ the Employee as President of the
Company.
3. The Employee desires to be so employed by the Company on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment. The Company hereby employs the Employee, and the
----------
Employee hereby employment with the Company as President.
2. Term. Subject to the provisions of Section 9 of this Agreement
----
regarding termination, this Agreement shall remain in effect for a term of two
(2) years beginning on the date hereof. This Agreement shall be renewed
automatically for successive one (1) year terms unless either party gives
written notice of an intent not to renew to the other party within sixty (60)
days of the expiration of such term.
3. Compensation.
------------
(a) For all services rendered by the Employee pursuant to this
Agreement, the Company shall pay the Employee a base salary of $120,000 per
annum, payable in equal semi-monthly installments, or at such other times as may
be mutually agreed upon by the parties. During the term of this Agreement, the
Employee's salary shall be reviewed once each Fiscal Year (as defined in Section
5(a) below), with the first such review to be made no later than October 31,
1998.
(b) As additional compensation, the Company shall consider paying
Employee a bonus each Fiscal Year in such amount as may be determined by the
board of directors of the Company (the "Board") in its sole discretion based
upon the profitability and overall financial condition of the Company and upon
the Employee's contribution to such profitability and financial condition.
4. Deductions. The Company is authorized to deduct from the actual
----------
compensation of the Employee such sums as may be required to be deducted or
withheld under the provisions of any federal, state, or local law or regulation
now in effect or hereafter put into effect during the term of this Agreement,
including without limitation, social security, unemployment, and income
withholding taxes.
<PAGE>
5. Benefits.
--------
(a) The Employee shall be entitled to a paid vacation each
Fiscal Year (as defined below) of four (4) weeks, the timing of which shall be
subject to mutual agreement between the Company and the Employee. The Employee's
attendance at trade shows, training, educational, and professional programs and
meetings shall not be charged against Employee's vacation allowance. The
Employee shall also be entitled to paid sick leave of fifteen (15) days each
fiscal year. The Employee shall not receive additional compensation or credits
for unused vacation or paid sick days, nor shall unused vacation or paid sick
days be carried forward to subsequent Fiscal Years. For purposes of this
Agreement, a "fiscal year" shall begin on the first (1st) day of the month
following the date hereof and shall end on the last day of the twelfth (12th)
month thereafter.
(b) The Company shall reimburse the Employee for all expenses
reasonably and necessarily incurred by him in the performance of his duties
hereunder. To be reimbursed, the Employee must submit written evidence of such
expenses to the Company within thirty (30) days after incurring such expense
along with a written explanation of the expense.
(c) The Employee shall receive such other benefits, if any, as
the Company generally provides to all other executive employees of the Company,
whether now in effect or hereafter adopted, including group hospital and
accidental insurance benefits and group disability insurance coverage.
6. Duties of the Employee.
----------------------
(a) The Employee is employed by the Company as President, and
subject to the direction of the Board, shall provide all of the services
generally associated with and inherent in the office of president.
(b) The Employee shall perform such other and further services
as may reasonably be requested by the Board, including carrying out all of the
policies and directives of the Board.
(c) The Employee shall faithfully serve the Company in the
capacities as aforesaid, and shall at all times devote the Employee's full time,
best efforts, skills, attention, and energies to performance of the duties
hereunder to the utmost of the Employee's ability, and shall do and perform all
such services, acts, and things connected therewith as are reasonably required
and as the Board shall from time to time direct. The Employee shall not become
engaged or involved in any activities or matters which may adversely affect or
reflect discredit on the Company or its business, or conflict with the
Employee's services to the Company. This Agreement shall not prohibit the
Employee from investing personal assets in other businesses or entities that do
not "compete" with the Company (as described in Section 9 of this Agreement). In
furtherance of the prior sentence, attached hereto as Schedule 6(c) is a list of
outside business interests of the Employee which shall be deemed to not
interfere with Employee's duties hereunder, so long as Employee devotes less
than 20 hours per calendar quarter, in the aggregate, to such business interests
and activities .
-2-
<PAGE>
7. Confidential Information and Trade Secrets;
Invention Assignment Agreement.
-------------------------------------------
It is understood and agreed that the Employee will serve in a
fiduciary capacity to the Company and, as such, will comply with the standards
applicable to fiduciaries and other employees of the Company. In furtherance
thereof, the Employee has signed of even date herewith the Confidential
Information and Invention Assignment Agreement.
8. Covenant Not to Compete.
-----------------------
(a) Non-Competition. The Employee hereby covenants and agrees
that the Employee will not, without the prior written consent of the Board, call
on (or accept business from) any customers and/or prospects for the purpose of
selling goods or services to such customer and/or prospect, commencing the date
of this Agreement and continuing for a period of twelve (12) months after the
termination, expiration, or non-renewal of this Agreement for any reason, either
alone or in partnership with or in conjunction with any other person, firm, or
corporation, whether as principal, agent, shareholder, employee, or in any other
form, capacity or manner whatsoever, directly or indirectly, participate, carry
on, conduct, or be engaged in or advise, any person, firm, corporation, or other
legal entity carrying on or engaging in a business venture which is directly or
indirectly competitive with the business conducted by the Company on the date
hereof or in the future. In addition, the Employee shall not solicit or
otherwise communicate with customers of the Company or contact, with the
intention of hiring, or hire any of the Company's employees, officers, or
directors, during the period of this covenant. For purposes hereof, "customers"
shall include those persons and entities which have purchased goods and/or
services from the Company, and "prospects" shall include those persons and
entities to whom employees or independent contractors have submitted an oral or
written proposal for the purpose of providing goods and services from the
Company, in either case within the twelve (12) months prior to the termination,
expiration, or non-renewal of this Agreement.
Moreover, the Employee shall neither accept any employment with or
render any services, directly or indirectly, to a "Competitor Organization" (as
defined below), nor independently or otherwise, render any services or develop
any "Competitive Product" (as defined below) during the period of this covenant.
For purposes of this Agreement, (i) "Competitor Organization" means any person
or organization controlled by, controlling, or under common control with such
person or organization, who or which is engaged in, is about to become engaged
in or intends to engage in any, research on or development, production,
marketing, or selling of a Competitive Product; and (ii) "Competitive Product"
means any product, process, or service of any person or organization other than
the Company, in existence or under development, which substantially resembles
and competes, directly or indirectly, with any product offered by the Company or
any service rendered by the Company on the date hereof or at any time during
the period of this covenant.
(b) Injunctive Relief. The Employee recognizes that the
Company's remedies at law may be inadequate to protect itself against a breach
of any of the terms, covenants, and provisions of this Agreement including by
way of illustration, but not limitation, the covenant not to compete contained
in this Section 8. Therefore, notwithstanding any other provision of this
Agreement or any other agreement (including any other agreement generally
requiring
<PAGE>
arbitration), the Employee agrees that injunctive or other equitable relief
shall be an appropriate remedy for breach of this covenant not to compete, as
well as the other terms, covenants, and provisions of this Agreement, and shall
be a remedy in addition to any and all other remedies available to the Company.
(c) Effect of Violation on Term of Covenant. If, after termination
---------------------------------------
of the Employee's employment with the Company for any reason, the Employee
violates any provision of Section 7, the Confidential Information and Invention
Assignment Agreement, or Section 8 of this Agreement, the duration of the
violated covenant shall be computed from the date the Employee resumes
compliance with such covenant or from the date the Company is granted injunctive
relief by a court of competent jurisdiction enforcing such covenant, whichever
occurs first, reduced by the number of days the Employee was not in violation of
such covenant after termination of the Employee's employment with the Company.
(d) Acknowledgment of Reasonableness and Necessity. The Employee
----------------------------------------------
acknowledges and agrees that in light of the duties of the Employee as President
of the Company, the restrictions stated in this Section 8 are reasonable and
necessary to protect the business interests of the Company. The parties agree
that if the restrictions set forth in this Section 8 are determined by any court
of competent jurisdiction (or arbitration panel, as the case may be), at the
time of enforcement, to be unreasonable as to the duration, scope, area of
restriction, or otherwise, then such restrictions should be applied only to such
activities and territory and only for such period of time as the court (or
arbitration panel, as the case may be) determines to be reasonable in light of
all circumstances then existing.
(e) Interest Public Entities. The restrictions set forth in this
------------------------
Section 8 shall not apply to ownership by the Employee of less than five percent
(5%) beneficial interest in the outstanding equity securities of any publicly-
held business entity. For purposes of this Agreement, "publicly-held" shall be
deemed to refer to a business entity which has securities that have been
registered under the Securities Exchange Act of 1934, as amended.
9. Termination of Employment.
-------------------------
(a) Upon the occurrence of any of the following events and the
expiration of any required notice, this Agreement and the Employee's employment
hereunder automatically shall terminate:
(1) The death or bankruptcy of the Employee.
(2) The Company's termination of the Employee's employment at
any time, "for cause" or not "for cause" (as defined below).
This Agreement and the Employee's employment hereunder shall
terminate upon the expiration of a period of thirty (30) days
after delivery by the Company of written notice to the
Employee of termination. The phrase "for cause" shall include
termination because of the Employee's (i) incompetence in
business-related matters, (ii) willful misconduct, (iii)
censure or reprimand by any regulatory body, (iv) breach of
fiduciary duty, (v) intentional failure to perform stated
duties, (vi) willful violation of any law, rule, or
-4-
<PAGE>
regulation (other than minor traffic violations or similar
offenses) including, without limitation, conviction of a
felony, (vii) failure to perform assigned duties in a
reasonably satisfactory manner, or (viii) material breach of
any provision of this Agreement.
(3) The disability of the Employee. The term "disability" as
used herein, shall mean the Employee's inability, by reason of
any physical or mental impairment, to perform the Employee's
duties hereunder. The Employee's disability shall be deemed to
have occurred if a qualified medical doctor selected by the
Company determines with a reasonable degree of medical
certainty that the Employee is unlikely to be able to perform
all the duties set forth herein for a period exceeding three
(3).
(4) The voluntary or involuntary dissolution of the Company.
(b) In the event the Employee voluntarily terminates the Employee's
employment or the Employee's employment is terminated "for cause" under this
Agreement, the Employee shall be entitled to receive from the Company only the
base salary and benefits as set forth herein that have accrued to the date of
termination in full settlement of all of the Company's obligations hereunder.
(c) In the event the Company terminates the employment of Employee by
reason of the Employee's disability, the Employee shall be entitled to receive
from the Company only the base salary and benefits set forth herein that have
accrued to the date of disability and for a period of two (2) months thereafter
in full settlement of all of the Company's obligations hereunder.
(d) In the event the Company terminates the employment of the Employee
not "for cause," the Employee shall be entitled to only the base salary and
benefits as set forth herein that have accrued to the date of termination and
the base salary through the remainder of the term set forth in Section 2
hereinabove in full settlement of all of the Company's obligations to the
Employee.
10. Remedies. The Employee hereby represents that the services to be
--------
performed by the Employee under this Agreement are of a special, unique,
extraordinary, and intellectual character, which gives them a particular
value, the breach of which cannot be reasonably or adequately
compensated in damages in an action at law. The Employee expressly
acknowledges and agrees that, notwithstanding any other agreement
generally requiring arbitration, the Company shall be entitled to
obtain, in addition to any other rights or remedies the Company may
possess, injunctive or other equitable relief to prevent a prospective
or continuing breach of any provision of this Agreement by the Employee.
11. Costs to Enforce. The party which substantially prevails in any
----------------
arbitration, action suit or other proceeding (whether brought in the form of a
claim or counterclaim) to enforce any of the covenants or obligations contained
in this Agreement, or if a final judgment or order or a temporary order is
entered enforcing any of such covenants or obligations, shall be entitled to
receive from the non-prevailing party all reasonable costs and expenses incurred
by the prevailing
-5-
<PAGE>
party in connection with such arbitration, action, suit or proceeding to
enforce, including but not limited to court costs and reasonable attorneys'
fees, in addition to any other rights or remedies available to the prevailing
party under this Agreement or at law or equity.
12. Notices. All notices or other communications required or permitted
by and among the parties shall be in writing and shall be deemed to have been
given, delivered or made when delivered by hand or mailed by certified or
registered mail, postage prepaid, return receipt requested, and addressed either
as follows or in such other manner as a party may subsequently designate to the
other party in writing:
If to the Company, at:
---------------------
10122 Colonial Drive
Ellicott City, Maryland 21042
with mandatory copies to:
------------------------
Hedy Nelson, Esq.
Ginsberg, Feldman & Bress
1250 Connecticut Ave., N.W.
Washington, D.C. 20036
and
E. Rogers Novak
Novak Biddle Venture Partners, L.P.
1897 Preston White Drive
Reston, VA 20191
If to the Employee, at:
----------------------
The Employee's address as shown on the personnel records of the
Company.
13. Severability. In the event any one or more of the provisions
------------
contained in this Agreement shall for any reason be held invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
14. Entire Agreement. This Agreement, together with the Confidential
----------------
Information and Invention Assignment Agreement of even date herewith, supersedes
any other agreement, whether written or oral, that may have been made or entered
into by the Employee and the Company relating to the matters contemplated
hereby. This Agreement and the with the Confidential Information and Invention
Assignment Agreement constitute the entire agreement concerning the transaction
contemplated herein and there are no agreements or commitments in relation to
the subject matter hereof except as set forth herein.
-6-
<PAGE>
15. Amendments. This Agreement may not be amended or supplemented
----------
except in writing as may mutually be agreed to by the parties (provided,
--------
however, that such amendment must be approved in writing by the two (2) Board
- -------
members nominated by the holders of the Series A preferred stock in the
Employer) to be necessary, desirable, or expedient to further the purpose of
this Agreement, or to clarify the intention of the parties.
16. Applicable Law. This Agreement and the legal relations among the
--------------
parties hereto shall be governed by and construed in accordance with the
substantive laws of the State of Maryland, without giving effect to conflict of
law provisions and principles thereof.
17. Interpretation. When the context in which words are used in this
--------------
Agreement indicates that such is the intent, words in the singular number shall
include the plural, and vice versa, and words in the masculine gender shall
include the feminine and neuter genders, and vice versa.
18. Titles and Headings. Titles and headings to sections and
-------------------
paragraphs herein are inserted for convenience of reference only, and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
19. Binding Effect. This Agreement shall be binding upon and
--------------
enforceable against the Company and its successors and assigns.
20. No Attachment. Except as required by law, no right to receive
-------------
payments under this Agreement shall be subject to anticipation, alienation,
sale, assignment, encumbrance, charge, pledge, or hypothecation, or to
execution, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary to affect any such action shall
be null, void and of no effect.
21. Survival of Certain Provisions. The agreements and covenants of
------------------------------
the parties pursuant to Section 8 of this Agreement shall survive the
termination of this Agreement. Each such agreement and covenant by the Employee
shall be construed as being independent of the other provisions herein, and the
existence of any claim or cause of action by the Employee against the Company
shall not constitute a defense to the enforcement of any such covenant or
agreement.
22. Binding Arbitration. The Employee hereby acknowledges and agrees
-------------------
that, except as otherwise set forth herein, any and all disputes arising out of
the employment relationship created hereby shall be resolved as set forth in the
Confidential Information and Invention Assignment Agreement.
23. Acknowledgments. THE PARTIES HERETO EACH ACKNOWLEDGE THAT THEY
---------------
HAVE READ AND UNDERSTAND ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND
HAVE CONSULTED WITH LEGAL COUNSEL AND/OR OTHER SUITABLE ADVISERS REGARDING THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THE EMPLOYEE ACKNOWLEDGES THAT THE
PROVISIONS OF THIS AGREEMENT ARE REASONABLE AND REPRESENTS THAT THE EMPLOYEE
WILL
-7-
<PAGE>
BE ABLE TO ENGAGE IN OTHER ACTIVITIES FOR THE PURPOSE OF EARNING A LIVELIHOOD
SHOULD THE PROVISIONS OF THIS AGREEMENT BE ENFORCED.
24. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
25. Further Assurances. The parties hereby covenant and agree to sign,
execute, and deliver, or cause to be signed, executed, and delivered, and to do
or make, or cause to be done or made, upon the reasonable request of the other
party, any and all agreements, instruments, papers, deeds, acts, or things,
supplemental, confirmatory or otherwise, as may be reasonably required by the
other party for the purpose of facilitating the performance of the provisions of
this Agreement.
THE PARTIES, INTENDING TO BE LEGALLY BOUND, have executed this
Agreement on the date first above written.
COMPANY: MinderSoft, Inc.
------- a Maryland corporation
/s/ Stephen R. Chapin, Jr.
By: --------------------------------------
/s/ President
Title: --------------------------------
EMPLOYEE: Stephen R. Chapin, Jr.
--------
/s/ Stephen R. Chapin, Jr.
--------------------------------------
#68727-20851.01639v3
-8-
<PAGE>
SCHEDULE 6(c)
To
MINDERSOFT, INC./STEPHEN R. CHAPIN, JR.
EMPLOYMENT AGREEMENT
Other Business Ventures
Business ventures involving the following patents and patent
applications.
<TABLE>
<CAPTION>
Patent Applications
-------------------
Application
Country Number Filing Date
- ------- ----------- -----------
<S> <C> <C>
US 60/004,665 10/02/95
US 08/560,585 11/20/95
US 08/699,067 08/09/96
US 08/743,429 11/01/96
WO US96/18612 11/20/96
US 08/906,908 08/06/97
<CAPTION>
Patents Issued
--------------
Country Patent Number Date Issued
- ------- ------------- -----------
<S> <C> <C>
US 4,760,618 08/02/88
US 4,673,440 06/16/87
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of November 1,
1997, by and between MinderSoft, Inc. a Maryland corporation (the "Company"),
John Chapin, ("Employee") recites and provides as follows:
RECITALS:
1. The Company is a database marketing company which uses Internet
push technology (patent pending) to deliver highly personalized reminders based
on a user-provided profile and the company's proprietary content. National
retailers sponsor the remainder software appropriate for their industry and in
turn distribute it at no cost to their customers.
2. The Company desires to employ the Employee as VP, Sponsor
Marketing.
3. The Employee desires to be so employed by the Company on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are herby acknowledged, the parties hereto
agree as follows:
1. Employment. The Company hereby employs the Employee, and the
----------
Employee hereby accepts employment with the Company as VP, Sponsor Marketing.
2. Term. Subject to the provisions of Section 9 of this Agreement
----
regarding termination, this Agreement shall remain in effect at Company's
sole discretion.
3. Compensation.
------------
(a) For all services rendered by the Employee pursuant to this
Agreement, the Company shall pay the Employee a base salary of $72,000 per
annum, payable in equal semi-monthly installments, or at such other times as may
be mutually agreed upon by the parties. During the term of this Agreement, the
Employee's salary shall be reviewed once each Fiscal Year (as defined in Section
5(a)below), with the first such review to be made no later than October 31,
1998.
(b) As additional compensation, the Company shall consider
paying Employee a bonus each Fiscal Year in such amount as may be determined by
the board of directors of the Company (the "Board") in its sole discretion based
upon the profitability and overall financial condition of the Company and upon
the Employee's contribution to such profitability and financial condition.
<PAGE>
4. Deductions. The Company is authorized to deduct from the actual
----------
compensation of the Employee such sums as may be required to be deducted or
withheld under the provisions of any federal, state, or local law or regulation
now in effect or hereafter put into effect during the term of this Agreement,
including without limitation, social security, unemployment, and income
withholding taxes.
5. Benefits.
--------
(a) The Employee shall be entitled to a paid vacation each
Fiscal Year (as defined below) of two (2) weeks, the timing of which shall be
subject to mutual agreement between the Company and the Employee. The
Employee's attendance at trade shows, training, educational, and professional
programs and meetings shall not be charged against Employee's vacation
allowance. The Employee shall also be entitled to paid sick leave of ten (10)
days each fiscal year. The Employee shall not receive additional compensation
or credits for unused vacation or paid sick days, nor shall unused vacation or
paid sick days be carried forward to subsequent Fiscal Years. For purposes of
this Agreement, a "fiscal year" shall begin on the first (1/st/) day of the
month following the date hereof and shall end on the last day of the twelfth
(12/th/) month thereafter.
(b) The Company shall reimburse the Employee for all expenses
reasonably and necessarily incurred by him in the performance of his duties
hereunder. To be reimbursed, the Employee must submit written evidence of such
expenses to the Company within thirty (30) days after incurring such expense
along with a written explanation of the expense.
(c) The Employee shall receive such other benefits, if any, as
the Company generally provides to all other executive employees of the Company,
whether now in effect or hereafter adopted, including group hospital and
accidental insurance benefits and group disability insurance coverage.
6. Duties of the Employee.
----------------------
(a) The Employee is employed by the Company as VP, Sponsor
Marketing, and subject to the direction of the President, shall provide all
of the services generally associated with and inherent in the office of VP,
Sponsor Marketing.
(b) The Employee shall perform such other and further services
as may reasonably be requested by the President, including carrying out all of
the policies and directives of the President.
(c) The Employee shall faithfully serve the Company in the
capacities as aforesaid, and shall at all times devote the Employee's full time,
best efforts, skills, attention, and energies to performance of the duties
hereunder to the utmost of the Employee's ability, and shall do and perform all
such services, acts, and things connected therewith as are reasonably required
-2-
<PAGE>
and as the Board shall from time to time direct. The Employee shall not become
engaged or involved in any activities or matters which may adversely affect or
reflect discredit on the Company or its business, or conflict with the
Employee's services to the Company. This Agreement shall not prohibit the
Employee from investing personal assets in other businesses or entities that do
not "compete" with the Company (as described in Section 9 of this Agreement).
(d) The Employee may be required to relocate to the Dallas,
TX or Baltimore MD area at anytime after May, 1998 at the Company's discretion.
7. Confidential Information and Trade Secrets: Invention Assignment
----------------------------------------------------------------
Agreement.
- ---------
It is understood and agreed that the Employee will serve in a
fiduciary capacity to the Company and, as such, will comply with the standards
applicable to fiduciaries and other employees of the Company. In furtherance
thereof, the Employee has signed of even date herewith the Confidential
Information and Invention Assignment Agreement.
8. Covenant Not to Compete.
-----------------------
(a) Non-Competition. The Employee hereby covenants and
---------------
agrees that the Employee will not, without the prior written consent of the
Board, call on (or accept business from) any customers and/or prospects for the
purpose of selling goods or services to such customer and/or prospect,
commencing the date of this Agreement and continuing for a period of twelve (12)
months after the termination, expiration, or non-renewal of this Agreement for
any reason, either alone or in partnership with or in conjunction with any other
person, firm, or corporation, whether as principal, agent, shareholder,
employee, or in any other form, capacity or manner whatsoever, directly or
indirectly, participate, carry on, conduct, or be engaged in or advise, any
person, firm, corporation, or other legal entity carrying on or engaging in a
business venture which is directly or indirectly competitive with the business
conducted by the Company on the date hereof or in the future. In addition, the
Employee shall not solicit or otherwise communicate with customers of the
Company or contact, with the intention of hiring, or hire any of the Company's
employees, officers, or directors, during the period of this covenant. For
purposes hereof, "customers" shall include those persons and entities which have
purchased goods and/or services from the Company, and "prospects" shall include
those persons and entities to whom employees or independent contractors have
submitted an oral or written proposal for the purpose of providing goods and
services from the Company, in either case within the twelve (12) months prior to
the termination, expiration, or non-renewal of this Agreement.
Moreover, the Employee shall neither accept any employment with or
render any services, directly or indirectly, to a "Competitor Organization" (as
defined below), nor independently or otherwise, render any services or develop
any "Competitive Product" (as defined below) during the period of this covenant.
For purposes of this Agreement, (i)
-3-
<PAGE>
"Competitor Organization" means any person or organization controlled by,
controlling, or under common control with such person or organization, who or
which is engaged in, is about to become engaged in or intends to engage in any,
research on or development, production marketing, or selling of a Competitive
Product; and (ii) "Competitive Product" means any product, process, or service
of any person or organization other than the Company, in existence or under
development, which substantially resembles and competes, directly or indirectly,
with any product offered by the Company or any service rendered by the Company
on the date hereof or at any time during the period of this covenant.
(b) Injunctive Relief. The Employee recognizes that the Company's
-----------------
remedies at law may be inadequate to protect itself against a breach of any of
the terms, covenants, and provisions of this Agreement including by way of
illustration, but not limitation, the covenant not to compete contained in this
Section 8. Therefore, notwithstanding any other provision of this Agreement or
any other agreement (including any other agreement generally requiring
arbitration), the Employee agrees that injunctive or other equitable relief
shall be an appropriate remedy for breach of this covenant not to compete, as
well as the other terms, covenants, and provisions of this Agreement, and shall
be a remedy in addition to any and all other remedies available to the Company.
(c) Effect of Violation on Term of Covenant. If, after termination
---------------------------------------
of the Employee's employment with the Company for any reason, the Employee
violates any provision of Section 7, the Confidential Information and Invention
Assignment Agreement, or Section 8 of this Agreement, the duration of the
violated covenant shall be computed from the date the Employee resumes
compliance with such covenant or from the date the Company is granted injunctive
relief by a court of competent jurisdiction enforcing such covenant, whichever
occurs first, reduced by the number of days the Employee was not in violation of
such covenant after termination of the Employee's employment with the Company.
(d) Acknowledgment of Reasonableness and Necessity. The Employee
----------------------------------------------
acknowledges and agrees that in light of the duties of the Employee as VP,
Sponsor Marketing of the Company, the restrictions stated in this Section 8 are
reasonable and necessary to protect the business interests of the Company. The
parties agree that if the restrictions set forth in this Section 8 are
determined by any court of competent jurisdiction (or arbitration panel, as the
case may be), at the time of enforcement, to be unreasonable as to the duration,
scope, area of restriction, or otherwise, then such restrictions should be
applied only to such activities and territory and only for such period of time
as the court (or arbitration panel, as the case may be) determines to be
reasonable in light of all circumstances then existing.
(e) Interest in Public Entities. The restrictions set forth in this
---------------------------
Section 8 shall not apply to ownership by the Employee of less than five percent
(5%) beneficial interest in the outstanding equity securities of any
publicly-held business entity. For purposes of this Agreement, "publicly-held"
shall be deemed to refer to a business entity which has securities that
-4-
<PAGE>
have been registered under the Securities Exchange Act of 1934, as amended.
9. Termination of Employment.
-------------------------
(a) Upon the occurrence of any of the following events and the
expiration of any required notice, this Agreement and the Employee's employment
hereunder automatically shall terminate:
(1) The death or bankruptcy of the Employee.
(2) The Company's termination of the Employee's
employment at any time, "for cause" or not "for cause"
(as defined below). This Agreement and the Employee's
employment hereunder shall terminate upon the expiration
of a period of thirty (30) days after delivery by the
Company of written notice to the Employee of
termination. The phrase "for cause" shall include
termination because of the Employee's (i) incompetence
in business-related matters, (ii) willful misconduct,
(iii) censure or reprimand by any regulatory body, (iv)
breach of fiduciary duty, (v) intentional failure to
perform stated duties, (vi) willful violation of any
law, rule, or regulation (other than minor traffic
violations or similar offenses) including, without
limitation, conviction of a felony, (vii) failure to
perform assigned duties in a reasonably satisfactory
manner, or (viii) material breach of any provision of
this Agreement.
(3) The disability of the Employee. The term
"disability" as used herein, shall mean the Employee's
inability, by reason of any physical or mental
impairment, to perform the Employee's duties hereunder.
The Employee's disability shall be deemed to have
occurred if a qualified medical doctor selected by the
Company determines with a reasonable degree of medical
certainty that the Employee is unlikely to be able to
perform all the duties set forth herein for a period
exceeding three (3) months.
(4) The voluntary or involuntary dissolution of the
Company.
(b) In the event the Employee voluntarily terminates the
Employee's employment or the Employee's employment is terminated "for cause" or
"not for cause" under this Agreement, the Employee shall be entitled to receive
from the Company only the base salary and benefits as set forth herein that have
accrued to the date of termination in full settlement of all of the Company's
obligations hereunder.
(c) In the event the Company terminates the employment of
Employee by reason of the Employee's disability, the Employee shall be entitled
to receive from the Company only
-5-
<PAGE>
the base salary and benefits set forth herein that have accrued to the date of
disability and for a period of three (3) months thereafter in full settlement of
all of the Company's obligations hereunder.
10. Remedies. The Employee hereby represents that the services to
--------
be performed by the Employee under this Agreement are of a special, unique,
extraordinary, and intellectual character, which gives them a particular value,
the breach of which cannot be reasonably or adequately compensated in damages in
an action at law. The Employee expressly acknowledges and agrees that,
notwithstanding any other agreement generally requiring arbitration, the Company
shall be entitled to obtain, in addition to any other rights or remedies the
Company may possess, injunctive or other equitable relief to prevent a
prospective or continuing breach of any provision of this Agreement by the
Employee.
11. Costs to Enforce. The party which substantially prevails in any
----------------
arbitration, action, suit or other proceeding (whether brought in the form of a
claim or counterclaim) to enforce any of the covenants or obligations contained
in this Agreement, or if a final judgment or order or a temporary order is
entered enforcing any of such covenants or obligations, shall be entitled to
receive from the non-prevailing party all reasonable costs and expenses incurred
by the prevailing party in connection with such arbitration, action, suit or
proceeding to enforce, including but not limited to court costs and reasonable
attorneys' fees, in addition to any other rights or remedies available to the
prevailing party under this Agreement or at law or equity.
12. Notices. All notices or other communications required or
-------
permitted by and among the parties shall be in writing and shall be deemed to
have been given, delivered or made when delivered by hand or mailed by certified
or registered mail, postage prepaid, return receipt requested and addressed
either as follows or in such other manner as a party may subsequently designate
to the other party in writing:
If to the Company at:
--------------------
10122 Colonial Drive
Ellicott City, Maryland 21042
with mandatory copies to:
------------------------
Hedy Nelson, Esq.
Ginsberg, Feldman & Bress
1250 Connecticut Ave., N.W.
Washington, D.C. 20036
-6-
<PAGE>
If to the Employee, at:
----------------------
The Employee's address as shown on the personnel records of the
Company.
13. Severability. In the event any one or more of the provisions
------------
contained in this Agreement shall for any reason be held invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
14. Entire Agreement. This Agreement supersedes any other agreement,
----------------
whether written or oral, that may have been made or entered into by the Employee
and the Company relating to the matters contemplated hereby. This Agreement
constitutes the entire agreement concerning the transaction contemplated herein
and there are no agreements or commitments in relation to the subject matter
hereof except as set forth herein.
15. Amendments. This Agreement may not be amended or supplemented
----------
except in writing as may mutually be agreed to by the parties.
16. Applicable Law. This Agreement and the legal relations among the
--------------
parties hereto shall be governed by and construed in accordance with the
substantive laws of the State of Maryland, without giving effect to conflict of
law provisions and principles thereof.
17. Interpretation. When the context in which words are used in this
--------------
Agreement indicates that such is the intent, words in the singular number shall
include the plural, and vice versa, and words in the masculine gender shall
include the feminine and neuter genders, and vice versa.
18. Titles and Headings. Titles and headings to sections and
-------------------
paragraphs herein are inserted for convenience of reference only, and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
19. Binding Effect. This Agreement shall be binding upon and
--------------
enforceable against the Company and its successors and assigns.
20. No Attachment. Except as required by law, no right to receive
-------------
payments under this Agreement shall be subject to anticipation, alienation,
sale, assignment, encumbrance, charge, pledge, or hypothecation, or to
execution, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary to affect any such action shall
be null, void and of no effect.
-7-
<PAGE>
21. Survival of Certain Provisions. The agreements and covenants of
------------------------------
the parties pursuant to Section 8 of this Agreement shall survive the
termination of this Agreement. Each such agreement and covenant by the Employee
shall be construed as being independent of the other provisions herein, and the
existence of any claim or cause of action by the Employee against the Company
shall not constitute a defense to the enforcement of any such covenant or
agreement.
22. Binding Arbitration. The Employee hereby acknowledges and agrees
-------------------
that, except as otherwise set forth herein, any and all disputes arising out of
the employment relationship created hereby shall be resolved as set forth in the
Confidential Information and Invention Assignment Agreement.
23. Acknowledgments. THE PARTIES HERETO EACH ACKNOWLEDGE THAT THEY
---------------
HAVE READ AND UNDERSTAND ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND
HAVE CONSULTED WITH LEGAL COUNSEL AND/OR OTHER SUITABLE ADVISERS REGARDING THE
TERMS AND PROVISIONS OF THIS
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
-8-
<PAGE>
AGREEMENT. THE EMPLOYEE ACKNOWLEDGES THAT THE PROVISIONS OF THIS AGREEMENT ARE
REASONABLE AND REPRESENTS THAT THE EMPLOYEE WILL BE ABLE TO ENGAGE IN OTHER
ACTIVITIES FOR THE PURPOSE OF EARNING A LIVELIHOOD SHOULD THE PROVISIONS OF THIS
AGREEMENT BE ENFORCED.
24. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
25. Further Assurances. The parties hereby covenant and agree to sign,
------------------
execute, and deliver, or cause to be signed, executed, and delivered, and to do
or make, or cause to be done or made, upon the reasonable request of the other
party, any and all agreements, instruments, papers, deeds, acts, or things,
supplemental, confirmatory or otherwise, as may be reasonably required by the
other party for the purpose of facilitating the performance of the provisions of
this Agreement.
THE PARTIES, INTENDING TO BE LEGALLY BOUND, have executed this Agreement
on the date first above written.
COMPANY: MinderSoft, Inc.
------- a Maryland corporation
By: _____________________________
Title: _____________________________
EMPLOYEE: John Chapin
--------
-----------------------------
-9-
<PAGE>
RELEASE AND SETTLEMENT
----------------------
The undersigned, Frans Kok, individually and as the authorized officer of Johan
Hekelaar, Inc., for the sole consideration of One Hundred Fifty Thousand Dollars
($150,000.00), paid by LifeMinders.com, Inc., formerly known as MinderSoft, Inc.
("LifeMinders"), the receipt and adequacy of which is hereby acknowledged, does
hereby release, acquit and forever discharge LifeMinders, its officers,
directors, partners, associates, shareholders, employees, assigns, and
successors, jointly, severally and/or individually from all claims and demands,
rights and causes of action of any kind the undersigned now has or hereafter may
have, known or unknown, including but not limited to any demands, rights and
causes of action related to any and all stock options in MinderSoft, Inc., as
well as any and all consulting relationships between Frans Kok and/or Johan
Hekelaar, Inc. and LifeMinders. This release expresses a full and complete
RELEASE AND SETTLEMENT of all liability arising from any and all relationships
or agreements of any kind that now exist or may have existed between Frans Kok
individually and Johan Hekelaar, Inc. and LifeMinders.
Nothing contained herein shall be deemed to compromise, diminish or in
any way extinguish or terminate the 100,000 shares of common stock and/or
shareholder interests of Frans Kok individually in MinderSoft, Inc. and/or its
successors, which shares and interests are hereby expressly acknowledged.
I HAVE CAREFULLY READ THE FOREGOING RELEASE AND KNOW THE CONTENTS
THEREOF, AND I SIGN THE SAME AS MY OWN FREE ACT.
This 15th day of July, 1999.
WITNESS:
/s/ Sandy Gallaro /s/ Frans J. Kok
- -------------------------------- -------------------------------------
Frans Kok, individually and as the
authorized officer of Johan Hekelaar,
Inc.
/s/ James P. Dvorak LifeMinders.com, Inc.
- --------------------------------
By: /s/ Stephen R. Chapin, Jr.
---------------------------------
Stephen R. Chapin, Jr.
President and
Chief Executive Officer
<PAGE>
Consulting Agreement
--------------------
This consulting Agreement ("Agreement") effective as of June 1, 1997, is by and
between MinderSoft, Inc. a Maryland corporation (the "Company"), and Lordhill
Company, a Maryland corporation (the "Consultant").
WHEREAS, the Company wishes to engage the Consultant and the Consultant
desires to provide consulting services for the Company upon the terms and
conditions set forth in this Agreement:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Consultant agree as follows:
1. Consulting Services
-------------------
A. Agreement to Consult. During the term of the Agreement,
Consultant agrees to perform to the best of his ability the
consulting work, as set forth in subpart D of this paragraph 1
(the "Consulting Work"), for the Company as the Board of
Directors of the Company, or its designee, may from time to
time request.
B. Place of Work. Consultant shall render services
primarily at Consultant's offices, or at such places and at such
other times as the Company and Consultant shall from time to
time agree upon.
C. Time. Consultant's daily schedule and hours worked under
this Agreement on a given day shall generally be subject to
Consultant's discretion. Company relies upon Consultant to
devote appropriately scheduled and sufficient time as is
reasonably necessary to fulfill the spirit and purpose of this
Agreement.
D. Consulting Work. During the term of this Agreement,
Consultant agrees to perform, and Company agrees to retain and
pay Consultant for, the following work (the "Consulting Work"):
1. To assist the Company in gaining sponsors and
customers for its products.
2. To act as financial and business advisor for
the Company.
3. To perform such other duties as mutually agreed
between the Company and Consultant.
2. Term of Agreement
-----------------
Subject to the provisions of Section 6 hereof, this Agreement shall be
effective as of June 1, 1997 (the "Commencement Date") and continue for
an initial term of one (1) year (the "Initial Term"). Thereafter this
Agreement shall continue in effect on a year to year basis unless
terminated in accordance with Section 6 hereof.
3. Scope of Duties
---------------
At all times, the Consultant shall serve under the direction of the
President of the Company and the Board of Directors of the Company
(collectively, the "Management") and shall perform such services within
the scope of the Consulting Work as the Managmement in its sole
discretion, shall deem appropriate.
4. Compensation
------------
A. Consulting Fees. The Company shall pay the Consultant a fee of
$8,000 per month.
B. Payment of Consulting Fees. Fee installments shall be paid to
Consultant such that Consultant shall receive such no later than the
seventh (7th) day following the last day of any month. All other fees
shall be paid to Consultant within thirty (30) days after receipt of
Consultant's invoice.
C. Other. All payments of consulting fees to the Consultant shall
be made without deduction of any tax witholding with respect thereto
under applicable federal and state laws. Consultant hereby agrees to
pay all such witholdings required by law.
<PAGE>
5. Expenses.
--------
In addition to the Consulting Fees to be paid in accordance with Paragraph 4
above, the Company agrees to pay to the Consultant a monthly amount to cover
all "Allowable Expenses." For purposes of this Paragraph 5, "Allowable
Expenses" shall be deemed to include expenses for transportation including
air transportation and automobile rental, lodging and meals for Consultant
while performing the Consulting Work at any locations which are outside of
Maryland.
6. Termination.
-----------
A. Consultant and Company agrees that this Agreement may be terminated
by the Company only for "Cause" within the period of this Agreement,
subject to the other terms of this section 6. Such termination shall be
effective upon delivery of written notice to Consultant of the Company's
election to terminate this Agreement under this Section 6. "For Cause"
when used in connection with the termination of engagement with the
Company, shall mean the termination of the Consultant's services by the
Company by reason of (i) the conviction of the Consultant of a crime
involving moral turpitude by a court of competent jurisdiction; (ii) the
proven commission by the Consultant of an act of fraud upon the Company;
(iii) the willful and proven misappropriation of any funds or property
of the Company by the Consultant; (iv) the willful, continued and
unreasonable failure by the Consultant to perform duties assigned to him
and agreed to by him; and (v) the willful and proven misappropriation of
the Company's work product or confidential information without approval
of the Company.
B. If at any time during the term of this Agreement, Consultant is
unable, due to physical or mental disability, to perform effectively the
duties hereunder, the Company may terminate this Agreement without
further obligations hereunder, except as set forth in Paragraph 4 above
for services previously rendered.
C. If Consultant should die during the term of this Agreement,
Consultant's retention by the Company and the Company's obligations
hereunder shall terminate as of the end of the month in which
Consultant's death occurs.
D. Consultant may voluntarily terminate the Agreement.
7. Notice.
------
All notices, requests, demands and other communications required by or
permitted under this Agreement shall be in writing and shall be sufficiently
delivered if delivered by hand, by courier service, or sent by registered
or certified mail, postage prepaid, to the parties at their respective
addresses listed below;
(a) If to the Consultant, to the address set forth on the signature
page of this Agreement:
(b) If to the Company:
MinderSoft, Inc.
10122 Colonial Drive
Ellicott City, Maryland 21042
Either party may change such party's address by such notice to the other
parties.
8. Miscellaneous Provisions.
------------------------
Assignment. This Agreement is non assignable without prior written agreement
----------
of the Company and Consultant.
Survival. The provisions of this Agreement shall survive the termination of
--------
the Consultant's engagement hereunder in accordance with the terms
hereunder.
Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of Maryland.
Binding Upon Successors. This Agreement shall be binding upon, and shall
-----------------------
inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the Company and the Consultant respect to the terms of the retention of the
Consultant by the Company and supersedes all prior agreements and
understandings, whether written or oral, between them concerning such terms
of employment.
Waiver and Amendments; Cumulative Rights and Remedies.
-----------------------------------------------------
(a) This Agreement may be amended, modified or supplemented, and
any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by either
party of a breach of any provision of the Agreement shall not
operate as a waiver of any subsequent breach.
<PAGE>
(b) No failure on the part of any party to exercise, and no
delay in exercising, any right or remedy hereunder shall
operate as a waiver thereof, no shall any single or partial
exercise of any such right or remedy by such party preclude
any other or further exercise thereof or the exercise of any
other right or remedy. All rights and remedies hereunder are
cumulative and are in addition to all other rights and
remedies provided by law, agreement or otherwise.
(c) The Consultant's obligations to the Company and the
Company's rights and remedies hereunder are in addition to
all other obligations of the Consultants and rights and
remedies of the Company created pursuant to any other
agreement.
Construction. Each party to this Agreement has had the opportunity to
------------
review this Agreement with legal counsel. This Agreement shall not be
construed or interpreted against any party on the basis that such party
drafted or authored a particular provision, parts of or the entirety of
this Agreement.
Severability. In the event that any provision or provisions of this
------------
Agreement is held to be invalid, illegal or unenforceable by any court
of law or otherwise, the remaining provisions of this Agreement shall
nevertheless continue to be valid, legal and enforceable as though the
invalid or unenforceable parts had not been included therein. In
addition, in such event the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the
parties as closely as possible with respect to those provisions which
were held to be invalid, illegal or unenforceable.
Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of
which together shall constitute on and the same instrument.
9. Arbitration.
-----------
Consultant and Company agree that if any dispute shall arise with
respect to this Agreement, each will resolve such dispute by
arbitration pursuant to the rules and regulations of the American
Arbitration Association located nearest to Ellicott City, Maryland.
IN WITNESS WHEREOF, the Company and the Consultant have executed this Agreement
under to be effective as of the date first above written.
MinderSoft, Inc. Lordhill Company
By: /s/ Stephen R. Chapin By: /s/ Hugh C. Ronalds
--------------------------------- ------------------------------------
Stephen R. Chapin Hugh C. Ronalds
President President
1433 Park Avenue
Baltimore, MD 21217
<PAGE>
[LORDHILL COMPANY]
November 18, 1997
Mr. Stephen R. Chapin
President
MinderSoft, Inc.
10122 Colonial Drive
Ellicott City, MD 21042
Dear Steve:
This letter will confirm our Agreement of this date that the Consulting Fee of
$8,000 per month in the Consulting Agreement dated June 1, 1997 between
MinderSoft, Inc. and Lordhill Company is changed to $7,000 per month for the
month of November 1997 and succeeding months and that Consulting Fee payments
for each month are due and payable the first day of the month. Additionally,
Section 6 D of the Agreement shall read Consultant or Company may voluntarily
terminate the Agreement. As of today the amount due and payable is $40,000 for
June through October 1997 plus $7,000 for November minus the amount paid to date
of $20,000 equal to a net amount due and payable today of $27,000.
Sincerely,
Hugh C. Ronalds
President
Agreed,
/s/ Stephen R. Chapin
Stephen R. Chapin
President
MinderSoft, Inc.
<PAGE>
[LORDHILL COMPANY]
March 27, 1998
Mr. Stephen R. Chapin
President
MinderSoft, Inc.
10122 Colonial Drive
Ellicott City, MD 21042
Dear Steve:
This letter will confirm our Agreement of this date that the Consulting Fee of
$8,000 per month in the Consulting Agreement dated June 1, 1997 ("Consulting
Agreement") between MinderSoft, Inc. and Lordhill Company has been changed to
$7,000 per month for the month of November 1997 and succeeding months and that
the monthly $7,000 Consulting Fee will be paid $3,500 on the 15th and $3,500 on
the 30th day of the month.
Additionally, Section 6 D of the Consulting Agreement shall read "Consultant may
voluntarily terminate this Agreement at any time. In addition to 6A here and
above after 18 months from June 1, 1999 Company may voluntarily terminate this
Agreement with 30 days written notice." Section 6E shall be added to read "Upon
voluntary or involuntary dissolution of the Company this Agreement is
automatically terminated as long as Company is not in default of the Consulting
Agreement with respect to any money owed Consultant." It is also agreed that the
Consulting Agreement (between MinderSoft and Lordhill Company) shall be
considered the equivalent to a Work Agreement between MinderSoft, Inc. and Hugh
C. Ronalds (Lordhill Company's President) for the purposes of the Stock
Restriction Agreement between MinderSoft, Inc. and Hugh C. Ronalds dated
November 24, 1997.
Sincerely,
/s/ Hugh C. Ronalds
Hugh C. Ronalds
President
Agreed,
/s/ Stephen R. Chapin
Stephen R. Chapin
President
MinderSoft, Inc.
<PAGE>
[LORDHILL COMPANY]
January 29, 1999
Mr. Stephen R. Chapin, Jr.
President
MinderSoft, Inc.
694 Spring St.
Herndon, VA 20170
Dear Steve:
This letter will confirm that we have agreed to modify the letter of March 27,
1998 regarding the Consulting Agreement dated June 1, 1997 between MinderSoft,
Inc. and Lordhill Company so that the first two sentences of the second
paragraph are replaced by the following:
Additionally, Section 6 D of the Consulting Agreement shall read "Consultant may
voluntarily terminate this Agreement at any time. In addition to 6A here and
above after eighteen (18) months from June 1, 1999 Company may voluntarily
terminate this Agreement with 30 days written notice."
Sincerely,
/s/ Hugh C. Ronalds
Hugh C. Ronalds
President
Agreed,
/s/ Stephen R. Chapin
President
MinderSoft, Inc.
<PAGE>
EXHIBIT 10.9
MINDERSOFT, INC.
1998 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
--------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or are granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means MinderSoft, Inc., a Maryland corporation.
-------
(h) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(i) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For
<PAGE>
purposes of Incentive Stock Options, no such leave may exceed 90 days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract,
including Company policies. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, on the 181st day of such
leave any Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(j) "Employee" means any person, including Officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means as of any date, the value of Common Stock
-----------------
determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan
------
-2-
<PAGE>
(q) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. All
Option Agreements are subject to the terms and conditions of the Plan.
(r) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(s) "Optionee" means an Employee or Consultant who receives an Option.
--------
(t) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1998 MinderSoft, Inc. Stock Option Plan.
----
(v) "Section 16(b)" means Section 16(b) of the Securities Exchange
-------------
Act of 1934, as amended.
(w) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(x) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan.
-------------------------
(a) Maximum Number of Shares. Subject to the provisions of Section 11
------------------------
of the Plan, the maximum aggregate number of Shares which may be subject to
option and sold under the Plan is 380,000 Shares. The Shares may be authorized
but unissued, or reacquired Common Stock.
(b) Expiration of Options. If an Option expires or becomes
---------------------
unexercisable without having been exercised in full, the unpurchased Shares
which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated). However, Shares that have actually
been issued under the Plan upon exercise of an Option, shall not be returned to
the Plan and shall not become available for future distribution under the Plan.
4. Administration of the Plan.
--------------------------
(a) Board or Committee. The Plan shall be administered by the Board or
------------------
a Committee appointed by the Board, which Committee shall be constituted to
comply with Applicable Laws. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Applicable Laws.
-3-
<PAGE>
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) with the approval of the Board, to reduce the exercise price
of any Option to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option has declined since the date the Option
was granted;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(x) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by Optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
-4-
<PAGE>
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Type of Option. Nonstatutory Stock Options may be granted to
--------------
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if
otherwise eligible, be granted additional Options.
(b) Designation of Option. Each Option shall be designated in the
---------------------
written option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that
the aggregate Fair Market Value of Shares subject to an Optionee's Incentive
Stock Options granted by the Company, any Parent or Subsidiary, which become
exercisable for the first time during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall
be treated as Nonstatutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares shall be determined as of
the time the Option with respect to such Shares is granted.
(c) No Right to Employment or Consulting Relationship. The Plan shall
-------------------------------------------------
not confer upon any Optionee any right with respect to continuation of
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
(d) Certain Limitations. Upon the Company or a successor corporation
-------------------
issuing any class of common equity securities required to be registered under
Section 12 of the Exchange Act or upon the Plan being assumed by a corporation
having a class of common equity securities required to be registered under
section 12 of the Exchange Act, the following limitations shall apply to grants
of Options to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 190,000 Shares.
(ii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section ll.
(iii) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 5(d)(i), the canceled Option will be counted against the
limit set forth in Section 5(d) (i). For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
-5-
<PAGE>
6. Term of Plan. The Plan shall become effective upon its adoption by the
------------
Board of Directors. It shall continue in effect for a term of ten (10) years
unless sooner terminated under section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) Per Share Price. The per Share exercise price for the Shares to
---------------
be issued pursuant to exercise of an Option shall be such price as is determined
by the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described
in the preceding paragraph, the per Share exercise price shall be no less than
100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) Consideration. The consideration to be paid for the Shares to be
-------------
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant). Such consideration may consist
entirely of (1) cash, (2) promissory note with such terms and security as
determined by the Administrator, (3) other Shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, (4) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the
-6-
<PAGE>
Company of the sale or loan proceeds required to pay the exercise price, or (5)
any combination of the foregoing methods of payment. In making its determination
as to the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise Rights as a Shareholder.
----------------------------------------------
(i) Any Option granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator, including
performance criteria with respect to the Company and/or the Optionee, and as
shall be permissible under the terms of the Plan. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during
any unpaid leave of absence.
(ii) An Option may not be exercised for a fraction of a Share.
(iii) An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan and permitted by the applicable Option Agreement. Shares issued upon
exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
(iv) Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter maybe available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day from the date of such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that Optionee was entitled
to exercise it at
-7-
<PAGE>
the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of such termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, Optionee may, but only within twelve (12) months from the date
of such termination (and in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option, such Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the day three months and one day following such
termination. To the extent that Optionee is not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate,
and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of the Optionee, only by the Optionee.
-8-
<PAGE>
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option, and the number of Shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued Shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of Shares of
stock of any class, or securities convertible into Shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option may be assumed or an equivalent option
or right substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation refuses
to assume or substitute for the Option, to the extent the Optionee is not
entitled to exercise the Option on the date of the merger or sale, the Option
shall terminate. In the event that the successor corporation refuses to assume
or substitute for the Option, the Administrator shall notify the Optionee at
least fifteen (15) days prior to merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company. The
vested portion of the Option shall be exercisable for a period of fifteen (15)
days from the date of such notice, and the Option shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option for each Share of Optioned
-9-
<PAGE>
Stock subject to the Option, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other Applicable Law or regulation,
including the requirements of the NASD or an established stock exchange), the
company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing and signed by the Optionee
and the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
14. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all Applicable Laws,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned Applicable Laws.
-10-
<PAGE>
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17. Agreements. Options shall be evidenced by written Option Agreements
-----------
in such form as the Administrator shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under all Applicable Laws. Until the Plan has
been approved by the Company's Shareholders, no Option shall be exercisable.
19. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
Witness the signatures below this 18th day of February, 1999:
Attest: MinderSoft, Inc.
John Chapin Stephen R. Chapin, Jr.
By:___________________ By:___________________
Secretary President and CEO
-11-
<PAGE>
_______________ ____, 1999
Hambrecht & Quist LLC
Thomas Weisel Partners LLC
PaineWebber Incorporated
Wit Capital Corporation
As Representatives of the
Several Underwriters
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, California 94104
Ladies and Gentlemen:
The undersigned is a stockholder of LifeMinders.com, Inc. (the "Company") and
wishes to facilitate the public offering (the "Offering") of Common Stock of the
Company ("Common Stock") pursuant to a Registration Statement on Form S-1 (the
"Registration Statement") to be initially transmitted for filing with the
Securities and Exchange Commission on or about September 24, 1999.
In consideration of the foregoing, and in order to induce you to act as
underwriters in the Offering, the undersigned hereby irrevocably agrees that it
will not, directly or indirectly, sell, offer, contract to sell, transfer the
economic risk of ownership in, make any short sale, pledge or otherwise dispose
of any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for or any other rights to purchase or acquire Common Stock,
without the prior written consent of Hambrecht & Quist LLC acting alone or of
each of the Representatives of the Underwriters acting jointly, for a period of
180 days from the effective date of the Registration Statement.
Notwithstanding the foregoing, if the undersigned is an individual, he or she
may transfer any shares of Common Stock or securities convertible into or
exchangeable or exercisable for the Company's Common Stock either during his or
her lifetime or on death by will or intestacy to his or her immediate family or
to a trust the beneficiaries of which are exclusively the undersigned and/or a
member or members of his or her immediate family; provided, however, that prior
to any such transfer each transferee shall execute an agreement, satisfactory to
Hambrecht & Quist LLC, pursuant to which each transferee shall agree to receive
and hold such shares of Common Stock, or securities convertible into or
exchangeable or exercisable for the Common Stock, subject to the provisions
hereof, and there shall be no further transfer except in accordance with the
provisions hereof. For the purposes of this paragraph, "immediate family" shall
mean spouse, lineal descendant, father, mother, brother or sister of the
transferor.
<PAGE>
Hambrecht & Quist LLC
Thomas Weisel Partners LLC
PaineWebber Incorporated
Wit Capital Corporation
_______________ ____, 1999
Page 2
The undersigned hereby waives any rights of the undersigned to sell shares of
Common Stock or any other security issued by the Company pursuant to the
Registration Statement, and acknowledges and agrees that for a period of 180
days from the effective date of the Registration Statement the undersigned has
no right to require the Company to register under the Securities Act of 1933
such Common Stock or other securities issued by the Company and beneficially
owned by the undersigned.
The undersigned understands that the agreements of the undersigned are
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns. The undersigned agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent
against the transfer of Common Stock or other securities of the Company held by
the undersigned except in compliance with this agreement.
Very truly yours,
Dated: --------------------- --------------------------------
Signature
--------------------------------
Printed Name and Title
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the inclusion in this Registration Statement on Form S-1
(File No. 333-87785) of Lifeminders.Com, Inc. of our report dated October 21,
1999 related to the financial statements of Lifeminders.Com, Inc. at December
31, 1997, 1998 and September 30, 1999 and for the period August 9, 1996 (date of
inception) to December 31, 1996, for the each of the two years in the period
ended December 31, 1998 and for each of the nine month periods ended September
30, 1998 and 1999. We also consent to the reference of our firm under the
headings "Selected Financial Information" and "Experts".
PricewaterhouseCoopers LLP
McLean, Virginia
October 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 232,073 11,279,137
<SECURITIES> 0 0
<RECEIVABLES> 0 4,368,802
<ALLOWANCES> 0 201,232
<INVENTORY> 0 0
<CURRENT-ASSETS> 232,073 22,437,649
<PP&E> 54,733 2,946,052
<DEPRECIATION> 8,505 209,399
<TOTAL-ASSETS> 278,301 25,348,586
<CURRENT-LIABILITIES> 477,340 4,497,240
<BONDS> 0 0
2,023,375 37,720,790
0 0
<COMMON> 32,750 33,494
<OTHER-SE> (2,255,164) (17,036,355)
<TOTAL-LIABILITY-AND-EQUITY> 278,301 25,348,586
<SALES> 56,750 5,979,493
<TOTAL-REVENUES> 56,750 5,979,493
<CGS> 59,472 471,907
<TOTAL-COSTS> 59,472 471,907
<OTHER-EXPENSES> 1,968,999 20,085,064
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,947,206) (14,453,241)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,947,206) (14,453,241)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,947,206) (14,453,241)
<EPS-BASIC> (0.64) (4.59)
<EPS-DILUTED> (0.64) (4.59)
</TABLE>
