<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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EDGAR ONLINE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7375 06-1447017
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
50 WASHINGTON STREET
NORWALK, CONNECTICUT 06854
(203) 852-5666
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MARC STRAUSBERG
CHAIRMAN OF THE BOARD
EDGAR ONLINE, INC.
50 WASHINGTON STREET
NORWALK, CONNECTICUT 06854
(203) 852-5666
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MITCHELL C. LITTMAN, ESQ. ROBERT ROSENMAN, ESQ.
STEVEN D. USLANER, ESQ. PAUL H. ZUMBRO, ESQ.
LITTMAN KROOKS ROTH & BALL P.C. CRAVATH, SWAINE & MOORE
655 THIRD AVENUE WORLDWIDE PLAZA
NEW YORK, NEW YORK 10017 825 EIGHTH AVENUE
(212) 490-2020 NEW YORK, NEW YORK 10019
(212) 474-1000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ----
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ----
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ----
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED OFFERING PRICE(1) FEE
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<S> <C> <C>
Common Stock, $.01 par value................................ $34,500,000 $9,591.00
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</TABLE>
(1) Estimated pursuant to Rule 457(a) solely for the purpose of calculating the
amount of the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 30, 1999
PROSPECTUS
SHARES
[LOGO]
EDGAR ONLINE, INC.
COMMON STOCK
-------------------------
This is the initial public offering of EDGAR Online, Inc. and we are offering
shares of our common stock. No public market currently exists for our
shares. We anticipate that the initial public offering price will be between
$ and $ per share.
We have applied to have the shares we are offering approved for quotation on the
Nasdaq National Market under the symbol "EDGR."
-------------------------
THIS INVESTMENT INVOLVES SUBSTANTIAL RISK. SEE "RISK FACTORS" BEGINNING ON PAGE
6.
-------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts...................................... $ $
Proceeds, before expenses, to EDGAR Online.................. $ $
</TABLE>
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
Certain of our shareholders have granted the underwriters a 30-day option to
purchase up to additional shares to cover over-allotments.
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New York
on , 1999.
-------------------------
C.E. UNTERBERG, TOWBIN FAHNESTOCK & CO. INC.
, 1999
<PAGE> 3
[THE INSIDE FRONT COVER TO CONTAIN THE FOLLOWING: PICTURES OF HOME PAGE AND
VARIOUS OTHER PAGES FROM THE EDGAR ONLINE WEB SITE]
-------------------------
The information on our Web site is not a part of this prospectus. EDGAR(R)
is a federally registered trademark of the U.S. Securities and Exchange
Commission (SEC), which has granted us a non-exclusive license to use the EDGAR
name in our service marks and corporate name. EDGAR Online is not affiliated
with, or approved by, the SEC, and the SEC does not endorse or recommend any of
our products or services. This prospectus contains service marks of EDGAR Online
and other tradenames, trademarks and service marks of other companies.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............. 1
Risk Factors.................... 6
Forward-Looking Statements...... 18
Use of Proceeds................. 19
Dividend Policy................. 19
Capitalization.................. 20
Dilution........................ 21
Selected Financial Data......... 23
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.................... 24
</TABLE>
<TABLE>
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PAGE
----
<S> <C>
Business........................ 30
Management...................... 41
Certain Transactions............ 50
Principal Stockholders.......... 52
Description of Capital Stock.... 54
Shares Eligible for Future
Sale.......................... 55
Underwriting.................... 58
Legal Matters................... 60
Experts......................... 60
Additional Information.......... 61
Index to Financial Statements... F-1
</TABLE>
-------------------------
IN MAKING A DECISION WHETHER TO BUY OUR COMMON STOCK, YOU SHOULD ONLY RELY
ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH ANY INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS
PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF OUR
COMMON STOCK ONLY WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION
CONTAINED IN THIS PROSPECTUS MAY ONLY BE ACCURATE ON THE DATE OF THIS
PROSPECTUS.
<PAGE> 5
PROSPECTUS SUMMARY
Because this is only a summary, it may not contain all of the information
that may be important to you. For a more complete understanding of this
offering, we encourage you to read this entire prospectus and the documents we
refer you to. Before deciding whether to invest in our common stock, you should
read the following summary together with the more detailed information and
consolidated financial statements and the notes to those statements appearing
elsewhere in this prospectus. In this prospectus, references to "EDGAR Online,"
"we," "us" and "our" refer to EDGAR Online, Inc. Except as otherwise noted, all
information in this prospectus (1) reflects a one-for-four stock split effected
in May 1997 and (2) assumes no exercise of the underwriters' over-allotment
option.
EDGAR ONLINE
OUR BUSINESS
EDGAR Online, Inc. is a leading Internet provider of business, financial
and competitive information contained in corporate filings made by public
companies with the SEC. Our services are designed to satisfy the demands of
individuals and businesses for timely and cost-effective access to the filings
of the more than 15,000 U.S. public companies. These services include a variety
of search and navigation tools, personalization features and e-mail and
Web-based alerts. We obtain corporate filings from the SEC's EDGAR (Electronic
Data Gathering, Analysis and Retrieval) database on a non-exclusive, real-time
basis. With our proprietary software, we enhance these filings by organizing and
processing them into an easily accessible and searchable format. We then use
these enhanced EDGAR filings as the basis for our value-added services, which we
offer on our EDGAR Online Web site, located at http://www.edgar-online.com.
We offer several tiers of paid subscription services to individual users
and custom-tailored applications to businesses. A monthly subscription to our
Web site for an individual user starts at $9.95 and includes the following
services:
- TODAY'S SEC FILINGS provides users with real-time access to EDGAR
filings;
- FULL SEARCH allows users to combine multiple criteria to search all EDGAR
filings;
- EDGAR ONLINE PEOPLE allows users to search the EDGAR database for
information about individuals named in EDGAR filings;
- EDGAR ONLINE PERSONAL allows users to store their queries and sends
e-mail alerts immediately when new EDGAR filings match their search
criteria;
- EDGAR ONLINE IPO EXPRESS allows users to track initial public offerings
as they are filed, priced, postponed or withdrawn; and
- DOCUMENT DISPLAY options allow users to download information in multiple
formats.
For corporate customers, we offer customized services to meet their particular
needs in a real-time and cost-effective manner. We have entered into a number
of, and are aggressively pursuing additional, corporate contracts to supply
EDGAR content for use on corporate intranets, extranets and Web sites. We
currently have over 70 corporate customers, including American Express, Merrill
Lynch and Intel.
In order to build brand awareness, increase traffic and create a large pool
of potential subscribers, we aggressively promote our Web site and provide a
portion of our content for free. This basic free service includes access to
filings on a delayed basis and selected features of Full Search and EDGAR Online
People, as well as stock quotes, charts, research and news. Both traffic on our
Web site and the number of individual registered users nearly tripled in 1998.
As of
<PAGE> 6
December 31, 1998, we had over 100,000 registered users, of which over 6,000
were paying subscribers. Approximately one million people visit our EDGAR Online
Web site monthly. For the past two years, Barron's has rated our EDGAR Online
site as one of the top 20 investment Web sites.
Users of our services can either access us directly as registered EDGAR
Online subscribers or indirectly by accessing the key Web portals and financial
Web sites that license selected EDGAR-based content from us. We have established
a significant number of strategic distribution relationships. We currently
supply EDGAR content to more than 60 widely used Web sites including Yahoo!,
Infoseek's GO Network, CNET's SNAP, Go2Net, PointCast, Infospace, CBS
MarketWatch, SmartMoney.com, Multex, Hoover's, Quote.com, Business Wire, Big
Charts, Raging Bull and Track Data.
We believe our Web site draws users who represent an attractive demographic
group for companies that advertise or conduct business over the Internet. Since
introducing our EDGAR Online Web site in January 1996, we have steadily
increased the number of individual advertising banners appearing on our Web
pages. In December 1998, more than 200 advertisers purchased banners on our Web
site.
OUR MARKET OPPORTUNITY
Today's business environment is characterized by a rapidly growing demand
for fast and easy access to corporate and financial information. SEC filings,
such as prospectuses and annual and quarterly reports, are a primary source of
this information. Prior to the introduction of the EDGAR system, SEC filings
were only available on a delayed basis in costly paper or CD-ROM format from a
limited number of document providers or SEC public reference rooms. The
availability of SEC filings in an electronic format, together with the
distributive power of the Internet, has created a significant opportunity to
deliver this information in a real-time and cost-effective manner. At the same
time, individuals and businesses are increasingly using the Internet as a source
of valuable business intelligence. According to Simba Information, revenues from
the sale of business information delivered online in the U.S. are projected to
grow from approximately $27 billion in 1998 to approximately $40 billion in
2002. Growth in this market is expected to continue as more people gain access
to, and increasingly rely on, the Internet as their primary source of business
information.
We believe that easy access to EDGAR-based information is important to
professionals, businesses and the growing population of online investors. In
addition, newly evolving technologies make it possible to locate and retrieve
selected details from vast electronic databases, such as the EDGAR database,
more quickly and economically than historically had been possible. By helping
our customers access the EDGAR filings contained in our comprehensive database,
which we update on a real-time basis, we believe that we are well positioned to
exploit these market opportunities. Furthermore, we are poised to establish
market leadership by continuing to develop value-added services with new
technologies, such as our data-mining capabilities, to meet the evolving demands
of our users.
OUR STRATEGY
Our goal is to create the preeminent brand for EDGAR-based business and
financial information on the Internet. We aim to meet the increasing market
demand for real-time, value-added business, financial and competitive
information by providing our users with sophisticated methods of mining data
contained in EDGAR filings. Our objective is to establish EDGAR Online as the
most reliable and trusted source of company information for individual
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<PAGE> 7
investors and businesses. We are aggressively seeking to increase the number of
our corporate customers. We also aim to further develop a community of loyal
individual users in order to build our subscription base and attract
advertisers.
CORPORATE INFORMATION
We are a Delaware corporation and were formed in November 1995 under the
name Cybernet Data Systems, Inc. In January 1999, we changed our name to EDGAR
Online, Inc. Our executive offices are located at 50 Washington Street, Norwalk,
Connecticut 06854 and our telephone number is (203) 852-5666.
3
<PAGE> 8
THE OFFERING
Common stock offered by
EDGAR Online............. shares
Common stock to be
outstanding after the
offering................. shares(1)
Use of proceeds............ Repayment of debt, expansion of our sales and
marketing efforts, possible acquisitions and other
general corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National
Market symbol............ EDGR
- -------------------------
(1) Gives effect to the (a) conversion of a $1 million convertible debenture
into 670,000 shares of common stock, (b) exercise of warrants into an
aggregate of 696,667 shares of common stock and (c) sale of 240,000 shares
of common stock in March 1999. Excludes (a) 800,000 shares issuable upon
exercise of outstanding options under our 1996 Stock Option Plan with a
weighted average exercise price of $2.36 per share, (b) 600,000 shares to be
reserved for future issuance under our 1999 Stock Option Plan, (c) 100,000
shares to be reserved for future issuance under our 1999 Outside Directors
Stock Option Plan, (d) 90,000 shares issuable upon exercise of outstanding
warrants with a weighted average exercise price of $2.10 per share and (e)
shares issuable upon exercise of warrants issued to the
underwriters at an exercise price equal to 110% of the initial public
offering price.
4
<PAGE> 9
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $ 169,822 $ 1,044,138 $ 2,003,117
Gross profit................................... $ (56,692) $ 160,935 $ 956,788
Loss from operations........................... $ (763,056) $(1,199,088) $(2,088,933)
Net loss....................................... $ (835,853) $(1,497,899) $(2,221,474)
Basic and diluted net loss per share........... $ (0.19) $ (0.26) $ (0.36)
Basic and diluted weighted average shares
outstanding.................................. 4,302,466 5,655,151 6,129,116
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2)
----------- ------------ -----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 148,380 $2,216,380
Working capital (deficit).............. $ (440,754) $1,627,246
Total assets........................... $ 784,943 $2,775,925
Total stockholders' equity
(deficit)............................ $(2,220,946) $ 717,779
</TABLE>
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(1) Gives pro forma effect to the (a) conversion of a $1 million debenture into
670,000 shares of common stock, (b) exercise of warrants into an aggregate
of 696,667 shares of common stock and (c) sale of 240,000 shares of common
stock in March 1999. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
notes 8 and 13 of the notes to our financial statements contained elsewhere
in this prospectus.
(2) As adjusted to give effect to the sale of shares of common stock
in this offering at an assumed initial public offering price of $ per
share, after deducting the underwriting discounts and the estimated offering
expenses payable by us, and the application of the estimated net proceeds
from this offering. See "Use of Proceeds" and "Capitalization."
5
<PAGE> 10
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the financial and other information contained in this prospectus, before
you decide whether to buy our common stock. Additional risks and uncertainties
may also impair our business operations. If any of these risks actually occur,
our business, financial condition and results of operations would likely suffer.
In such case, the trading price of our common stock could decline, and you might
lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY AND OUR FUTURE SUCCESS WILL DEPEND ON OUR
ABILITY TO IMPLEMENT OUR STRATEGY.
We were incorporated in November 1995 and launched our EDGAR Online Web
site, located at http://www.edgar-online.com, in January 1996. Accordingly, we
have a limited operating history on which you can evaluate our business and
prospects. In order to be successful, we must increase our revenues from the
sale of our services to corporate customers, individual subscription fees and
advertising sales. However, as an early stage company in the new and rapidly
evolving market for the delivery of financial and business information over the
Internet, we face numerous risks and uncertainties. These relate to our ability
to:
- create and successfully implement a marketing plan to (1) attract more
individual online users to our services, (2) convert visitors to paying
subscribers and (3) increase corporate sales;
- enhance our reputation as a leading Internet provider of information
services based on EDGAR filings;
- maintain our current, and develop new, strategic distribution
relationships;
- maintain our current, and continue to increase, advertising revenues;
- respond effectively to competitive pressures;
- continue to develop and upgrade our technology; and
- attract, retain and motivate qualified personnel.
If we are not successful in addressing these uncertainties through the
execution of our business strategy, our business, results of operations and
financial condition will be materially adversely affected.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE THAT LOSSES WILL CONTINUE.
We incurred net losses of $835,853 for the year ended December 31, 1996,
$1,497,899 for the year ended December 31, 1997 and $2,221,474 for the year
ended December 31, 1998. As of December 31, 1998, our accumulated deficit was
$4,746,460. We expect operating losses to continue for the foreseeable future as
we continue to incur significant operating costs and capital expenditures. As a
result, we will need to generate significant additional revenues to achieve and
maintain profitability. Although our revenues have grown in each of the last two
years, we may not ever generate sufficient revenues to achieve profitability.
Even if we do achieve profitability, we cannot assure you that we can sustain or
increase profitability on a quarterly or annual basis in the future. In
addition, if revenues grow slower than we anticipate, or if operating expenses
exceed our
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<PAGE> 11
expectations or cannot be adjusted accordingly, our business, results of
operations and financial condition will be materially adversely affected.
FUTURE ENHANCEMENTS TO THE SEC'S EDGAR SYSTEM MAY ERODE DEMAND FOR OUR SERVICES.
Through its Web site, the SEC provides free access to EDGAR filings on a
time-delayed basis of 24 to 72 hours. The SEC has recently announced its
intention to modernize the EDGAR system. The proposed changes currently relate
primarily to the presentation quality of EDGAR filings and the manner in which
EDGAR filings can be submitted. If the SEC were to make other changes to its Web
site such as providing (1) free real-time access to EDGAR filings or (2)
value-added services comparable to those provided on our Web site, our business,
results of operations and financial condition would be materially adversely
affected. Our future success will depend on our ability to continue to provide
value-added services that distinguish our Web site from the type of
EDGAR-information available from the SEC on its Web site. See
"Business -- Competition."
WE FACE INTENSE COMPETITION FROM OTHER PROVIDERS OF BUSINESS AND FINANCIAL
INFORMATION.
We compete with many providers of business and financial information,
including other Internet companies, for consumers' and advertisers' attention
and spending. Because our market poses no substantial barriers to entry, we
expect this competition to continue to intensify. The types of companies with
which we compete for users and advertisers include:
- traditional vendors of financial information, such as Disclosure;
- proprietary information services and Web sites targeted to business,
finance and investing needs, including those providing EDGAR content,
such as Bloomberg and LIVEDGAR; and
- Web-based providers of free EDGAR information, such as FreeEDGAR.
Our future success will depend on our ability to maintain and enhance our market
position by: (1) using technology to add value to raw EDGAR information; (2)
keeping our pricing models below those of our competitors; and (3) signing
high-traffic Web sites to distribution contracts.
Our potential commercial competitors include entities that currently
license our content, but which may elect to purchase a real-time EDGAR database
feed (called a Level I EDGAR feed) directly from the SEC and use it to create
value-added services, similar to services provided by us, for their own use or
for sale to others. This risk is particularly serious in light of the fact that
the SEC has, as part of the modernization of the EDGAR system, introduced a new
dissemination system effective November 1, 1998 that reduced the annual
subscription cost of a Level I feed by approximately 73%.
Many of our existing competitors, as well as a number of potential
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may enable them to respond more quickly to new or
emerging technologies and changes in the types of services sought by users of
EDGAR-based information, or to devote greater resources to the development,
promotion and sale of their services than we can. These competitors and
potential competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and make more attractive
offers to potential employees, subscribers and strategic partners. Our
competitors may also develop services that are equal or superior to the services
offered by us or that achieve greater market acceptance than our services. In
addition, current and prospective competitors may establish cooperative
relationships among themselves or with third parties to improve their ability to
address the needs of our existing and prospective customers. If these events
occur, they could have a materially adverse effect on our revenue. Increased
competition could also result in price
7
<PAGE> 12
reductions, reduced margins or loss of market share, any of which would
adversely affect our business, results of operations and financial condition.
See "Business -- Industry Background" and "-- Competition."
WE MAY NOT BE SUCCESSFUL IN INCREASING BRAND AWARENESS.
Our future success will depend, in part, on our ability to increase the
brand awareness of our EDGAR Online Web site. In order to build our brand
awareness, we must succeed in our marketing efforts, provide high quality
services and increase traffic to our Web site. We intend to substantially expand
our sales and marketing efforts as part of our brand-building efforts. Our
ability to increase advertising revenues will depend in part on our ability to
increase the number of users who visit our Web site. If our marketing efforts
are unsuccessful or if we cannot increase our brand awareness, our business,
financial condition and results of operations would be materially adversely
affected.
WE MAY NOT BE SUCCESSFUL IN DEVELOPING NEW AND ENHANCED SERVICES AND FEATURES
FOR OUR WEB SITE.
Our market is characterized by rapidly changing technologies, evolving
industry standards, frequent new product and service introductions and changing
customer demands. To be successful, we must adapt to our rapidly changing market
by continually enhancing our existing services and adding new services to
address our customers' changing demands. We could incur substantial costs if we
need to modify our services or infrastructure to adapt to these changes. Our
business could be adversely affected if we were to incur significant costs
without generating related revenues or if we cannot adapt rapidly to these
changes.
We may also experience technical or other difficulties that could delay or
prevent us from introducing new or enhanced services. Furthermore, after these
services are introduced, we may discover errors in these services which may
require us to significantly modify our software or hardware infrastructure to
correct these errors. Our business could be adversely affected if we experience
difficulties in introducing new or enhanced services or if these services are
not favorably received by users.
WE ARE DEPENDENT ON THE CONTINUED GROWTH OF THE EMERGING MARKET FOR ONLINE
BUSINESS AND FINANCIAL INFORMATION.
The success of our business will depend on the growing use of the Internet
for the dissemination of business and financial information. The number of
individuals and institutions that use the Internet as a primary source of
business and financial information may not continue to grow. The market for the
distribution of business and financial information, including EDGAR-based
content, over the Internet has only recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants who
have introduced or developed electronic distribution services over the Internet
and private networks. As is typical of a rapidly evolving industry, demand and
market acceptance for new services are subject to a high level of uncertainty.
Because the market for our products and services is new and rapidly
evolving, it is difficult to predict with any certainty what the growth rate, if
any, and the ultimate size of this market will be. We cannot be certain that the
market for our services will continue to develop or that our services will ever
achieve a significant level of market acceptance. If the market fails to
continue to develop, develops more slowly than expected or becomes saturated
with competitors, or if our services do not achieve significant market
acceptance, or if pricing becomes subject to considerable
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competitive pressures, our business, results of operations and financial
condition would be materially adversely affected.
MAINTAINING EXISTING AND ESTABLISHING NEW STRATEGIC RELATIONSHIPS WITH
HIGH-TRAFFIC WEB SITES IS CRUCIAL TO OUR FUTURE SUCCESS.
We rely on establishing and maintaining strategic relationships with
high-traffic Web sites for a significant portion of the traffic on our Web site.
For example, in the month of December 1998, approximately 44% of our traffic
came to us from the Web sites to which we have licensed our EDGAR-based content.
There is intense competition for placements on high traffic Web sites, and we
may not be able to maintain our present contractual relationships or enter into
any additional relationships on commercially reasonable terms, if at all. Even
if we maintain our existing relationships or enter into new strategic
relationships with other Web sites, they themselves may not continue to attract
significant numbers of users. Therefore, our site may not continue to receive
significant traffic or receive additional new users from these relationships.
Since our advertising revenues, which form a significant component of our total
revenues, depend to a great extent on the traffic to our Web site, our business
could be adversely affected if we do not maintain our current, and establish
additional, strategic relationships on commercially reasonable terms or if a
significant number of our strategic relationships do not result in increased use
of our Web site.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY A DOWNTURN IN THE FINANCIAL SERVICES
INDUSTRY.
We are dependent upon the continued demand for the distribution of business
and financial information over the Internet, making our business susceptible to
a downturn in the financial services industry. For example, a decrease in the
number of individuals investing their money in the equity markets could result
in a decrease in the number of subscribers utilizing our Web site for real-time
access to EDGAR filings. This downturn could have a material adverse effect on
our business, results of operations and financial condition.
WE DEPEND ON DOUBLECLICK FOR ADVERTISING REVENUES.
DoubleClick, Inc. has provided us with a full range of advertising services
for the last two years. Historically, a limited number of customers, all
represented by DoubleClick, have accounted for a significant percentage of our
paid advertising revenues. For the twelve months ended December 31, 1998, our
DoubleClick-related paid advertising revenue was 24% of our total 1998 revenues.
Our existing agreement with DoubleClick can be canceled by either party on 90
days notice. In addition, this agreement does not prohibit DoubleClick from
selling the same type of service that we currently receive from them to Web
sites that compete with our site.
We anticipate that our results of operations in any given period will
continue to depend to a significant extent upon revenues brought to us through
our relationship with DoubleClick. DoubleClick's failure to enter into a
sufficient number of advertising contracts during a particular period could have
a material adverse effect on our business, financial condition and results of
operations. In addition, if DoubleClick were unable or unwilling to provide
these advertising services to us in the future, we would be required to obtain
them from another provider or perform them ourselves. We would likely lose
significant advertising revenues while we are in the process of replacing
DoubleClick's services.
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<PAGE> 14
WE FACE INTENSE COMPETITION FOR ADVERTISING REVENUES AND THE VIABILITY OF THE
INTERNET AS AN ADVERTISING MEDIUM IS UNCERTAIN.
We compete with both traditional advertising media, such as print, radio
and television, and other Web sites for a share of advertisers' total
advertising budgets. If advertisers do not perceive the Internet to be an
effective advertising medium, companies like ours will be unable to compete
successfully with traditional media for advertising revenues. In addition, if we
are unable to generate sufficient traffic on our Web site, we could potentially
lose advertising revenues to other Web sites that generate higher user traffic.
Because advertising sales make up a significant component of our revenues,
either of these developments could have a significant adverse impact on our
business, results of operations or financial condition.
WE MAY NOT BE ABLE TO CREATE AND DEVELOP AN EFFECTIVE DIRECT SALES FORCE.
Until recently, we have not employed a sales force to sell our corporate
services. We plan to create a direct sales force, whose task will be to market
and sell our services to this market. Additionally, we expect to enter into
co-marketing and sales arrangements with other vendors of Web-based business and
financial information, with our sales executives managing these activities. This
strategy involves a number of risks, including those relating to:
- our ability to hire, retain and motivate an effective group of sales and
sales support personnel;
- the length of time it takes new sales personnel to generate sales; and
- the competition we face from other companies in hiring and retaining
sales personnel.
Because a significant component of our growth strategy relates to increasing our
revenues from sales of our corporate services, our business would be adversely
affected if we were unable to develop and maintain an effective sales force to
market our services to this customer group.
WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH.
We have experienced and are currently experiencing a period of significant
growth. This growth has placed, and our anticipated future growth will continue
to place, a significant strain on our technical, financial and managerial
resources. As part of this growth, we may have to implement new operational and
financial systems and procedures and controls to expand, train and manage our
employees and to maintain close coordination among our technical, accounting,
customer support, finance, marketing, and sales staffs. If we are unable to
manage our growth effectively, our business will be adversely affected.
Several members of our senior management joined us recently, including our
President and Chief Operating Officer in March 1998 and both our Vice President
of Corporate Sales and Chief Financial Officer in March 1999. These individuals,
who are becoming integrated as a management team, have not previously worked
together and may not be able to work together effectively to successfully manage
our growth.
WE DEPEND ON KEY PERSONNEL.
Our future success will depend to a significant extent on the continued
services of our senior management and other key personnel, particularly Susan
Strausberg, Chief Executive Officer, Marc Strausberg, Chairman and Chief
Information Officer, Tom Vos, President and Chief Operating Officer and Greg
Adams, Chief Financial Officer. The loss of the services of these, or certain
other
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<PAGE> 15
key employees, would likely have a material adverse effect on our business. We
do not maintain "key person" life insurance for any of our personnel. Our future
success will also depend on our continuing to attract, retain and motivate other
highly skilled employees. Competition for personnel in our industry is intense.
We may not be able to retain our key employees or attract, assimilate or retain
other highly qualified employees in the future. If we do not succeed in
attracting new personnel or retaining and motivating our current personnel, our
business will be adversely affected. See "Business" and "Management" for
detailed information on our key personnel.
WE DEPEND ON THIRD PARTIES FOR IMPORTANT ASPECTS OF OUR BUSINESS OPERATIONS.
We depend on third parties to develop and maintain the software and
hardware we use to operate our Web site. iXL Enterprises, Inc., an Internet
strategy consulting company, develops, maintains and upgrades our proprietary
software, which includes those features which enable users to locate and
retrieve data, as well as our database of EDGAR filings, Web-based customer
interfaces and customer support and billing systems. While our contract with iXL
is currently on a month-to-month basis, we are in negotiations with iXL to amend
our agreement to provide for a more definitive term. If iXL were unable or
unwilling to provide these services, we would need to find a suitable
replacement. The failure to find a suitable replacement or to come to an
agreement with an acceptable alternate provider on terms acceptable to us could
materially adversely affect our business, results of operations and financial
condition.
We also have a hosting contract with Globix Corporation, a provider of
Internet services, pursuant to which Globix operates and maintains the Web
servers owned by us in their New York City data center. Our hosting contract
with Globix expires in July 2003. If Globix were unable or unwilling to provide
these services, we would have to find a suitable replacement. Our operations
could be disrupted while we were in the process of finding a replacement for
Globix and the failure to find a suitable replacement or to reach an agreement
with an alternate provider on terms acceptable to us could materially adversely
affect our business, results of operations and financial condition. See
"Business -- Infrastructure, Operations and Technology."
WE FACE A RISK OF SYSTEM FAILURE.
Our ability to provide EDGAR content on a real-time basis depends on the
efficient and uninterrupted operation of our computer and communications
hardware and software systems. Similarly, our ability to track, measure and
report the delivery of advertisements on our site depends on the efficient and
uninterrupted operation of a third-party system provided by DoubleClick. These
systems and operations are vulnerable to damage or interruption from human
error, natural disasters, telecommunication failures, break-ins, sabotage,
computer viruses, intentional acts of vandalism and similar events. Any system
failure, including network, software or hardware failure, that causes an
interruption in our service or a decrease in responsiveness of our Web site
could result in reduced traffic, reduced revenue and harm to our reputation,
brand and relations with advertisers.
Our operations depend on Globix's ability to protect its and our systems in
its data center against damage from fire, power loss, water damage,
telecommunications failure, vandalism and similar unexpected adverse events.
Although Globix provides comprehensive facilities management services, including
human and technical monitoring of all production servers 24 hours-per-day, seven
days-per-week, Globix does not guarantee that our Internet access will be
uninterrupted, error-free or secure. Any disruption in the Internet access to
our Web site provided by Globix could materially adversely affect our business,
results of operations and financial condition. Our insurance policies may not
adequately compensate us for any losses that we may incur because of any
failures in our system or interruptions in the delivery of our services. Our
business, results of
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<PAGE> 16
operations and financial condition could be materially adversely affected by any
event, damage or failure that interrupts or delays our operations.
THERE ARE RISKS OF INCREASED USERS STRAINING OUR SYSTEMS AND OTHER SYSTEM
MALFUNCTIONS.
In the past, our Web site has experienced significant increases in traffic
when there have been important business or financial news stories and during the
seasonal periods of peak SEC filing activity. In addition, the number of our
users has continued to increase over time and we are seeking to further increase
the size of our user base and the frequency with which they use our services.
Therefore, our Web site must accommodate an increasingly high volume of traffic
and deliver frequently updated information. Our Web site has in the past, and
may in the future, experience slower response times or other problems for a
variety of reasons. These strains on our system could cause customer
dissatisfaction and could discourage visitors from becoming paying subscribers.
We also depend on the Level I EDGAR feed we purchase in order to provide
SEC filings on a real-time basis. Our Web site could experience disruptions or
interruptions in service due to the failure or delay in the transmission or
receipt of this information. These types of occurrences could cause users to
perceive our Web site as not functioning properly and cause them to use other
methods, including the SEC's Web site or those of our competitors, to obtain
EDGAR-based information.
WE LICENSE THE TERM EDGAR FROM THE SEC AND DEPEND ON OTHER INTELLECTUAL
PROPERTY.
Trademarks and other proprietary rights are important to our success and
our competitive position. The SEC is the owner of a United States trademark
registration covering the use of the term EDGAR. We have obtained a
non-exclusive, royalty-free license from the SEC to use the term EDGAR in our
trademarks, service marks and corporate name. This license is due to expire in
September 2008. Since we have built significant brand recognition through the
use of the term EDGAR in our service offerings, company name and Web site, our
business, results of operations and financial condition could be adversely
affected if we were to lose the right to use the term EDGAR in the conduct of
our business.
We seek to protect our trademarks and other proprietary rights by entering
into confidentiality agreements with our employees, consultants and strategic
partners, and attempting to control access to and distribution of our
proprietary information. Despite our efforts to protect our proprietary rights
from unauthorized use or disclosure, third parties may attempt to disclose,
obtain or use our proprietary information. The precautions we take may not
prevent this type of misappropriation. In addition, our proprietary rights may
not be viable or of value in the future since the validity, enforceability and
scope of protection of proprietary rights in Internet-related industries is
uncertain and still evolving.
Finally, third parties could claim that we have infringed their proprietary
rights. Although we have not been subjected to litigation relating to these
types of claims, such claims and any resultant litigation, should it occur,
could subject us to significant liability for damages and could result in the
invalidation of our proprietary rights. Even if we prevail, such litigation
could be time-consuming and expensive, and could result in the diversion of our
time and attention, any of which could materially adversely affect our business,
results of operations and financial condition. Any claims or litigation could
also result in limitations on our ability to use our trademarks and other
intellectual property unless we enter into license or royalty agreements, which
agreements may not be available on commercially reasonable terms, if at all.
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<PAGE> 17
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least the next 12
months. We may need to raise additional funds, however, to fund more rapid
expansion, to develop new or enhance existing services, or to respond to
competitive pressures. We cannot assure you that additional financing will 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 fund our
expansion, take advantage of unanticipated opportunities, develop or enhance
services or products or otherwise respond to competitive pressures would be
significantly limited. Our business, results of operations and financial
condition could be materially adversely affected by these financing limitations.
See "Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" for a
discussion of our working capital and capital expenditures.
WE FACE YEAR 2000 RISKS.
Because our business is completely dependent on the ability of our
customers to access our services through their computer systems and the
Internet, any serious disruption of this computer infrastructure caused by the
Year 2000 problem could have a material adverse effect on our business,
financial condition and results of operations. A disruption of this type could
result from problems experienced by our information providers, our information
technology systems, such as our Web servers, or from external problems affecting
the Internet and the methods our customers use to gain access to our services,
such as Internet service providers and online service providers. Efforts to
comply with Year 2000 requirements may disrupt or delay our ability to continue
developing and marketing our services, or we may incur unexpected costs in
connection with our Year 2000 compliance efforts. Any such Year 2000 related
disruptions could have a material adverse effect on our business, operating
results and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Impact of the Year 2000" for
information on our state of readiness, potential risks and contingency plans
regarding the Year 2000 issue.
RISKS RELATED TO OUR INDUSTRY
WE ARE DEPENDENT ON THE CONTINUED GROWTH IN INTERNET USAGE.
Our business would be adversely affected if Internet usage does not
continue to grow. Internet usage may be inhibited for a number of reasons such
as:
- the Internet infrastructure may not be able to support the demands placed
on it, or its performance and reliability may decline as usage grows;
- security and authentication concerns of users with respect to
transmission over the Internet of confidential information, such as
credit card numbers, and possible misappropriation of this confidential
information by unauthorized computer users; and
- privacy concerns of users, such as those related to the placement by Web
sites of certain information on a user's hard drive without the user's
knowledge or consent to gather user information.
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<PAGE> 18
WE ARE DEPENDENT ON THE INTERNET INFRASTRUCTURE.
Our future success will depend, in significant part, upon the maintenance
of the various components of the Internet infrastructure, such as a reliable
backbone network with the necessary speed, data capacity and security, and the
timely development of enabling products, such as high-speed modems, which
provide reliable and timely Internet access and services. To the extent that the
Internet continues to experience increased numbers of users, frequency of use or
increased user bandwidth requirements, we cannot be sure that the Internet
infrastructure will continue to be able to support the demands placed on it or
that the performance or reliability of the Internet will not be adversely
affected. Furthermore, the Internet has experienced a variety of outages and
other delays as a result of damage to portions of its infrastructure or
otherwise, and such outages or delays could adversely affect our Web site and
the Web sites of our co-branded partners, as well as the Internet service
providers and online service providers our customers use to access our services.
In addition, the Internet could lose its viability as a commercial medium due to
delays in the development or adoption of new standards and protocols that can
handle increased levels of activity. We cannot predict whether the
infrastructure and complementary products and services necessary to maintain the
Internet as a viable commercial medium will be developed or maintained.
WE ARE SUBJECT TO UNCERTAIN GOVERNMENT REGULATION AND OTHER LEGAL UNCERTAINTIES
RELATING TO THE INTERNET.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, current laws and
regulations may be applied and new laws and regulations may be adopted in the
future that address issues such as user privacy, pricing, taxation and the
characteristics and quality of products and services offered over the Internet.
For example, several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet service providers and online
service providers in a manner similar to long distance telephone carriers and to
impose access fees on these companies. This could increase the cost of
transmitting data over the Internet, which could increase our expenses and
discourage people from using the Internet to obtain business and financial
information. Moreover, it may take years to determine the extent to which
existing laws relating to issues such as property ownership, libel and personal
privacy are applicable to the Internet. Any new laws or regulations relating to
the Internet could adversely affect our business.
WE FACE WEB SECURITY CONCERNS THAT COULD HINDER INTERNET COMMERCE.
Any well-publicized compromise of Internet security could deter more people
from using the Internet or from using it to conduct transactions that involve
transmitting confidential information, such as stock trades or purchases of
goods or services. Because a portion of our revenue is based on individuals
using credit cards to purchase subscriptions over the Internet and a portion
from advertisers who seek to encourage people to use the Internet to purchase
goods or services, our business could be adversely affected by this type of
development. We may also incur significant costs to protect against the threat
of security breaches or to alleviate problems, including potential private and
governmental legal actions, caused by such breaches.
WE COULD FACE LIABILITY AND OTHER COSTS RELATING TO OUR STORAGE AND USE OF
PERSONAL INFORMATION ABOUT OUR USERS.
Our policy is not to willfully disclose any individually identifiable
information about any user to a third party without the user's consent. This
policy statement is available to users of our subscription services when they
initially register. Despite this policy, however, if third persons
14
<PAGE> 19
were able to penetrate our network security or otherwise misappropriate our
users' personal or credit card information, we could be subject to liability.
These could include claims for unauthorized purchases with credit card
information, impersonation or other similar fraud claims. They could also
include claims for other misuses of personal information such as for
unauthorized marketing purposes. These claims could result in litigation. In
addition, the Federal Trade Commission and several states have been
investigating certain Internet companies regarding their use of personal
information. We could incur additional expenses if new regulations regarding the
use of personal information are introduced or if these regulators chose to
investigate our privacy practices.
WE MAY BE LIABLE FOR INFORMATION DISPLAYED ON OUR WEB SITE.
We may be subjected to claims for defamation, negligence, copyright or
trademark infringement, violation of the securities laws or other claims
relating to the information that we publish on our Web site. These types of
claims have been brought, sometimes successfully, against online services as
well as other print publications in the past. We could also be subjected to
claims based upon the content that is accessible from our Web site through links
to other Web sites. Our general liability insurance may not cover these claims
and may not be adequate to protect us against all liabilities that may be
imposed.
RISKS RELATED TO THIS OFFERING
SALES OF SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY
AFFECT OUR STOCK PRICE.
Although substantially all our shareholders have agreed not to sell their
shares during the 12-month period following the date of this prospectus without
the consent of C.E. Unterberg, Towbin, sales of significant amounts of common
stock in the public market after this offering, or the perception that such
sales will occur, could materially adversely affect the market price of the
common stock or our ability to raise capital through future offerings of equity
securities. See "Shares Eligible for Future Sale."
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND OUR SHARES MAY
EXPERIENCE EXTREME PRICE FLUCTUATIONS.
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in our company
will lead to the development of a trading market in our common stock or how
liquid that market might become. The initial public offering price for the
shares was determined through negotiations between us and the representatives of
the underwriters and may not be indicative of prices that will prevail in the
trading market. The market price of our common stock may decline below the
initial public offering price.
The stock market has experienced significant price and volume fluctuations,
and the market prices for securities of technology companies have been highly
volatile. The market prices of the securities of Internet-related companies in
particular have experienced extreme fluctuations that are not necessarily
related to the operating performance of the affected companies.
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<PAGE> 20
WE MAY MAKE INVESTMENTS OR ACQUISITIONS THAT ARE NOT SUCCESSFUL.
In the future, we may make investments in or acquire complementary
businesses, products, services or technologies. We have no experience in these
activities. If we seek to make investments or acquisitions, we will be subject
to the following risks:
- We may not be able to identify suitable investment or acquisition
candidates.
- If we do identify suitable candidates, we may not be able to make
investments or acquisitions on commercially acceptable terms.
- If the purchase price for an acquisition consists of cash, we may need to
use all or a portion of our available cash, including proceeds from this
offering.
- Acquisitions may cause a disruption in our ongoing business, distract our
management and other resources and make it difficult to maintain our
standards, controls and procedures.
- We may not be able to successfully integrate the services, products and
personnel of any acquired business into our operations.
- We may not be able to retain key employees of the acquired companies or
maintain good relations with their customers or suppliers.
- We may be required to incur additional debt.
- We may be required to issue equity securities, which may be dilutive to
existing shareholders, to pay for acquisitions.
- We may have to incur significant accounting charges, such as for goodwill
or for acquired in-process research and development, which may adversely
affect our results of operations.
INVESTORS IN THIS OFFERING WILL INCUR SUBSTANTIAL IMMEDIATE DILUTION.
The initial public offering price of our common stock is substantially
higher than the net tangible book value per share of the common stock will be
immediately after this offering. Therefore, if you purchase our common stock in
this offering, you will incur immediate dilution of approximately $ in
the net tangible book value per share of common stock from the price you paid
for such common stock (based upon an assumed initial public offering price of
$ per share). See "Dilution." The exercise of outstanding options and
warrants may result in further dilution.
THE INTERESTS OF OUR CONTROLLING STOCKHOLDERS COULD CONFLICT WITH THOSE OF OUR
OTHER STOCKHOLDERS.
The interests of our controlling stockholders could conflict with the
interests of other EDGAR Online stockholders, including purchasers in this
offering. Following completion of this offering, our directors and executive
officers, together with our other principal stockholders, will own or control
approximately % of our outstanding common stock. Accordingly, these
stockholders may be able to influence the outcome of stockholder votes,
including votes concerning the election of directors, amendments to our charter
and bylaws and the approval of significant corporate transactions such as a
merger or a sale of our assets. In addition, such controlling influence could
have the effect of delaying, deferring or preventing a change in control of our
company. See "Principal Stockholders."
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<PAGE> 21
WE HAVE BROAD DISCRETION IN THE APPLICATION OF PROCEEDS, WHICH MAY INCREASE THE
RISK THAT THE PROCEEDS WILL NOT BE APPLIED EFFECTIVELY.
We currently have no specific uses for a substantial portion of the net
proceeds of this offering. Accordingly, investors in this offering will be
relying on management's judgment with only limited information about our
specific intentions regarding the use of proceeds. Our failure to apply such
funds effectively could have a material adverse effect on our business, results
of operations and financial condition. See "Use of Proceeds."
ANTI-TAKEOVER PROVISIONS AND OUR RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT.
Certain provisions of the Delaware General Corporation Law may delay,
discourage or prevent a change in control. These provisions may discourage bids
for our common stock at a premium over the market price and may adversely affect
the market price and the voting and other rights of the holders of our common
stock. In addition, our governing documents authorize the issuance of up to one
million shares of preferred stock. Such preferred stock, which is issuable
without stockholder approval, could grant its holders rights and powers that
would tend to discourage changes in control.
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<PAGE> 22
FORWARD-LOOKING STATEMENTS
Certain statements made or incorporated by reference in this prospectus are
"forward-looking statements," as that term is defined in the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include
statements about:
- the competitiveness of the online business and financial information
industry;
- our strategies;
- the future growth of the Internet as a communications and advertising
medium;
- the Year 2000 problem; and
- other statements that are not historical facts.
When used in this prospectus, the words "anticipate," "believe," "expect,"
"estimate" and similar expressions are generally intended to identify
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties, there are important factors that could cause our actual
results to differ materially from those expressed or implied by these forward-
looking statements, including:
- changes in general economic and business conditions (including in the
online business and financial information industry);
- actions of our competitors;
- the extent to which we are able to develop new services and markets for
our services;
- the time and expense involved in such development activities;
- the level of demand and market acceptance of our services;
- changes in our business strategies; and
- other factors discussed above under this "Risk Factors" section as well
as elsewhere in this prospectus.
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<PAGE> 23
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of the
shares of common stock offered by us will be $ million, after deducting
underwriting discounts and the estimated offering expenses payable by us and
assuming a public offering price of $ per share (the mid-point of the range
set forth on the cover page of this prospectus). We will not receive any
proceeds from the sale of shares by our stockholders if the underwriters
exercise their over-allotment option.
We currently estimate that the use of the net proceeds of this offering
will be as follows:
- repayment of certain outstanding indebtedness consisting of
approximately:
- $625,000 owed to Bowne & Co., Inc., which indebtedness matures
February 28, 2000 and has been accruing interest at the rate of 12%
per annum;
- $90,000 owed to Track Data Corporation, which has been accruing
interest at 2% over the prime rate established by a financial
institution (10.25% at December 31, 1998) per annum;
- $644,000 owed to Susan Strausberg and Marc Strausberg for net deferred
compensation; and
- payment of $250,000 to VM Equity Partners, Inc. as a termination fee
under a financial advisory agreement;
- expansion of our sales and marketing efforts;
- possible acquisitions of or investments in business, services and
technologies that are complementary to those of ours; and
- other general corporate purposes, including working capital.
We have no current plans, agreements or commitments with respect to any
such acquisitions or other investments, and we are not currently engaged in any
negotiations with respect to any such transaction. Pending these uses, the net
proceeds from this offering will be invested in short-term, investment grade
debt instruments, certificates of deposit or direct or guaranteed obligations of
the United States.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. We currently intend to retain future earnings, if any, to
fund the development and growth of our business. Future dividends, if any, will
be determined by our Board of Directors. In addition, we may incur indebtedness
in the future which may prohibit or effectively restrict the payment of
dividends, although we have no current plans to do so.
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<PAGE> 24
CAPITALIZATION
The following table sets forth the capitalization of EDGAR Online as of
December 31, 1998:
- on an actual basis;
- on a pro forma basis to reflect (a) the conversion of a $1 million
convertible debenture into 670,000 shares of common stock, (b) the
exercise of warrants into an aggregate of 696,667 shares of common stock,
(c) the sale of 240,000 shares of common stock in March 1999 and (d) the
authorization of shares of preferred stock and the increase in the number
of authorized shares of common stock; and
- on a pro forma as adjusted basis to give effect to the sale of the
shares of common stock in this offering, at an assumed
initial public offering price of $ per share and after deducting
underwriting discounts and the estimated offering expenses payable by us
and the application of the estimated net proceeds from this offering. See
"Use of Proceeds."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Long-term debt, less current portion.......... $ 1,414,410 $ 500,000
----------- ----------- -----------
Stockholders' equity (deficit):
Preferred stock, $0.01 par value; 1,000,000
authorized on a pro forma basis; no shares
issued and outstanding on an actual, pro
forma or pro forma as adjusted basis........ -- -- --
Common stock, $0.01 par value; 30,000,000
shares authorized; 6,331,290 shares issued
and outstanding on an actual basis;
7,937,957 shares issued and outstanding on a
pro forma basis; and shares issued
and outstanding on a pro forma as adjusted
basis(1).................................... 63,313 79,380
Additional paid in capital.................... 2,462,201 5,461,877
Accumulated deficit........................... (4,746,460) (4,823,478)
----------- ----------- -----------
Total stockholders' equity
(deficit)........................ (2,220,946) 717,779
----------- ----------- -----------
Total capitalization................ $ (806,536) $ 1,217,779
=========== =========== ===========
</TABLE>
- -------------------------
(1) Excludes (a) 800,000 shares issuable upon the exercise of outstanding
options under our 1996 Stock Option Plan with a weighted average exercise
price of $2.36 per share, (b) 600,000 shares to be reserved for future
issuance under our 1999 Stock Option Plan, (c) 100,000 shares to be reserved
for future issuance under our 1999 Outside Directors Stock Option Plan, (d)
90,000 shares issuable upon the exercise of outstanding warrants with a
weighted average exercise price of $2.10 per share and (e) shares
issuable upon exercise of warrants issued to the underwriters at an exercise
price equal to 110% of the initial public offering price.
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DILUTION
The pro forma net tangible book value of EDGAR Online as of December 31,
1998, was approximately $717,779, or approximately $0.09 per share of common
stock. Pro forma net tangible book value per share represents the amount of
EDGAR Online's total tangible assets less total liabilities, divided by the pro
forma number of shares of common stock outstanding after giving effect to (a)
the conversion of a $1 million convertible debenture into 670,000 shares of
common stock, (b) the exercise of warrants into an aggregate of 696,667 shares
of common stock and (c) the sale of 240,000 shares of common stock in March
1999. After giving effect to the sale of the shares of common stock
offered by this prospectus at an assumed initial public offering price of $ per
share, and after deducting underwriting discounts and the estimated offering
expenses payable by us, the pro forma net tangible book value of EDGAR Online,
as of December 31, 1998, as adjusted, would have been approximately $ , or
$ per pro forma share of common stock. This represents an immediate increase
in net tangible book value of $ per share to existing stockholders and an
immediate dilution in net tangible book value of $ per share to new
investors purchasing shares of common stock in this offering. If the initial
public offering price is higher or lower, the dilution to the new investors will
be greater or less, respectively. The following table illustrates this per share
dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at December
31, 1998............................................... $
Increase in pro forma net tangible book value per share
attributable to new investors..........................
Pro forma net tangible book value per share after
offering..................................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1998, the differences between the number of shares of common stock purchased
from EDGAR Online, the aggregate cash consideration paid and the average price
per share paid by existing stockholders and new investors purchasing shares of
common stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. % $ % $
New investors...................... % %
-------- ----- -------- ----- -----
Total.............................. 100.0% $ 100.0%
======== ===== ======== ===== =====
</TABLE>
If the underwriters' over-allotment option is exercised in full, the number
of shares of common stock held by existing stockholders will be reduced to
, or % of the total number of shares of common stock to be
outstanding immediately after this offering, and the number of shares of common
stock held by new investors will be increased to , or % of the
total number of shares of common stock to be outstanding immediately after this
offering. See "Principal Stockholders."
The foregoing discussion and tables assume no exercise of options
outstanding under our 1996 Stock Option Plan and 1999 Stock Option Plan, no
issuance of shares reserved for future issuance under our 1996 Stock Option
Plan, 1999 Stock Option Plan and 1999 Outside Directors Stock Option Plan and no
exercise of outstanding warrants, other than the exercise of warrants into an
aggregate of 696,667 shares of common stock as described above. As of December
31, 1998, on a pro forma basis, there were (a) 800,000 shares issuable upon the
exercise of outstanding options
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<PAGE> 26
under our 1996 Stock Option Plan with a weighted average of $2.36 per share, (b)
600,000 shares to be reserved for future issuance under our 1999 Stock Option
Plan, (c) 100,000 shares to be reserved for future issuance under our 1999
Outside Directors Stock Option Plan and (d) 90,000 shares issuable upon the
exercise of outstanding warrants with a weighted average of $2.10 per share. In
connection with this offering, an additional shares will be issuable upon
exercise of warrants issued to the underwriters at an exercise price equal to
110% of the initial public offering price. See "Risk Factors -- Investors in
this offering will incur substantial immediate dilution," "Management -- Stock
Option Plans" and note 8, note 9 and note 13 of the notes to our financial
statements contained elsewhere in this prospectus.
22
<PAGE> 27
SELECTED FINANCIAL DATA
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" for, and as of the end of, each of the
years in the three-year period ended December 31, 1998, and for the period from
November 1995 (inception) to December 31, 1995 are derived from our financial
statements. The financial statements for, and as of the end of, each of the
years in the three-year period ended December 31, 1998 have been audited by KPMG
LLP, independent certified public accountants, and those financial statements
and the report thereon are included elsewhere in this prospectus. The data set
forth below should be read in connection with, and are qualified by reference
to, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the related notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ -- $ 169,822 $ 1,044,138 $ 2,003,117
Cost of revenues........................ -- 226,514 883,203 1,046,329
---------- --------- ----------- -----------
Gross profit............................ -- (56,692) 160,935 956,788
Operating expenses:
Selling, general and administrative..... 191,234 663,750 1,193,014 1,615,122
Advertising costs....................... -- 42,614 167,009 297,599
Stock compensation expense.............. -- -- -- 1,133,000
---------- --------- ----------- -----------
Loss from operations.................... (191,234) (763,056) (1,199,088) (2,088,933)
Interest expense and other, net......... -- 72,547 298,561 132,291
---------- --------- ----------- -----------
Loss before income taxes................ (191,234) (835,603) (1,497,649) (2,221,224)
Income tax expense...................... -- 250 250 250
---------- --------- ----------- -----------
Net loss................................ $ (191,234) $(835,853) $(1,497,899) $(2,221,474)
========== ========= =========== ===========
Basic and diluted net loss per
share(1).............................. $ (0.05) $ (0.19) $ (0.26) $ (0.36)
========== ========= =========== ===========
Basic and diluted weighted average
shares outstanding(1)................. 4,000,000 4,302,466 5,655,151 6,129,116
========== ========= =========== ===========
Pro forma net loss per share............ $ (0.34)
===========
Pro forma weighted average shares
outstanding........................... 6,408,283
===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1995 1996 1997 1998
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ -- $ 17,086 $ 16,809 $ 148,380
Working capital (deficit)................. $ (8,735) $(481,091) $(1,339,280) $ (440,754)
Total assets.............................. $ 41,751 $ 200,368 $ 366,254 $ 784,943
Total stockholders' equity (deficit)...... $(51,984) $(356,837) $(1,588,811) $(2,220,946)
</TABLE>
- ------------------------
(1) Diluted loss per share has not been presented separately, as the outstanding
stock options, warrants and convertible debenture are anti-dilutive for each
of the periods presented. Anti-dilutive potential common shares outstanding
were 0, 1,489,099, 829,545 and 653,400 for the periods ended December 31,
1995, 1996, 1997 and 1998.
23
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the related notes that appear elsewhere in this prospectus. The
following discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and elsewhere in this prospectus, particularly in "Risk Factors."
OVERVIEW
EDGAR Online is a leading Internet provider of business, financial and
competitive information contained in corporate filings made by U.S. public
companies with the SEC. We were founded in November 1995 as Cybernet Data
Systems, Inc. In January 1999, we changed our corporate name to EDGAR Online,
Inc.
We had no revenue in 1995. Our primary activities in 1995 related to
beginning development of our proprietary systems. In January 1996, we launched
our Web site and began selling our subscription services and establishing
contractual relationships with large Web portal and business and financial
information sites to supply EDGAR content for display on these sites. We started
selling advertising banners and sponsorships on our site in February 1997. We
have a limited operating history and are still in the early stages of
development.
We derive revenues from three primary sources: individual subscriptions,
corporate contracts and advertising. Revenue from individual subscriptions and
corporate contracts is deferred and recognized as income over the subscription
period. Revenue from advertising is recognized as the services are provided.
Individual subscriptions are typically billed in advance to subscribers' credit
cards and are collected, net of credit card transaction fees deducted by the
credit card processing institution, within one week of the sale. Services
related to corporate contracts are typically billed quarterly in advance.
Advertising revenue is paid to us by DoubleClick, net of advertising commission
fees, in the month following the month in which the revenue is earned.
In addition, a portion of our revenues is derived from barter transactions.
Barter advertising revenue is a non-cash item and relates to advertising placed
on our Web site by other Internet companies in exchange for our advertising
placed on their Web sites. Barter advertising revenue is recorded in the month
that banners are exchanged. The amount of barter advertising revenue and expense
is recorded at the lower of the estimated fair value of advertising provided or
received and is expected to become a smaller percentage of revenue in the
future. Other barter revenue is also non-cash and relates to corporate contract
sales for which we received computer equipment or other non-cash consideration
for services provided. The amount of such revenues are recorded at the fair
market value of the equipment or services received or services provided,
whichever is more objectively determinable. Barter expenses reflect the expense
offset to barter revenue.
We intend to increase our operating expenses to fund increased marketing
and advertising, to enhance our Web site and to continue to establish
relationships critical to our success.
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<PAGE> 29
RESULTS OF OPERATIONS
The following table sets forth selected statement of operations data as a
percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Revenues......................................... 100% 100% 100%
Cost of revenues................................. 133% 85% 52%
---- ---- ----
Gross profit..................................... (33)% 15% 48%
Operating expenses............................... 416% 130% 152%
---- ---- ----
Loss from operations............................. (449)% (115)% (104)%
==== ==== ====
</TABLE>
Revenues. Revenues were $169,822 in 1996, with individual subscription
revenues representing $99,661, or 59%, of total revenues and corporate contract
revenues representing $70,161, or 41%, of total revenues. There were no
advertising or barter revenues in 1996. Revenues increased 515% to $1,044,138 in
1997, due to a $352,278, or 353%, increase in individual subscription revenues,
a $148,686, or 212%, increase in corporate contract revenues and the addition of
$166,671 in advertising revenues and $206,681 in barter advertising revenues.
The increase in revenue in 1997 was primarily attributable to increased
visibility of our Web services and the addition of advertising to our Web site.
Revenues increased 92% in 1998 to $2,003,117. This increase was attributable to
a $442,912, or 98%, increase in individual subscriptions, a $74,057, or 34%,
increase in corporate contract revenues, a $306,251, or 184%, increase in
advertising revenues, a $56,759, or 27%, increase in barter advertising revenues
and the addition of $79,000 in other barter revenues. These increases were
primarily due to increased marketing efforts, an expanded customer base and
additional content syndication agreements with Web portal and financial sites,
which led to increased traffic on our Web site and increased advertising
revenues.
Cost of Revenues. Cost of revenues consists primarily of fees paid to
acquire the Level I EDGAR data feed from the SEC, Web site development and
maintenance charges and the costs associated with our computer equipment and
communications lines used in conjunction with our Web site. In addition, for
each period, a barter advertising expense is recorded equal to the barter
advertising revenue for that period. Total cost of revenues was $226,514 in
1996, $883,203 in 1997 and $1,046,329 in 1998. The cost of revenue in 1996 was
impacted by certain start-up costs of developing the proprietary software used
to operate our Web site, all of which were expensed. Cost of revenues in 1997
increased as a result of increased software development costs as compared to
1996. In 1998, cost of revenues increased as a result of both increased
purchases of computer and communications services needed to handle increased
traffic, and development of Version 2.0 of the EDGAR Online Web site, which was
introduced in the fall of 1998. Gross margins related to the sale of our
services were (33%) in 1996, 15% in 1997 and 48% in 1998.
Operating Expenses. Operating expenses consist primarily of personnel
expenses, advertising and promotion expenses, depreciation and amortization and
general corporate expenses. Operating expenses increased $653,659, or 93%, from
$706,364 in 1996 to $1,360,023 in 1997 and increased $1,685,698, or 124%, to
$3,045,721 in 1998. As a percentage of revenues, operating expenses decreased
from 416% in 1996 to 130% in 1997 and increased to 152% in 1998 as a result of
non-cash stock compensation expense in 1998 of $1,133,000. Absent this charge,
operating expenses would have decreased to 95% of revenues for 1998. The dollar
increase in operating expenses is a function of (1) addition of company
personnel, (2) higher advertising commissions due to
25
<PAGE> 30
increased advertising volume, (3) increased depreciation of infrastructure and
(4) a non-cash charge of $1,133,000 associated with the issuance of employee
stock options.
SELECTED QUARTERLY REVENUE RESULTS
The following table sets forth unaudited revenue results for each of our
last eight fiscal quarters. In the opinion of our management, this unaudited
quarterly information has been prepared on a basis consistent with our audited
consolidated financial statements and includes all adjustments (consisting of
normal and recurring adjustments) that management considers necessary for a fair
presentation of the data. These quarterly revenue results are not necessarily
indicative of future quarterly patterns or revenue results. This information
should be read in conjunction with our financial statements and the related
notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE SOURCES:
Individual subscriptions.... $ 68,219 $ 89,963 $142,691 $151,066 $184,245 $216,017 $245,963 $248,626
Corporate contracts......... 37,633 60,293 54,300 66,621 24,972 74,436 77,171 116,325
Advertising................. 26,360 43,003 33,421 63,887 80,118 122,133 118,932 151,739
Barter advertising.......... 0 62,141 43,020 101,520 82,627 66,652 50,224 63,937
Other barter................ 0 0 0 0 12,500 18,750 18,750 29,000
-------- -------- -------- -------- -------- -------- -------- --------
Total.............. $132,212 $255,400 $273,432 $383,094 $384,462 $497,988 $511,040 $609,627
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations with cash generated
from operations and by obtaining capital contributions from individual private
investors and corporations. We believe that our existing capital resources,
together with cash generated from operations and the proceeds of this offering,
will enable us to maintain our operations for at least 12 months from the date
of this prospectus. During 1995 and the first half of 1996, we received $125,250
worth of services from various vendors in exchange for warrants to purchase
shares of our common stock at an exercise price of $0.05 per share. In the third
quarter of 1996, Bowne & Co., Inc. invested $462,500 by purchasing shares of our
common stock. In 1997, we received $15,925 from the exercise of previously
issued warrants.
Beginning in 1997, Bowne has made a series of loans to us totaling
$500,000. These loans carry an interest rate of 12% per annum. The proceeds of
the loans were used for working capital and general corporate purposes. We
intend to repay the principal and accrued interest on the loans with a portion
of the proceeds of this offering. In July 1998, we received $1,000,000 in gross
proceeds from the sale of a convertible debenture with detachable warrants to
Globix Corporation. In , 1999, Globix converted this debenture into
670,000 shares of our common stock and exercised its warrant to purchase an
additional 666,667 shares of our common stock. See "Use of Proceeds," "Principal
Stockholders" and "Certain Transactions." In connection with the sale of the
debenture and warrants to, and the exercise of the warrants by, Globix, we paid,
or agreed to pay, VM Equity Partners a cash fee of $100,000 and issued to VM
Equity Partners warrants to purchase an aggregate of 66,833 shares of common
stock at an exercise price of $1.50 per share.
In 1998, we received gross proceeds of $155,000 from the sale of our common
stock, for which we paid, or agreed to pay, VM Equity Partners a cash fee of
$7,750 and issued to VM Equity Partners warrants to purchase 5,167 shares of
common stock at an exercise price of $1.50 per share. In 1998, we also received
$50,001 from the exercise of previously issued warrants. Also in
26
<PAGE> 31
1998, we satisfied $125,000 of accounts payable with the issuance of common
stock. In March 1999, we received $1,080,000 in gross proceeds from the sale of
240,000 shares of common stock. As compensation for the placement of 120,000 of
these shares, we agreed to pay VM Equity Partners a cash fee of $27,000 and
issued to VM Equity Partners warrants to purchase 6,000 shares of common stock
at an exercise price of $4.50 per share. As compensation for the placement of
the remaining 120,000 shares, we issued to C.E. Unterberg, Towbin warrants to
purchase 12,000 shares of common stock at an exercise price of $4.50 per share.
Under a separate financial advisory agreement, we have agreed to pay VM Equity
Partners a termination fee of $250,000 upon completion of this offering. See
"Use of Proceeds." In addition, we received an aggregate of $1,015,000 in gross
proceeds in connection with the exercise of warrants in , 1999.
Net cash used in operating activities was $341,035, $317,070 and $867,645
for the years ended December 31, 1996, 1997 and 1998, respectively. We have
financed these activities through private debt placements and equity investments
as described above.
Capital expenditures, primarily for computers, office and communications
equipment, totaled $112,312, $224,132 and $78,127 for the years ended December
31, 1996, 1997 and 1998, respectively. The purchases were required to support
our expansion and increased infrastructure.
In January 1996, we entered into five-year employment agreements with our
two founders to serve as Co-Chief Executive Officer and President, respectively.
In March 1999, Mr. Strausberg resigned as President and currently serves as the
Chairman of the Board of Directors and Chief Information Officer. The employment
contracts provide for our Chief Executive Officer and Chairman to each receive a
base salary of $150,000 per year. During the years 1996 and 1997, both officers
agreed to defer their entire salaries. In 1998, both officers received partial
salaries totaling $57,211 each. Such salaries began to be paid on a current
basis in January 1999. See "Use of Proceeds," "Management," "Certain
Transactions" and note 7 of the notes to our financial statements contained
elsewhere in this prospectus.
IMPACT OF THE YEAR 2000
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 may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, computer systems and/or software used by many companies and
governmental agencies may need to be upgraded to comply with such Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
State of Readiness. We have begun to assess the Year 2000 readiness of our
information technology ("IT") systems, including the hardware and software that
we utilize in connection with managing our Web sites and providing our
value-added services to customers, and our non-IT systems. Our Year 2000
assessment plan consists of the following:
- quality assurance testing of our proprietary software developed by iXL;
- contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
the delivery of our services over the Internet;
- contacting providers of material non-IT systems; and
- assessment of repair or replacement requirements.
iXL has advised us that our proprietary software has been designed to be
Year 2000 compliant and iXL is in the process of performing on our behalf Year
2000 compliance simulations on our proprietary software to test system
readiness. This testing is scheduled to be completed by
27
<PAGE> 32
June 1, 1999. Based on the results of these Year 2000 simulation tests, we
intend to revise the code of our proprietary software as necessary to improve
its Year 2000 compliance. We have been informed by many of the vendors of
material hardware and software components of our IT systems, including Globix
and TRW (which acts under contract as the SEC's dissemination agent for the
EDGAR system and from which we purchase our Level I EDGAR feed), that the
products used by them to provide services to us are currently Year 2000
compliant. We are in the process of attempting to obtain from other vendors of
our material hardware and software components of our IT systems assurances of
their Year 2000 compliance. We plan to complete this vendor process during the
summer of 1999. We are currently assessing the materiality of our non-IT systems
and will seek assurances of Year 2000 compliance from providers of material
non-IT systems. Until such testing is complete and such vendors and providers
are contacted and have responded, we will not be able to completely evaluate
whether our IT systems or non-IT systems will need to be revised or replaced.
Costs. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the operating costs associated with
time spent by employees in the evaluation process and Year 2000 compliance
matters generally. At this time, we do not possess the information necessary to
estimate the potential costs of revisions to our proprietary software, should
such revisions be required, or the replacement of third-party software, hardware
or services that are determined not to be Year 2000 compliant. Although we do
not anticipate that such expenses will be material, such expenses, if higher
than anticipated, could have a material adverse effect on our business, results
of operations and financial condition.
Risks. We are not currently aware of any Year 2000 compliance problems
relating to our proprietary software or our IT or non-IT systems that would have
a material adverse effect on our business, results of operations and financial
condition, notwithstanding our efforts to detect and correct such problems.
There can be no assurance that we will not discover Year 2000 compliance
problems in our proprietary software that will require substantial revisions or
replacements. In addition, there can be no assurance that third-party software,
hardware or services incorporated into our material IT and material non-IT
systems will not need to be revised or replaced, which could be time consuming
and expensive. Our failure to fix, if necessary, our proprietary software or to
fix or replace, if necessary, third-party software, hardware or services on a
timely basis could result in lost revenues, increased operating costs and other
business interruptions, any of which could have a material adverse effect on our
business, results of operations and financial condition. Moreover, the failure
to adequately address Year 2000 compliance issues in our proprietary software
and our IT and non-IT systems could result in claims of mismanagement,
misrepresentation or breach of contract and related litigation, which could be
costly and time-consuming to defend.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by such entities to
be Year 2000 compliant could result in a systemic failure beyond our control,
such as a prolonged Internet, telecommunications or electrical failure, which
could prevent us from operating our Web site.
Contingency Plan. While, as discussed above, we are engaged in an ongoing
Year 2000 assessment, we have not developed any contingency plans. The results
of our Year 2000 simulation testing and the responses received from third-party
vendors and service providers will be taken into account in determining the need
for and nature and extent of any contingency plans.
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<PAGE> 33
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides
guidance for determining whether computer software is internal-use software and
on accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. We do not believe that the adoption of
SOP 98-1 will have a material impact on our results of operations or financial
position.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," (SFAS 133) which establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
This statement is not expected to affect us as we currently do not have any
significant derivative instruments or hedging activities.
29
<PAGE> 34
BUSINESS
THE COMPANY
EDGAR Online, Inc. is a leading Internet provider of business, financial
and competitive information contained in corporate filings made by public
companies with the SEC. Our services are designed to satisfy the demands of
individuals and businesses for timely and cost-effective access to the filings
of the more than 15,000 U.S. public companies. These services include a variety
of search and navigation tools, personalization features and e-mail and
Web-based alerts. We obtain corporate filings from the SEC's EDGAR (Electronic
Data Gathering, Analysis and Retrieval) database on a non-exclusive, real-time
basis. With our proprietary software, we enhance these filings by organizing and
processing them into an easily accessible and searchable format. We then use
these enhanced SEC filings as the basis for our value-added services, which we
offer on our EDGAR Online Web site, located at http://www.edgar-online.com.
We derive revenues from the following three primary sources:
- monthly fees from individual subscribers to our Web site;
- fees generated from corporate customers for (1) group subscriptions to
our Web site, (2) information customized for their particular needs and
(3) delivery of their SEC filings for display on their corporate Web
sites; and
- advertising revenues derived from sales of banners and sponsorship
buttons on our site.
In order to build brand awareness, increase traffic and create a large pool
of potential subscribers, we aggressively promote our site and provide a portion
of our content for free. We have also established a significant number of
strategic distribution relationships. We currently supply EDGAR content to more
than 60 widely used Web sites including Yahoo!, Infoseek's GO Network, CNET's
SNAP, Go2Net, PointCast, Infospace, CBS MarketWatch, SmartMoney.com, Multex,
Hoover's, Quote.com, Business Wire, Big Charts, Raging Bull and Track Data.
INDUSTRY BACKGROUND AND OPPORTUNITY
Today's business environment is characterized by a rapidly growing demand
for fast and easy access to corporate and financial information. SEC filings,
such as prospectuses and annual and quarterly reports, are a primary source of
this information. The SEC began to require electronic filings in 1994 and, since
May 1996, all reporting U.S. public companies have been required to make their
SEC filings in an electronic format through the EDGAR system. The SEC
established this system to perform automated collection and acceptance of
submissions by companies and others who are required to file disclosure
documents with the SEC. Prior to the introduction of the EDGAR system, SEC
filings were only available on a delayed basis in costly paper or CD-ROM format
from a limited number of document providers or SEC public reference rooms.
As a result of the rapid growth of the Internet, corporate and financial
information can now be delivered in a more efficient and less expensive manner.
Individuals and institutions are increasingly using the Internet as a source of
valuable business intelligence. According to Simba Information, revenues from
the sale of business information delivered online in the U.S. are projected to
grow from approximately $27 billion in 1998 to approximately $40 billion in
2002. Industry sources report that paid online subscriptions for business and
professional information grew almost 27% in 1997 to 3.3 million subscribers and
increased 33% in the first half of 1998 to an estimated 4.4 million subscribers.
Growth in this market is expected to continue as more people gain access to and
increasingly rely on the Internet as their primary source of business
information.
30
<PAGE> 35
In addition, the growth of online investing has created a population of
individuals who are making their own investment decisions rather than relying on
traditional brokers and delayed sources of information. According to
International Data Corporation, the number of online brokerage accounts in the
United States is expected to grow from 3.5 million at the end of 1997 to 24
million at the end of 2002. We believe these trends indicate that an increasing
number of people will use the Internet as a tool to obtain the information
contained in SEC filings.
The Internet has also emerged as an attractive medium for advertisers.
Forrester Research estimates that total Internet advertising expenditures will
grow from an estimated $1 billion in 1998 to over $8 billion by 2002. Internet
advertising is expanding to include not only technology and Internet-related
companies, but also traditional advertisers, such as consumer product companies,
airlines, financial services companies and automobile manufacturers.
The availability of SEC filings in an electronic format, together with the
distributive power of the Internet, has created a significant opportunity to
deliver this information in ways that previously had not been possible. In
addition, newly evolving technologies make it possible to locate and retrieve
selected information from electronic databases, such as the EDGAR database, in a
real-time and cost-effective manner. We believe that as the demand for U.S.
corporate and financial information grows, we are poised to become the leading
Internet distributor of business and financial information based on EDGAR
filings.
THE EDGAR ONLINE SOLUTION
Having recognized the possibility of combining EDGAR data, the Internet and
new data-mining technologies to serve the market for real-time information about
U.S. public companies, in 1996 we launched the first commercial Web site that
made information derived from EDGAR filings available on a real-time basis. Our
Web site provides EDGAR filings and real-time business news, e-mail and
Web-based alerts based upon these filings. Our proprietary software enhances
EDGAR filings by organizing and processing them into user-friendly formats. We
also provide users with multiple navigation and search features that allow them
to efficiently retrieve the specific information they seek. For the last three
years, we have been at the forefront in integrating EDGAR-based information into
high traffic business and financial information Web sites. We believe that
EDGAR-based information is now an integral part of the mix of business and
financial information available on these types of Web sites.
We seek to capture the fast-growing market of individual users of business
and financial information by offering low cost, value-added services to our
paying subscribers. We also offer basic free content that encourages repetitive
usage by visitors to our Web site and customize our services to meet the
particular needs of our corporate and institutional customers.
STRATEGY
Our goal is to create the preeminent brand for EDGAR-based business and
financial information on the Internet. We aim to meet the increasing market
demand for real-time, value-added business, financial and competitive
information by providing our users with sophisticated methods of mining data
contained in EDGAR filings. Our objective is to establish EDGAR Online as the
most reliable and trusted source of company information for individual investors
and businesses. We are aggressively seeking to increase the number of our
corporate customers. We also aim to further develop a community of loyal
individual users in order to build our subscription base and attract
advertisers. Key elements of our strategy are described below.
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STRENGTHEN BRAND RECOGNITION
We believe that strengthening brand recognition of our EDGAR Online Web
site helps us to attract additional traffic, subscribers, strategic distribution
partners and advertisers. Our EDGAR Online name and logo, the advertising and
promotion we receive from our co-branded partners and our plans for
significantly increased marketing activities will continue to raise visibility
and cultivate our brand identity. We intend to continue to pursue distribution
relationships with high-traffic Web sites to expose our brand name and drive
additional traffic to our Web site. We will also seek to increase traffic to our
Web site with a national brand building campaign in traditional and online
media.
AGGRESSIVELY INCREASE SUBSCRIBER BASE AND SUBSCRIPTION REVENUES
We will use a portion of the proceeds of this offering to develop an
aggressive sales and marketing campaign to increase the number of individual
subscribers to our site. This campaign will use direct mail and trial offers to
market our value-added premium services to our existing base of more than
100,000 registered users. We will also promote our services to the more than
900,000 individuals who access our Web site each month through our strategic
distribution network. In addition, our marketing efforts will focus on
increasing the number of group subscriptions we sell to businesses and on
further developing our custom-tailored business applications.
INCREASE ADVERTISING REVENUES
We believe our Web site attracts users who, as a group, are more affluent
and better educated than those of many other Web sites and therefore represents
an attractive medium for companies that advertise over the Internet. In December
1998, more than 200 separate advertisers placed banners on our site as part of
the DoubleClick network. In order to attract new users and retain a loyal
audience that appeals to a broad range of advertisers and business partners, we
are investing in content, improving and expanding the functionality of our Web
site and engaging in increased advertising and promotional programs. We believe
that this strategy will attract new subscribers and advertisers to our Web site.
Advertising sales are also directly tied to the number of page views that are
available on a monthly basis. In the twelve month period from January to
December 1998, our salable page views doubled to approximately 8 million.
PURSUE ADDITIONAL REVENUE STREAMS BY INTRODUCING NEW SERVICES
We believe we have significant opportunities to capitalize on our audience
and content offerings to create multiple revenue streams for future growth. We
have sophisticated search technology under development to further mine the data
in EDGAR filings and plan to market tailored products to specific niche users of
this type of information. We are also developing product offerings designed to
help businesses and individuals make selected SEC filings over the Internet,
such as Schedules 13D and 13G which are used to report beneficial ownership
interests in public companies.
EDGAR ONLINE WEB SITE
Our Web site, located at http://www.edgar-online.com, is a leading Internet
source for SEC filings. We believe that we are one of the most heavily
trafficked commercial sources of EDGAR information on the Internet. For the past
two years, Barron's has rated our EDGAR Online site as one of the top 20
investment Web sites.
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All filings made through the EDGAR system since 1994 may be obtained
through our Web site. Individual users who wish to access our full range of
services pay a monthly fee starting at $9.95. Individual subscribers who access
more than 25 real-time filings per month are charged additional fees. Our
highest standard subscription rate of $99.95 per month entitles a user to
unlimited access to real-time filings. Selected services are also available to
non-paying registered users of our Web site.
Our EDGAR Online Web site, which is password protected and requires
registration for access, is displayed through a graphical interface that
provides easy navigation for the user. Our Web site is regularly updated from a
functionality standpoint to meet the specific needs of our users. The main areas
into which the content is organized are described below. Our paying subscribers
have access to all of these services and to EDGAR filings on a real-time basis.
Today's SEC Filings is an up-to-the-minute list of new EDGAR filings
received by the SEC. This information can be sorted by company name, form type
or time filed. Each entry also provides a brief description of the filing. The
Today's SEC Filings list can be accessed by non-paying visitors as well as by
paying subscribers, but the filings themselves cannot be downloaded by
non-paying visitors until one full business day after they are submitted to the
SEC. The Today's SEC Filings page also displays a list of Form 144 filings,
which is a non-EDGAR form that sellers of restricted securities are required to
file with the SEC to give notice of a proposed sale of these types of
securities. These filings are provided for subscribers as an additional
value-added service at a premium cost.
Full Search allows users to combine multiple criteria to search EDGAR
filings on a very general basis or an extremely detailed basis. Users can search
by company name, ticker symbol, central index key (CIK) code, industry or
sector, city, state, SEC form type and filing date or filing date range. We also
offer pre-packaged search protocols that allow searching for annual reports
(Form 10-K), latest quarterly reports (Form 10-Q), latest proxy filings
(Schedule 14A), insider transactions (Schedules 13D, 13G, Forms 3, 4 and 5) and
Form 144 (Notice of Proposed Sale of Securities Pursuant to Rule 144) filings.
Document Display: Users are provided the option of viewing filings in the
following formats:
- HTML (Hypertext Markup Language): This format treats the document as
one page. It downloads quickly, but is not the optimal format for
output or printing. The document is displayed with the table of
contents appearing on the left side of a user's computer screen with
navigation links to the relevant sections including financial tables.
- RTF (Rich Text Format): Paying subscribers can select RTF to download
the document into Word(R) or WordPerfect(R). Enhanced formatting
allows the user to output specific pages, search for keywords and
print filings suitable for presentation.
- XLS (Excel(R) Spreadsheet Format): Users have the option of extracting
balance sheet, income statement and cash flow statements directly into
spreadsheet applications and financial models. This extraction feature
allows the user to quickly compare financial statement data across
multiple companies or industries.
EDGAR Online People allows users to search the EDGAR database for
information about individuals named in SEC filings. A user can either look for
occurrences of a specific person across all filings or can retrieve a table
listing all people appearing in the filings for a specific company. To obtain
more information about an individual, such as compensation, stock option grants
or employment agreements, the user clicks on the filing and is brought directly
to the relevant sections of the filing, where each occurrence of the
individual's name is highlighted.
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EDGAR Online Personal allows users to store their queries and sends alerts
immediately when new filings come in that match the user's search criteria. With
EDGAR Online Personal, a customized portfolio of companies, industries and
regions may be created. A portfolio can include specific companies, form types
or combinations such as "All Form S-1 filings by technology sector companies in
California."
EDGAR Online IPO Express displays new public offerings as they are filed,
priced, postponed or withdrawn and provides daily and weekly summaries of all
companies filing IPO prospectuses with the SEC. Users can quickly and easily
access key sections of the prospectus, including competition, risk factors,
management and financial data, as well as key details such as underwriters and
ticker symbols.
Special Extracted Information: Our services also allow subscribers to
directly extract popular sections of filings:
- Glimpse extracts and retrieves the Management's Discussion and
Analysis section of Forms 10-K and 10-Q. Many of our co-branded
partners choose to display this extracted information with the other
financial information appearing on their Web sites.
- FDS (Financial Data Schedule) extracts the financial data schedule
from filings and formats it into table or spreadsheet form.
Supporting company data is also available on our Web site, including:
- Stock Quotes: 20 minute delayed stock quotes from PC Quote;
- Charts: including interactive charts, quotes, reports and indicators
on over 50,000 stocks, mutual funds and market indexes from Big
Charts; and
- News and Research Resources: from sources such as Hoover's, Zacks,
Multex and News Alert.
CORPORATE SERVICES
We have entered into a number of, and are aggressively pursuing, additional
corporate contract sales to supply data for use on corporate intranets,
extranets and Web sites.
CORPORATE INTRANETS AND EXTRANETS
We provide EDGAR content to corporate customers such as American Express,
Bowne & Co., Inc. and Merrill Lynch for their internal use, including on their
intranets and extranets. Each of these customers receives a tailored application
for their internal use at a price based on content, degree of customization and
the number of users. These corporate customers are willing to pay a premium for
having the content of SEC filings processed and delivered to them in ways that
best meet their internal needs. These services include real-time delivery of
selected types of filings or specific elements of filings that contain
information such as changes in shareholders' ownership used in targeting
investors or company information used as sales leads. In addition, we offer bulk
sales of subscriptions to our Web site services to firms for use by their
employees.
SUBSCRIPTION WEB SITES
We deliver EDGAR content to other subscription Web sites, such as
Hoovers.com, Quote.com and Multex, that bundle our content into their service
offerings to the business and investment community. These Web sites either
integrate our services into their comprehensive offerings, or they offer our
services as higher cost options.
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CORPORATE WEB SITES
We provide data to corporate Web sites including Advanced Micro Devices,
Compaq, Globix, Intel, Mutual of New York and Worldcom. These companies use the
information supplied by us as part of the investor relations sections of their
Web sites.
FUTURE SERVICE OFFERINGS
Given the proliferation of business information, we believe that our
customers need greater functionality in searching for the specific business
information that is important to them. Recognizing this need, we intend to
introduce later this year a new service offering to our paying subscribers that
will involve the use of a key word search engine. By entering a single word or a
series of words into a query box, users will be able to search through a
database of the last two years of EDGAR filings. For example, entering the words
"advertising" and "Yahoo" would bring the user to the sections of Yahoo!'s SEC
filings which discuss Yahoo!'s advertising revenues.
We also intend to introduce later this year a new service offering that
will enable users to use natural language to search IPO filings for concepts,
rather than searching for specific key words. This new service offering would
utilize the DR-LINK(R) natural language search engine which we currently license
on a non-exclusive basis from Manning & Napier Information Services. A user
would enter a complex natural language description of his search, such as "I am
looking for an Internet business incorporated in Delaware that generates
subscription revenues." The program will then search the full text of over 4,000
IPO registration statements filed through the EDGAR system since 1996. The
search results will be ranked by relevance and keyed to the section of the
document that contains the relevant information. Users will have the option of
receiving e-mail alerts when future occurrences of the same criteria appear in
subsequent IPO filings. We anticipate that this premium priced service will be
attractive to venture capital and investment firms, business plan writers,
securities analysts, attorneys, accountants and others needing an efficient
method of performing comparative company analyses.
KEY DISTRIBUTION RELATIONSHIPS
We have entered into a number of, and are aggressively pursuing additional,
distribution relationships to enhance our brand recognition and audience reach.
We provide EDGAR content to these partners in order to build traffic to our Web
site. Currently, approximately 44% of our traffic stems from these
relationships. We have more than 60 of these distribution relationships,
including the following:
PORTAL OR SEARCH ENGINE WEB SITES
We provide selected EDGAR content to portal and search engine sites
including Yahoo!, Infoseek's GO Network, CNET's SNAP, Go2Net and Infospace. For
example, we provide the Yahoo! Finance Web site with headline information about
SEC filings and the extracted Management's Discussion and Analysis section of
Forms 10-K and 10-Q on a real-time basis. We deliver selected free information
for display on other Web sites, such as Infoseek's GO Network and Infospace. We
also support co-branded pages, which provide links to our Web site where we have
the opportunity to sell subscriptions. Our agreements with these entities
provide that in return for supplying EDGAR content to these co-branded partners,
we retain advertising revenues generated on our site.
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NEWS, FINANCIAL INFORMATION AND INVESTMENT SITES
We provide selected EDGAR content to news, financial information and
investing sites such as CBS MarketWatch, SmartMoney.com, Multex, PointCast,
Hoover's, Quote.com, Track Data, Business Wire, Big Charts and Raging Bull. We
provide Multex, Hoover's, Quote.com and Track Data with a digital feed of
real-time header information from all EDGAR filings. These Web sites offer this
information to their paying subscribers who can download real-time and
historical full-text filings from our Web site. We support co-branded links to
CBS MarketWatch, Hoover's, SmartMoney.com, Business Wire and Raging Bull.
LINKS FROM THOUSANDS OF WEB SITES WORLDWIDE
The open architecture of the Internet allows Web sites to link without
permission to Web pages they believe will benefit their users. We estimate that
more than 2,000 different Web sites provide links to our Web site, thereby
generating extensive traffic to our site and increasing our brand awareness.
CUSTOMERS AND ADVERTISERS
We have a diversified base of individual subscribers, corporate customers
and advertisers. We believe that this customer and advertiser base will grow
significantly and become further diversified as we implement our sales and
marketing plan and increase the range of our service offerings.
INDIVIDUAL SUBSCRIBERS
As of December 31, 1998, EDGAR Online had over 100,000 registered users, of
which over 6,000 were paying subscribers. Based on information from @plan.,
Inc., an Internet-focused market research provider, we believe our individual
users represent a demographic group characterized by levels of education and
personal income that are well above the average profile of an Internet user.
According to the registration data we collect, these individuals are typically
executives, research analysts, bankers, journalists, attorneys, accountants,
sales representatives, recruiters or business development and marketing
professionals. We provide them with cost-effective and flexible tools to obtain
information about companies' financial performance, competitive position,
strategic plans, products and industries, expenditure plans, management changes,
shareholder changes, capital raising and other information reported in SEC
filings.
CORPORATE CUSTOMERS
As of December 31, 1998, we had 70 corporate customers representing a broad
range of industry sectors. These corporate customers include American Express,
Merrill Lynch and Intel. We believe that our corporate contract services are
attractive to professional firms and large corporations who can benefit from
using our services to generate valuable business, financial and competitive
information that can help them conduct their businesses more effectively.
ADVERTISERS
We sell advertising through DoubleClick, an Internet advertising services
provider, to over 200 companies. Our advertisers represent a broad cross section
of industries that are attracted by the subject matter of our Web site and by
the demographics of the users of our Web site. These advertisers include
companies such as Datek Online Brokerage Services, Fidelity Investments, Korn
Ferry, GTE, Nortel Power and IBM.
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MARKETING AND SALES
Historically, we have focused our business on building strategic
relationships with major portal, search engine and financially-oriented Web
sites to build our brand recognition. These co-branded relationships and our
well-known presence on the Internet have allowed us to attract individual
subscribers and corporate customers. We plan to use a portion of the proceeds of
this offering to aggressively expand our sales and marketing efforts.
We seek to:
- attract more individual online users to our services and convert visitors
into paying subscribers;
- increase corporate sales;
- strengthen brand awareness through a variety of advertising, marketing
and promotional programs;
- expand marketing efforts to public companies that display SEC filings on
their Web sites; and
- increase our advertising revenues by increasing traffic to our Web site
and continuing to provide our advertisers with a growing, demographically
desirable audience.
We believe that corporate customers will represent an important source of
revenue growth in the next few years as we continue to introduce value-added
search and extraction products and customized fee-based services to corporate
purchasers of sophisticated financial information. We intend to assign several
of our new sales professionals to market our services exclusively to corporate
accounts.
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
Our development programming is performed by iXL Enterprises, Inc. from its
office in Norwalk, Connecticut on our computers. iXL also manages our Web site.
iXL, formerly Pequot Systems, has been our software developer since our
inception. We own all the programs that run our Web site, including those
developed by iXL. Our Web site is hosted at facilities located at Globix
Corporation in New York City. Globix maintains multiple Web servers owned by us
which run Microsoft NT operating systems and use Microsoft Internet Information
Server. The system is maintained on a 24 hours-a-day, 7 days-a-week basis
remotely by iXL technicians with the exception of our networking communications
which are managed by Globix. See "Certain Transactions."
All our systems, including our accounting system, user database and
database of EDGAR filings, and all proprietary software are backed up on a daily
basis to our data center in our Norwalk, Connecticut offices and also backed up
to tape. The tape backup is held offsite. Our software and database are
replicated across multiple servers, using the clustering facilities of Microsoft
Windows NT Server, Enterprise edition. This provides us with both resilience
against hardware failure and with scalability to handle our increasing traffic
loads.
The flow of information in and out of our site operates as follows:
- the live feed of EDGAR filings comes from the SEC's dissemination agent,
TRW, which sends this feed to Globix via a private high speed T-1
connection; and
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- the raw EDGAR filings are processed by our proprietary software and
posted to our site or distributed to third parties with which we have
distribution contracts via production servers located at Globix's
facilities.
Our services are available to users 24 hours-a-day, 7 days-a-week. Customer
service is available weekdays 9:00 AM to 7:30 PM (ET). Inquiries come in through
our Web site and via e-mail and telephone. At March 29, 1999, we had 6 employees
engaged in customer service and network support.
COMPETITION
The market for Internet information services and products is relatively
new, has no substantial barriers to entry and is intensely competitive and
rapidly changing. The number of Web sites competing for consumers' and
advertisers' attention and spending has proliferated and we expect that
competition will continue to intensify. We currently compete, directly and
indirectly, for subscribers, viewers and advertisers with the following
categories of companies:
- traditional vendors of financial information such as Disclosure, Inc.;
- proprietary information services and Web sites targeted to business,
finance and investing needs, including those providing EDGAR content,
such as Bloomberg and LIVEDGAR; and
- Web-based providers of free EDGAR information, such as FreeEDGAR.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to devote greater resources than we
can to the development and promotion of their services. These competitors may
also engage in more extensive research and development, undertake more
far-reaching marketing campaigns, adopt more aggressive pricing policies
(including offering their EDGAR content for free) and make more attractive
offers to existing and potential employees, strategic partners and advertisers.
Our competitors may offer EDGAR content that achieves greater market acceptance
than ours. It is also possible that new competitors may emerge and rapidly
acquire significant market share. We may not be able to compete successfully for
subscribers, which could have a material adverse effect on our business, results
of operations and financial condition. Increased competition could result in
price reductions, reduced margins or loss of market share, any of which could
materially adversely affect our business, results of operations and financial
condition. See "Risk Factors -- We face intense competition from other providers
of business and financial information."
We also compete with other Web sites, television, radio and print media for
a share of advertisers' total advertising budgets. If advertisers perceive the
Internet in general or our Web site in particular to be a limited or an
ineffective advertising medium, they may be reluctant to devote a portion of
their advertising budget to Internet advertising or to advertising on our Web
site. See "Risk Factors -- We face intense competition for advertising revenues
and the viability of the Internet as an advertising medium is uncertain."
INTELLECTUAL PROPERTY
Our success depends significantly upon our proprietary technology. We
currently rely on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
rights. All of our employees have executed confidentiality and non-use
agreements which provide that any rights they may have in copyrightable works or
patentable technologies belong to us. In addition, prior to entering into
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discussions with third parties regarding our proprietary technologies, we
require that such parties enter into a confidentiality agreement. If these
discussions result in a license or other business relationship, we also require
that the agreement setting forth the parties' respective rights and obligations
include provisions for the protection of our intellectual property rights.
The SEC has granted us a non-exclusive, royalty-free license to use the
name EDGAR in our logo and corporate name initially through 2008, and we have
received notification from the U.S. Patent and Trademark Office that our
application to register our EDGAR Online trademark has proceeded to the
publication stage.
We use database technology designed for us by iXL. This proprietary
technology integrates software that was developed exclusively for us by iXL with
software systems obtained commercially. The software developed for us by iXL
includes our database of EDGAR filings, Web-based customer interfaces, data
mining capabilities and customer support and billing systems. The software
systems obtained commercially include the Great Plains Accounting System and
NetOwl Extractor. The nature of our proprietary system allows us to enhance our
service offerings by rapidly integrating new technology developed for us by
third parties. See "Certain Transactions."
We also have non-exclusive rights to the DR-LINK natural language search
engine pursuant to an agreement with Manning & Napier Information Services,
which we plan to include in our service offerings later this year. See
"-- Future Service Offerings."
GOVERNMENT REGULATION
We are subject, both directly and indirectly, to various laws and
governmental regulations relating to our business. There are currently few laws
or regulations directly applicable to online services of the Internet. However,
due to the increasing popularity and use of commercial online services and the
Internet, it is possible that a number of laws and regulations relating to
commercial online services and the Internet may be adopted. Such laws and
regulations may cover issues such as user privacy, pricing and characteristics
and quality of products and services. Moreover, the applicability to commercial
online services and the Internet of existing laws governing issues such as
property ownership, libel and personal privacy is uncertain and could expose us
to substantial liability. Any such new legislation or regulation or the
application of existing laws and regulations to the Internet could have a
material adverse effect on our business, results of operations and financial
condition.
Tax authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in Internet commerce. New state
tax regulations may subject us to additional state sales and income taxes. As
our service is available over the Internet anywhere in the world, multiple
jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in each such jurisdiction. The failure by us to qualify as a
foreign corporation in a jurisdiction where we are required to do so could
subject us to taxes and penalties for the failure to qualify. It is also
possible that state and foreign governments might attempt to regulate our
transmissions of content on our Web site.
FACILITIES
Our executive offices are located in Norwalk, Connecticut, where, together
with iXL, we lease 6,600 square feet of office space. See "Certain
Transactions -- Pequot Systems (iXL)." The term of this lease expires April
2000. We are seeking additional office space which we believe will be available
on commercially reasonable terms.
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EMPLOYEES
As of March 29, 1999, we had 16 full-time employees. We believe that we
have good relations with our employees.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of our
executive officers and directors as of the date of this prospectus:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Susan Strausberg................... 59 Chief Executive Officer, Secretary and
Director
Marc Strausberg.................... 64 Chairman of the Board, Chief Information
Officer and Director
Tom Vos............................ 51 President, Chief Operating Officer and
Director
Greg D. Adams...................... 38 Chief Financial Officer
Brian Fitzpatrick.................. 42 Vice President of Corporate Sales
Jay Sears.......................... 32 Vice President of Marketing and Business
Development
David Trenck....................... 25 Vice President of Operations
Marc H. Bell(1)(2)................. 31 Director
Bruce Bezpa(2)..................... 43 Director
Stefan Chopin(1)................... 40 Director and Chief Technology Consultant
Mark Maged(1)...................... 65 Director
</TABLE>
- -------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Susan Strausberg, a co-founder of EDGAR Online, has served as Chief
Executive Officer and Secretary since EDGAR Online was formed in November 1995.
From December 1994 until the formation of EDGAR Online, Ms. Strausberg was a
consultant to Internet Financial Network. In her capacity as Chief Executive
Officer, Ms. Strausberg oversees strategic planning and development and is
responsible for the production of the EDGAR Online Web site. Ms. Strausberg has
served on the Board of Directors of RKO Pictures since December 1998. Ms.
Strausberg, the wife of Mr. Strausberg, EDGAR Online's Chairman, has a B.A.
degree from Sarah Lawrence College.
Marc Strausberg, a co-founder of EDGAR Online, has served as Chairman of
the Board of Directors and President since EDGAR Online was formed in November
1995. Mr. Strausberg resigned as President upon the election of Tom Vos to this
position in March 1999. In December 1994, Mr. Strausberg co-founded Internet
Financial Network, a financial information vendor and served as IFN's
co-chairman until founding EDGAR Online. From 1992 to 1994, Mr. Strausberg was
the publisher of the Livermore Report, a newsletter that focused on the
valuation of initial public offerings. From August 1987 to December 1994, Mr.
Strausberg served as Chairman and President of Sindex Inc., which provided
computer-based trading operations to individuals, hedge funds and brokerage
firms. Mr. Strausberg oversees product development for EDGAR Online. Mr.
Strausberg, the husband of Ms. Strausberg, EDGAR Online's Chief Executive
Officer, has a B.A. degree from Muhlenberg College.
Tom Vos joined EDGAR Online as a Director in August 1996 and was elected
Chief Operating Officer in March 1998. Mr. Vos was elected President in March
1999. Mr. Vos is responsible for EDGAR Online's day-to-day operations. From 1986
until April 1998, Mr. Vos was Vice President
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of Marketing at Bowne & Co., Inc. In that capacity, Mr. Vos was responsible for
strategic planning, acquisitions and new product development. While at Bowne,
Mr. Vos was also responsible for advertising and public relations and for the
development of both Bowne's Web site and its EDGAR services department. Mr. Vos
has a B.S. degree in Physics from Notre Dame University, an M.S. degree in
Electrical Engineering from Ohio State University and an M.B.A. degree from Pace
University.
Greg D. Adams joined EDGAR Online as Chief Financial Officer in March 1999.
Mr. Adams is a Certified Public Accountant with diversified business experience
in both the public and private sectors. From May 1996 to March 1999, Mr. Adams
was Senior Vice President Finance and Chief Financial Officer of PRT Group Inc.,
a technology solutions and services company. From June 1994 to May 1996, Mr.
Adams was the Chief Financial Officer of the Blenheim Group Inc., a publicly
held UK information technology exposition and conference management company.
From August 1983 to May 1994, Mr. Adams served as Senior Manager in the areas of
audit and business advisory services with KPMG Peat Marwick. He is a member of
the New York State Society of Certified Public Accountants and the American
Institute of Certified Public Accountants. Mr. Adams has a B.B.A. degree in
Accounting from the College of William & Mary.
Brian Fitzpatrick joined EDGAR Online as Vice President of Corporate Sales
in March 1999. From August 1998 to March 1999, he was Regional Vice President,
Sales and Marketing for Iverson Financial Systems, Inc., a business information
provider, and from May 1993 to August 1998, he was Vice President, Sales and
Marketing of Newsware, Inc, a financial news service. From August 1991 to May
1993 he was the National Accounts Manager of Desktop Data, a real-time news and
information filtering business. From 1986 to 1991, he was Key Accounts Manager
of Walsh Greenwood Information Systems, a provider of PC-based intelligent
market data systems for the financial services industry. Mr. Fitzpatrick has a
B.A. degree from Boston University.
Jay Sears joined EDGAR Online as Vice President of Marketing and Business
Development in May 1997. Mr. Sears is responsible for strategic alliances,
content syndication, content sales, advertising sales, membership and direct
marketing, public relations and general marketing for EDGAR Online. From
September 1995 to April 1997, Mr. Sears was Vice President of Marketing for
Wolff New Media, a publisher of Internet and printed guides to the Internet.
From July 1991 to August 1995, Mr. Sears was a Senior Account Supervisor at
Creamer Dickson Basford, an international marketing, communications and public
relations firm. Mr. Sears has a B.A. degree from Kenyon College.
David Trenck joined EDGAR Online in December 1995 as its first employee and
was responsible for data entry and customer support. In May 1998, he became Vice
President of Operations. Mr. Trenck is in charge of product implementation and
liaison with iXL, EDGAR Online's primary service offering developer.
Marc H. Bell joined EDGAR Online as a member of the Board of Directors in
August 1998. Mr. Bell has been the President and Chief Executive Officer of
Globix Corporation since its inception in 1989. Mr. Bell has a B.S. degree from
Babson College and an M.S. degree from New York University.
Bruce Bezpa joined EDGAR Online as a member of the Board of Directors in
March 1999. He has worked for Bowne & Co., Inc., a leading financial printer and
provider of Internet, localization and outsourcing services, for 15 years in
various capacities including as Vice President-Strategic Development (since July
1996), Director-Mutual Funds Services from August 1994 to June 1996 and
Director-Marketing from April 1989 to July 1994. Mr. Bezpa holds B.A. and M.B.A.
degrees from Rutgers University.
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Stefan Chopin joined EDGAR Online as a member of the Board of Directors in
1996. As the Chief Technology Consultant to EDGAR Online, Mr. Chopin is
responsible for software interface development and systems integration and
maintenance. Mr. Chopin is the founder and President of Pequot Systems, a
software development and consulting firm. In October 1998, Pequot was acquired
by iXL Enterprises, Inc. and began operating as iXL Financial Services. Prior to
founding Pequot Systems in November 1995, Mr. Chopin served as the Vice
President of Engineering for Micrognosis, Inc., a leading provider of trading
room systems.
Mark Maged joined EDGAR Online as a member of the Board of Directors in
March 1999. He has been Chairman since 1995 and Chief Executive Officer since
January 1997, of Internet Tradeline, Inc., an operator of electronic shopping
malls on the Internet. During the eight years prior to becoming Chief Executive
Officer of Internet Tradeline, Mr. Maged, either individually or as Chairman of
MJM Associates, LLC, engaged in various private investment banking activities in
the United States and internationally. From 1975 through 1983, he served as
President and Chief Executive Officer of Schroder's Incorporated, which operated
banking, investment banking and investment management businesses as the United
States arm of Schroders PLC, an international merchant bank. He is currently a
member of the Board of Directors of Commodore Holdings Limited. He holds a
bachelor's degree from the City College of New York and both a master's degree
and a law degree from Harvard University.
BOARD COMMITTEES
EDGAR Online's Board of Directors has established an Audit Committee and
appointed Marc Bell and Bruce Bezpa to be its members. The Audit Committee has
the responsibility to review audited financial statements and accounting
practices of EDGAR Online and to consider and recommend the employment of, and
approve the fee arrangements with, independent accountants for both audit
functions and for advisory and other consulting services.
The Board has also established a Compensation Committee and appointed Marc
Bell, Stephan Chopin and Mark Maged to be its members. The Compensation
Committee has the responsibility to review and recommend to the Board the
compensation plans and levels for the officers of EDGAR Online, administers our
stock option plans and establishes and reviews general policies relating to
compensation and benefits of employees of EDGAR Online.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationships exist between any members of EDGAR Online's
Board of Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any such interlocking
relationship existed in the past. Messrs. Bell and Chopin are affiliated with
companies with which we have business and financial relationships. See "Certain
Transactions."
DIRECTOR COMPENSATION
No cash compensation has ever been paid to any of the directors of EDGAR
Online for service in such capacity. However, directors are currently eligible
to receive stock options under EDGAR Online's 1996 Stock Option Plan. In March
1999, each of the four non-employee directors of EDGAR Online was granted
options to purchase 10,000 shares of common stock at an exercise price of $4.50
per share. Non-employee directors of EDGAR Online will be eligible to receive
non-discretionary, automatic grants of options to purchase common stock as part
of our 1999 Outside Directors Stock Option Plan. See "-- Stock Option Plans."
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<PAGE> 48
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 by our Chief Executive Officer and certain
other executive officers whose annual salaries and bonus were in excess of
$100,000 in 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION(1) SECURITIES
------------------ UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#)
- --------------------------- -------- ------ ------------
<S> <C> <C> <C>
Susan Strausberg..................................... $150,000(2) -- --
Chief Executive Officer
Marc Strausberg...................................... $150,000(2) -- --
Chairman and Chief Information Officer(3)
Tom Vos.............................................. $ 93,750(4) -- 200,000
President and Chief Operating Officer
Jay Sears............................................ $ 97,400 10,000 65,000
Vice President of Marketing and Business
Development
</TABLE>
- -------------------------
(1) The column for "Other Annual Compensation" has been omitted because there is
no compensation required to be reported in such column. The aggregate amount
of perquisites and other personal benefits provided to each Named Executive
Officer is less than 10% of the total annual salary and bonus of such
officer.
(2) In 1998, $92,788 of this amount was deferred and not paid. See "Certain
Transactions" and "Use of Proceeds."
(3) Mr. Strausberg served as President during 1998.
(4) Mr. Vos joined EDGAR Online as Chief Operating Officer on March 31, 1998 and
earns salary at the rate of $125,000 per annum. He was elected by the Board
of Directors to the additional position of President in March 1999.
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<PAGE> 49
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
granted to the Named Executive Officers during 1998. We have never granted any
stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
-------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED 1998(2) SHARE($) DATE 5% 10%
- ---- ---------- ------------- --------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Susan Strausberg........ -- -- -- -- -- --
Marc Strausberg......... -- -- -- -- -- --
Tom Vos................. 200,000 50% $0.25 March 31, 2008 $936,711 $1,477,340
Jay Sears............... 65,000 16% $0.25 May 31, 2007 $289,120 $ 434,892
</TABLE>
- -------------------------
(1) Each option represents the right to purchase one share of common stock. The
options shown in this table were all granted under our 1996 Stock Option
Plan.
(2) In the year ended December 31, 1998, we granted options to employees to
purchase an aggregate of 400,000 shares of common stock.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by the rules of the SEC and do not represent our estimate or projection of
future common stock price growth. These amounts represent certain assumed
rates of appreciation in the value of our common stock from the fair market
value on the date of grant. Actual gains, if any, on stock option exercises
are dependent on the future performance of the common stock and overall
stock market conditions. The amounts reflected in the table may not
necessarily be achieved.
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<PAGE> 50
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the exercise of stock
options during the fiscal year ended December 31, 1998 by each of the Named
Executive Officers and the fiscal year-end value of unexercised options. No
options were exercised by any of the Named Executive Officers during this
period.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Susan Strausberg.................... -- -- -- --
Marc Strausberg..................... -- -- -- --
Tom Vos............................. 200,000 -- $664,000 --
Jay Sears........................... 65,000 -- $215,800 --
</TABLE>
- -------------------------
(1) There was no public market for the common stock on December 31, 1998. The
fair market value of the common stock as of December 31, 1998 was determined
by our Board of Directors to be $3.57 per share.
EMPLOYMENT AGREEMENTS
We entered into a five year employment agreement dated January 1, 1996 with
Susan Strausberg. The agreement extends automatically for an additional year at
the end of the initial term and each anniversary thereafter unless 30-day prior
notice of termination is provided by either Ms. Strausberg or EDGAR Online. The
agreement provides for an initial base salary of $150,000 for 1996 subject to an
annual 10% increase each subsequent year, plus an annual bonus at the discretion
of the Board. Ms. Strausberg waived the annual 10% increase for the years 1997,
1998 and 1999. During the years 1996 and 1997, Ms. Strausberg agreed to defer
her entire salary. During 1998, she received $57,211 and agreed to defer the
balance of her salary. Ms. Strausberg has been receiving her full base salary on
a current basis since January 1, 1999.
We entered into a five year employment agreement dated January 1, 1996 with
Marc Strausberg. The agreement extends automatically for an additional year at
the end of the initial term and each anniversary thereafter unless 30-day prior
notice of termination is provided by either Mr. Strausberg or EDGAR Online. The
agreement provides for an initial base salary of $150,000 for 1996 subject to an
annual 10% increase each subsequent year, plus an annual bonus at the discretion
of the Board. Mr. Strausberg waived the annual 10% increase for the years 1997,
1998 and 1999. During the years 1996 and 1997, Mr. Strausberg agreed to defer
his entire salary. During 1998, he received $57,211 and agreed to defer the
balance of his salary. Mr. Strausberg has been receiving his full base salary on
a current basis since January 1, 1999.
We have entered into a two year employment agreement dated
with Tom Vos to serve as President and Chief Operating Officer. The agreement
extends automatically for an additional year at the end of the initial term and
each anniversary thereafter unless 30-day prior notice of termination is
provided by either Mr. Vos or EDGAR Online. The agreement provides Mr. Vos with
an annual salary of $125,000 and an annual bonus at the discretion of the Board.
In addition, if Mr. Vos remains employed by us at the end of the initial term,
he will be entitled to receive a retention bonus equal to two years of his then
applicable base salary, plus the average of his last two annual cash bonuses.
Mr. Vos will also receive a severance payment identical to the
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<PAGE> 51
retention bonus described above in the event there is a change of control (as
defined in the agreement) and Mr. Vos' employment is terminated (either by him
or the employer) within one year thereafter. Additionally, the agreement
contains a non-compete and non-solicitation provision effective during the term
of his employment and for one year thereafter.
We have entered into a three year employment agreement dated
with Greg Adams to serve as Chief Financial Officer. The agreement extends
automatically for an additional year at the end of the initial term and each
anniversary thereafter unless 30-day prior notice of termination is provided by
either Mr. Adams or EDGAR Online. The agreement provides Mr. Adams with (1) an
annual salary of $125,000, (2) an annual bonus at the discretion of the Board,
provided that Mr. Adams will be entitled to a minimum bonus of $62,500 for the
first year of his employment and (3) a $500 monthly car allowance. Mr. Adams
will also receive options to purchase (a) 109,000 shares of common stock at an
exercise price of $4.50 per share, which will vest 25% in year one and 75% in
year two and (b) 16,000 shares of common stock at the initial public offering
price per share, which will vest equally over a three-year period. In addition,
the agreement contains a severance arrangement whereby Mr. Adams is entitled to
receive a payment determined as follows in the event he is terminated without
cause: (a) six months salary if the termination occurs within the first six
months of his employment, (b) twelve months salary if the termination occurs
between the seventh and eighteenth month of his employment and (c) eighteen
months salary if the termination occurs at anytime following the eighteenth
month of his employment. Additionally, the agreement contains a non-compete and
non-solicitation provision effective during the term of his employment and for
one year thereafter.
We have entered into a three year employment agreement dated
with Brian Fitzpatrick to serve as Vice President of Corporate Sales. The
agreement provides Mr. Fitzpatrick with (1) an annual salary of $125,000 and (2)
an annual bonus at the discretion of the Board, provided that Mr. Fitzpatrick
will be entitled to a minimum annual bonuses of (a) $100,000 for 1999, (b)
$125,000 for 2000 and (c) $150,000 for 2001. Mr. Fitzpatrick received a signing
bonus of $85,000 when he joined us. Mr. Fitzpatrick will also receive options to
purchase 60,000 shares of common stock at an exercise price of $4.00 per share,
which will vest equally over a three-year period. Additionally, the agreement
contains a non-compete and non-solicitation provision effective during the term
of his employment and for nine months thereafter in the case of the non-compete
provision and one year thereafter in the case of the non solicitation provision.
We have entered into an employment agreement dated with Jay
Sears, which may be terminated by either party upon 30-days prior notice. The
agreement provides Mr. Sears with an annual salary of $80,000 and an annual
bonus at the discretion of the Board. Mr. Sears' annual salary was increased to
$100,000 effective August 1998. If Mr. Sears' employment is terminated without
cause, we will pay him six months of his total annual compensation.
Additionally, the agreement contains non-compete and non-solicitation provisions
effective during the term of his employment and for six months thereafter in the
case of the non-compete provision and one year thereafter in the case of the
non-solicitation provision.
STOCK OPTION PLANS
EDGAR Online's currently active stock option plans include our 1996 Stock
Option Plan, 1999 Stock Option Plan and 1999 Outside Directors Stock Option
Plan. Each of the plans, except for the 1999 Outside Directors Stock Option
Plan, provide for:
- the grant of incentive stock options and non-qualified stock options and
- the current administration of the plans by the Compensation Committee.
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<PAGE> 52
The exercise price of options granted under each plan are determined by the
Compensation Committee, except that the exercise price of incentive stock
options must be at least as equal to the fair market value of EDGAR Online's
common stock on the date of grant. Each of the plans provides for option vesting
to accelerate and become fully vested in the event of a change of control of
EDGAR Online if the options are not assumed or substituted by a successor
corporation.
The 1996 Stock Option Plan (the "1996 Plan"), which provides for the
granting of options to purchase up to an aggregate of 800,000 shares of our
authorized but unissued common stock (subject to adjustment in certain cases,
including stock splits, recapitalization and reorganizations) to our officers,
directors, employees and consultants, was adopted in November 1998. The 1999
Stock Option Plan (the "1999 Plan"), which provides for the granting of options
to purchase up to an aggregate of 600,000 shares of our authorized but unissued
common stock (subject to adjustment in certain cases, including stock splits,
recapitalization and reorganizations) to our officers, directors, employees and
consultants, was adopted in March 1999. The Stock Option Plans are intended as
an incentive to encourage stock ownership by officers and certain of our other
employees in order to increase their proprietary interest in our continued
growth and success and to encourage such employees to remain in the employ of
EDGAR Online.
Under the 1999 Outside Directors Stock Option Plan, commencing with the
2002 annual meeting of stockholders and on each third anniversary thereafter,
each of our current non-employee directors will automatically be granted a
nonstatutory option to purchase 7,500 shares of common stock. New directors will
be granted such an option at the time of their election by stockholders and on
each third anniversary thereafter. The exercise price of each of these options
will be equal to the fair market value of our common stock on the date of grant.
These options will vest equally over a three-year period.
No incentive stock option may be granted to an individual who, at the time
the option is granted, owns, directly or indirectly, stock possessing more than
10% of the total combined voting power of all classes of our common stock,
unless (1) such option has an option price of at least 110% of the fair market
value of the common stock on the date of the grant of such option and (2) such
option cannot be exercised more than five years after the date it is granted.
As of March 26, 1999, 800,000 options were authorized under the 1996 Plan
and options to purchase all 800,000 shares had been granted. As of March 26,
1999, 600,000 options were authorized under the 1999 Plan, no options to
purchase shares had been granted and 600,000 options were available for future
grants. As of March 26, 1999, 100,000 options were authorized under the 1999
Outside Directors Stock Option Plan, no options to purchase shares had been
granted and 100,000 options were available for future grants.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our amended and restated certificate of incorporation includes a provision
that eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to EDGAR Online or its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
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<PAGE> 53
These provisions are permitted under Delaware law.
Our amended and restated bylaws provide that:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to certain very limited exceptions;
- we may indemnify our other employees and agents to the same extent that
we indemnify our officers and directors, unless otherwise required by
law, our certificate of incorporation, our bylaws or agreements; and
- we must advance expenses, as incurred, to our directors and executive
officers in connection with legal proceedings to the fullest extent
permitted by Delaware law, subject to certain very limited exceptions.
Prior to the completion of this offering, we intend to enter into indemnity
agreements with each of our directors and executive officers to give them
additional contractual assurances regarding the scope of the indemnification
described above and to provide additional procedural protections. In addition,
we intend to obtain directors' and officers' insurance providing indemnification
for our directors, officers and certain employees for certain liabilities. We
believe that these indemnification provisions and agreements are necessary to
attract and retain qualified directors and officers.
The limitation of liability and indemnification provisions in our amended
and restated certificate of incorporation and our amended and restated bylaws
may discourage stockholders from bringing a lawsuit against directors for breach
of their fiduciary duty. They may also have the effect of reducing the
likelihood of derivative litigation against directors and officers, even though
such an action, if successful, might otherwise benefit us and our stockholders.
Furthermore, a stockholder's investment may be adversely affected to the extent
we pay the costs of settlement and damage awards against directors and officers
pursuant to these indemnification provisions.
49
<PAGE> 54
CERTAIN TRANSACTIONS
BOWNE & CO., INC.
In May and July 1996, Bowne & Co., Inc. loaned us an aggregate of $75,000
pursuant to non-interest bearing notes (the "$75,000 Notes"), which were
convertible into a $112,500 credit toward the future purchase of our common
stock. In August 1996, EDGAR Online, Bowne and Marc Strausberg, Susan Strausberg
and Michael Horowitz (the "Selling Shareholders") entered into an Equity
Purchase Agreement pursuant to which Bowne purchased 400,000 shares of common
stock from us and 200,000 shares from each of the Selling Shareholders for an
aggregate purchase price of $875,000. The purchase price was determined as the
result of arm's length bargaining among the parties. From this transaction,
EDGAR Online received $387,500 in cash and the $75,000 Notes were converted into
shares of common stock valued at $112,500. Each of the three Selling
Shareholders received $125,000. Our agreement with Bowne provided Bowne with
certain anti-dilution rights, a right of first refusal and tag-along rights with
regard to future sales of shares owned by the Selling Shareholders and certain
issuances of shares by EDGAR Online, as well as Board participation rights.
Bowne's designee to our Board of Directors is Bruce Bezpa, its Vice President.
In 1997, we borrowed $500,000 pursuant to a line-of-credit extended to us
by Bowne. These loans are evidenced by promissory notes which were due on
December 30, 1997, each at an interest rate of 12% prior to the maturity date
and 18% thereafter. EDGAR Online and Bowne have subsequently agreed to two
extensions on the repayment of these notes, which are now due on February 28,
2000. These loans are guaranteed by Marc Strausberg. We intend to repay the
principal and accrued interest on the loans with a portion of the proceeds of
this offering. See "Use of Proceeds" and "Principal Stockholders."
EDGAR Online sells certain EDGAR content to Bowne and provides Bowne with
EDGAR Online services in its offices. Bowne also pays EDGAR Online for
advertising it places on the EDGAR Online site. In 1998, EDGAR Online charged
Bowne a total of $52,350 for these services. We believe that the terms of our
agreements with Bowne are beneficial to EDGAR Online and no less favorable to
EDGAR Online than terms which might be available to us from unaffiliated third
parties.
GLOBIX CORPORATION
In July 1998, we issued a 10% convertible debenture in the principal amount
of $1,000,000 to Globix Corporation along with warrants to purchase 666,667
shares of common stock at an exercise price of $1.50 per share. The terms of the
transaction were determined as the result of arm's length bargaining between the
parties. As part of this transaction, our agreement with Bowne was amended to
modify certain of Bowne's rights and to include Globix as a party, thereby
providing Globix with the same anti-dilution rights, tag-along rights and Board
participation rights as Bowne. In 1999, Globix converted its
debenture and exercised its warrants, thereby acquiring 1,336,667 shares of our
common stock. In July 1998, we also entered into a five-year hosting contract
with Globix that requires us to co-locate our Internet servers at the Globix
facility in New York City. During 1998, we paid Globix a total of $6,513 under
this contract. We believe that the terms of our agreements with Globix are
beneficial to EDGAR Online and no less favorable to EDGAR Online than terms
which might be available to us from unaffiliated third parties.
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<PAGE> 55
PEQUOT SYSTEMS (iXL)
EDGAR Online and Pequot Systems ("Pequot") share equally the costs of a
single lease on 6,600 square feet of space. We occupy half of this space and are
jointly obligated with Pequot on the lease, which expires in April 2000. Since
our inception, we have outsourced our technology development to Pequot. During
1995, in partial payment for services rendered, Pequot received warrants to
purchase shares of common stock at an exercise price of $.05 per share. The
warrants were exercised in May 1997. In March 1998, Pequot agreed to accept
shares of our common stock valued at $1.25 per share in partial payment for
services rendered. As a result of these two transactions, Pequot received
359,384 shares of common stock. In 1998, we paid Pequot a total of $610,073 for
services provided. As a result of the acquisition of Pequot by iXL, an unrelated
company, in 1998, the shares owned by Pequot were transferred to Pequot's
founders, including Stefan Chopin, the founder and President of Pequot. Mr.
Chopin has been a member of our Board of Directors since 1996. We believe that
the terms of our agreements with Pequot are beneficial to EDGAR Online and no
less favorable to EDGAR Online than terms which might be available to us from
unaffiliated third parties.
TRACK DATA CORPORATION
In conjunction with our formation, Track Data Corporation, a business
information company and one of our principal stockholders, extended a $100,000
loan to EDGAR Online at an interest rate of prime plus 2% and received and
subsequently exercised warrants to purchase 810,572 shares of common stock.
Track Data purchases services from us, which are paid for through reductions in
the principal amount of this loan. During 1998, the loan was reduced by $17,250
in this fashion. At the end of 1998, the loan principal was $59,448 plus accrued
interest due of $27,304. We intend to repay any remaining principal and interest
with a portion of the proceeds from this offering.
SUSAN STRAUSBERG AND MARC STRAUSBERG
From time to time, we have received cash loans from and have made cash
advances to Susan Strausberg and Marc Strausberg, our founders. These loans bear
interest at the prime rate applied to the net outstanding balance. The net
amounts owed to EDGAR Online at December 31, 1996, 1997, 1998 were $17,432,
$51,114, $141,554, respectively. During this same period, Susan Strausberg and
Marc Strausberg agreed to defer all or most of their annual salaries of $150,000
each. The aggregate amount of deferred compensation for the two of them combined
at December 31, 1996, 1997 and 1998 was $300,000, $600,000 and $785,577,
respectively. These deferred salaries, net of the loans outstanding to them,
will be paid to Marc and Susan Strausberg upon consummation of this offering.
See "Use of Proceeds."
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<PAGE> 56
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of March 29, 1999 and as adjusted to
reflect the sale of the shares of common stock offered hereby by (1) each of our
directors, including our Chief Executive Officer, (2) our three most highly
compensated executive officers, other than our Chief Executive Officer, who were
serving as executive officers at the end of 1998, (3) all our executive officers
and directors as a group and (4) each person who we know owns beneficially more
than 5% of our common stock. The table also provides information with respect to
the number of shares of common stock that certain of our stockholders are
obligated to sell if the underwriters exercise their over-allotment option and
the impact that this will have on those stockholders' post-offering common stock
holdings. Unless otherwise indicated, the address of each beneficial owner
listed below is c/o EDGAR Online, Inc., 50 Washington Street, Norwalk, CT 06854.
<TABLE>
<CAPTION>
ASSUMING THE OVER-ALLOTMENT
OPTION IS EXERCISED BY THE
UNDERWRITERS
PERCENTAGE -----------------------------------
BENEFICIALLY OWNED SHARES TO BE PERCENT
NUMBER ---------------------- OFFERED BY THE BENEFICIALLY
OF BEFORE AFTER OVER-ALLOTMENT OWNED AFTER
NAME OF BENEFICIAL OWNER SHARES(1) OFFERING OFFERING(2) SELLING STOCKHOLDERS OFFERING
- ------------------------ ---------- -------- ----------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Executive Officers and Directors:
Susan Strausberg(3).............. 3,392,000 42.73% %
Marc Strausberg(4)............... 3,392,000 42.73% %
Tom Vos(5)....................... 240,000 2.95% %
Jay Sears(6)..................... 65,000 * *
Stefan Chopin(7)................. 339,384 4.28% %
c/o iXL Enterprises, Inc.
50 Washington Street
Norwalk, CT 06854
Bruce Bezpa...................... 0 * *
c/o Bowne & Co., Inc.
345 Hudson Street
New York, NY 10014
Marc Bell........................ 1,336,667 16.84% %
c/o Globix Corporation
295 Lafayette Street
New York, NY 10012(8)
Mark Maged....................... 0 * *
c/o Internet Tradeline, Inc.
111 West 40th Street
New York, NY 10018
All executive officers and
directors as a group (11
persons)...................... 5,433,051 65.91% %
</TABLE>
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<PAGE> 57
<TABLE>
<CAPTION>
ASSUMING THE OVER-ALLOTMENT
OPTION IS EXERCISED BY THE
UNDERWRITERS
PERCENTAGE -----------------------------------
BENEFICIALLY OWNED SHARES TO BE PERCENT
NUMBER ---------------------- OFFERED BY THE BENEFICIALLY
OF BEFORE AFTER OVER-ALLOTMENT OWNED AFTER
NAME OF BENEFICIAL OWNER SHARES(1) OFFERING OFFERING(2) SELLING STOCKHOLDERS OFFERING
- ------------------------ ---------- -------- ----------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Other 5% Stockholders:
Globix Corporation............... 1,336,667 16.84% %
295 Lafayette Street
New York, NY 10012
Bowne & Co., Inc................. 1,000,000 12.60% %
345 Hudson Street
New York, NY 10014
Track Data Corporation........... 810,572 10.21% %
56 Pine Street
New York, NY 10005
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Percentage ownership is based on shares outstanding as of March 29, 1999,
after giving pro forma effect to the conversion of a $1 million debenture
into 670,000 shares of common stock and the exercise of warrants into
696,667 shares of common stock. Shares of common stock subject to options
currently exercisable or exercisable within 60 days of March 29, 1999 are
deemed outstanding for the purpose of computing the percentage ownership of
the person holding such options but are not deemed outstanding for computing
the percentage ownership of any other person. Unless otherwise indicated
below, the persons and entities named in this table have sole voting and
sole investment power with respect to all shares beneficially owned, subject
to community property laws where applicable.
(2) Assumes no exercise of the underwriters' over-allotment option.
(3) Includes 1,696,000 shares owned by Ms. Strausberg's husband, Marc
Strausberg, EDGAR Online's Chairman of the Board. Ms. Strausberg disclaims
beneficial ownership of the shares owned by her husband.
(4) Includes 1,696,000 owned by Mr. Strausberg's wife, Susan Strausberg, EDGAR
Online's Chief Executive Officer. Mr. Strausberg disclaims beneficial
ownership of the shares owned by his wife.
(5) Includes 200,000 shares issuable upon exercise of options exercisable within
60 days of March 29, 1999.
(6) Includes 65,000 shares issuable upon exercise of options exercisable within
60 days of March 29, 1999.
(7) Includes shares owned jointly with Barbara Chopin, his wife.
(8) Includes 1,336,667 shares owned by Globix Corporation. Mr. Bell is the
President and Chief Executive Officer of Globix Corporation. In such
capacities, Mr. Bell may be deemed to be the beneficial owner of such
shares, although he disclaims beneficial ownership except to the extent of
his pecuniary interest, if any.
53
<PAGE> 58
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, our authorized capital
stock will consist of 30,000,000 shares of common stock, par value $0.01 per
share, and 1,000,000 shares of preferred stock, par value $0.01 per share. The
following summary description of the capital stock of EDGAR Online is qualified
in its entirety by reference to our amended and restated certificate of
incorporation and bylaws.
COMMON STOCK
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as our Board of Directors from time to time may
determine. Holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of shareholders. Cumulative voting for the
election of directors is not authorized by Edgar Online's certificate of
incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The common stock is
not entitled to preemptive rights and is not subject to conversion or
redemption. Upon the liquidation, dissolution or winding-up of EDGAR Online, the
holders of shares of common stock would be entitled to share ratably in the
distribution of all of EDGAR Online's assets remaining available for
distribution after satisfaction of all our liabilities and the payment of the
liquidation preference of any outstanding preferred stock. Each outstanding
share of common stock is, and all shares of common stock to be outstanding upon
completion of this offering will be upon payment therefor, duly and validly
issued, fully paid and nonassessable.
PREFERRED STOCK
Our Board of Directors is authorized, subject to any limitations prescribed
by Delaware law, to issue preferred stock in one or more series. The Board can
fix the rights, preferences and privileges of the shares of each series and any
qualifications, limitations or restrictions thereon.
The Board may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of common stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes could, under certain circumstances, have the effect of delaying,
deferring or preventing a change in control of Edgar Online. We have no current
plan to issue any shares of preferred stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, which regulates corporate takeovers. This section prevents
Delaware corporations that are subject to it from engaging, under certain
circumstances, in a "business combination," which includes a merger or sale of
more than 10% of the corporation's assets, with any "interested stockholder," or
a stockholder who owns 15% or more of the corporation's outstanding voting
stock, as well as affiliates and associates of any such persons, for three years
following the date that such stockholder became an "interested stockholder"
unless:
- the transaction in which such stockholder became an "interested
stockholder" is approved by the board of directors of the corporation
prior to the date the "interested stockholder" attained such status;
54
<PAGE> 59
- upon consummation of the transaction that resulted in the stockholder's
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of this
calculation those shares owned by persons who are directors and also
officers; or
- on or subsequent to such date, the "business combination" is approved by
the board of directors of the corporation and authorized at an annual or
special meeting of stockholders by the affirmative vote of at least
two-thirds of the outstanding voting stock that is not owned by the
"interested stockholder."
Our bylaws provide that stockholders may act only at an annual or special
meeting of stockholders and may not act by written consent. Our certificate of
incorporation and the bylaws provide that special meetings of the stockholders
may only be called by the Chairman of the Board, the Chief Executive Officer,
the Board or by any stockholder holding at least 25% of the outstanding common
stock. Such provisions may have the effect of delaying or preventing a
change-in-control.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer Corporation. Its address is 40 Wall Street, New York, New York 10005,
and its telephone number at this location is (212) 936-5100.
LISTING
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "EDGR."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock. Sales of substantial amounts of our common stock in the public market, or
the perception that such sales could occur, could adversely affect prevailing
market prices of our common stock and could impair our future ability to raise
capital through the sale of equity securities.
Upon completion of this offering, there will be an aggregate of
shares of our common stock outstanding, assuming no exercise of
the underwriters' over-allotment option and no exercise of outstanding options
or warrants. Of the outstanding shares, all the shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act, unless such shares are purchased by our "affiliates," as that
term is defined in Rule 144 under the Securities Act. Those
shares of common stock held by our existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act and are
subject to certain lock-up agreements described below. Even after the lock-ups
expire, restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules 144
or 701 under the Securities Act, which rules are summarized below. As described
below, certain of our shareholders have registration rights in respect of their
shares of common stock. The registration of any of these shares would result in
those shares becoming freely tradeable without restriction under the Securities
Act immediately upon effectiveness of the applicable registration statement.
55
<PAGE> 60
LOCK-UP AGREEMENTS
All our officers, directors and existing stockholders have signed "lock-up"
agreements under which they have agreed not to transfer or dispose of, directly
or indirectly, any shares of common stock or any securities convertible into or
exercisable or exchangeable for shares of common stock, for a period of 12
months after the date of this prospectus without the prior written consent of
C.E. Unterberg, Towbin. See "Underwriting -- Lock-up Agreements."
RULE 144
In general, under Rule 144, as currently in effect, a person who owns
shares that were acquired from us or an affiliate of us at least one year prior
to the proposed sale is entitled to sell, within any three-month period
beginning 90 days after the date of this prospectus, a number of shares that
does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering
or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
RULE 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates for purposes of the Securities Act at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years, including the holding period of any prior owner other
than an affiliate of us, is entitled to sell such shares without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144. Therefore, unless otherwise restricted, "144(k) shares" may be sold
immediately upon the completion of this offering.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock or option plan or other written agreement
is eligible to resell such shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with certain
restrictions, including the holding period, contained in Rule 144.
REGISTRATION RIGHTS
Pursuant to the terms of registration rights agreements entered into
between us and certain of our stockholders, the holders of 2,770,000 share of
common stock are entitled to "piggyback" registration rights concerning the
registration of shares of common stock under the Securities Act. In the event
that we propose to register any shares of common stock under the Securities Act,
either for our own account or for the account of other security holders, the
stockholders having piggyback rights are entitled to receive notice of that
registration and are entitled to include their shares in the registration,
subject to various limitations described below. The above registration
56
<PAGE> 61
rights are subject to customary conditions and limitations, including the right
of the underwriters of an offering to limit the number of shares of common stock
held by security holders with registration rights to be included in that
registration. We are generally required to bear all of the expenses of all these
registrations, except underwriting discounts and commissions. The registration
of any of the shares of common stock held by stockholders with registration
rights would result in these shares becoming freely tradable without restriction
under the Securities Act immediately upon effectiveness of that registration
statement.
57
<PAGE> 62
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among us and the underwriters, each of the underwriters named below, for whom
C.E. Unterberg, Towbin and Fahnestock & Co. Inc. are acting as representatives,
has severally agreed to purchase from us the number of shares of common stock
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
C.E. Unterberg, Towbin......................................
Fahnestock & Co. Inc........................................
------
Total..................................................
======
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions. The nature of the underwriters'
obligations is that they are committed to purchase and pay for all of the above
shares of common stock if any are purchased.
PUBLIC OFFERING PRICE AND DEALERS CONCESSION
The underwriters propose initially to offer the shares of common stock
offered by this prospectus to the public at the public offering price per share
set forth on the cover page of this prospectus and to certain dealers at that
price less a concession not in excess of $ per share. The underwriters may
allow, and these dealers may reallow, a discount not in excess of $ per
share on sales to certain other dealers. After commencement of this offering,
the offering price, discount price and reallowance may be changed by the
underwriters. No such change will alter the amount of proceeds to be received by
us as set forth on the cover page of this prospectus.
OVER-ALLOTMENT OPTION
Certain selling shareholders have granted the underwriters an option, which
may be exercised within 30 days after the date of this prospectus, to purchase
up to additional shares of common stock to cover over-allotments,
if any, at the initial public offering price, less the underwriting discount set
forth on the cover page of this prospectus. If the underwriters exercise their
over-allotment option to purchase any of these additional shares of
common stock, these additional shares will be sold by the underwriters on the
same terms as those on which the shares offered by this prospectus are being
sold. The selling shareholders will be obligated, pursuant to the over-allotment
option, to sell shares to the underwriters if the underwriters exercise their
over-allotment option. The underwriters may exercise their over-allotment option
only to cover over-allotments made in connection with the sale of the shares of
common stock offered by this prospectus. The names of the selling shareholders,
and the amounts they are respectively obligated to sell if the underwriters
exercise their over-allotment option, are set forth under the heading "Principal
Stockholders."
58
<PAGE> 63
UNDERWRITING COMPENSATION
The following table summarizes the compensation to be paid to the
underwriters by us and the selling shareholders who have granted the
underwriters the over-allotment option:
<TABLE>
<CAPTION>
TOTAL
--------------------------------
PER WITHOUT WITH
SHARE OVER-ALLOTMENT OVER-ALLOTMENT
-------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts paid by us............
Underwriting discounts paid by the selling
shareholders...............................
</TABLE>
INDEMNIFICATION OF UNDERWRITERS
We have agreed to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in connection with these
liabilities.
UNDERWRITERS' WARRANTS
Upon completion of this offering, we will sell to the underwriters, for
their own accounts, warrants covering an aggregate of up to shares of
common stock exercisable at a price equal to 110% of the initial public offering
price set forth on the cover page of this prospectus. The underwriters will pay
a price of $ per warrant. The underwriters may exercise these warrants
as to all or any lesser number of the underlying shares of common stock
commencing on the first anniversary of the date of this offering until the fifth
anniversary of the date of this offering. The terms of these warrants require us
to register the common stock for which these warrants are exercisable within one
year from the date of the prospectus. These underwriters' warrants are not
transferable by the warrant holders other than to officers and partners of the
underwriters. The exercise price of these underwriters' warrants and the number
of shares of common stock for which these warrants are exercisable are subject
to adjustment to protect the warrant holders against dilution in certain events.
In addition, as compensation for the placement of 120,000 shares of common stock
in a March 1999 private placement, we issued C.E. Unterberg, Towbin warrants to
purchase 12,000 shares of common stock at an exercise price of $4.50 per share.
LOCK-UP AGREEMENTS
We, and all of our directors, officers, and substantially all of our
existing stockholders, option holders and warrant holders have agreed to a
"lock-up" arrangement under which we and they may not offer, sell, contract to
sell, pledge or otherwise dispose of, or file a registration statement with the
SEC in respect of, or establish or increase a put position within the meaning of
Section 16 of the Exchange Act with respect to any shares of capital stock of
EDGAR Online or any securities convertible into or exercisable or exchangeable
for such capital stock, or publicly announce an intention to effect any such
transaction, in each case without the prior written consent of C.E. Unterberg,
Towbin for a period of one year after the date of this prospectus, subject to
certain exceptions. Certain selling stockholders have, however, granted the
underwriters an option to purchase up to additional shares of common
stock to cover over-allotments, if any, at the initial public offering price
less the underwriting discount. The terms of the lock-up agreement entered into
with these selling stockholders will permit them to sell those shares that they
are obligated to sell if the underwriters exercise their over-allotment option.
See "-- Over-allotment Option."
59
<PAGE> 64
STABILIZATION AND OTHER TRANSACTIONS
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the common stock. These transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M under the Exchange Act,
pursuant to which the underwriters may bid for, or purchase, common stock for
the purpose of stabilizing the market price. The underwriters also may create a
short position by selling more common stock in connection with this offering
than they are committed to purchase from us, and in such case may purchase
common stock in the open market following completion of this offering to cover
all or a portion of such short position. In addition, the underwriters may
impose "penalty bids" whereby they may reclaim from a dealer participating in
this offering, the selling concession with respect to the common stock that it
distributed in this offering, but which was subsequently purchased for the
accounts of the underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
common stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in the paragraph is required, and, if
they are undertaken, they may be discontinued at any time.
DISCRETIONARY ACCOUNTS
The underwriters have informed us that they do not intend to confirm sales
to any account over which they exercise discretionary authority.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no market for our common stock.
Accordingly, the initial public offering price for the common stock was
determined by negotiation between us and the underwriters. Among the factors
considered in determining the initial public offering price were our record of
operations, our current financial condition, our future prospects, the state of
the markets for our services, the experience of our management, the economics of
the online information industry in general, the general condition of the equity
securities market and the demand for similar securities of companies considered
comparable to us.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Littman Krooks Roth & Ball P.C., New York, New York. Certain
members of Littman Krooks Roth & Ball P.C. own in the aggregate 7,500 shares of
common stock. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The financial statements and schedule of EDGAR Online, Inc. as of December
31, 1998 and 1997, and for each of the years in the three-year period ended
December 31, 1998, have been included herein and in the registration statement
in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
60
<PAGE> 65
ADDITIONAL INFORMATION
EDGAR Online has filed a registration statement on Form S-1 with the SEC
with respect to the shares of common stock to be sold in this offering. This
prospectus, which forms a part of that registration statement, does not contain
all of the information included in the registration statement. Certain
information is omitted and you should refer to the registration statement and
its exhibits. With respect to references made in this prospectus to any contract
or other document of EDGAR Online, such references are not necessarily complete
and you should refer to the exhibits attached to the registration statement for
copies of the actual contract or document. You may review a copy of the
registration statement at the SEC's public reference room in Washington, D.C.,
and at the SEC's regional offices in Chicago, Illinois and New York, New York.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of its public reference rooms. The registration statement can also be reviewed
by accessing the SEC's Web site at http://www.sec.gov.
As a result of this offering, EDGAR Online will become subject to the
information and reporting requirements of the Securities Exchange Act of 1934
and will file periodic reports, proxy statements and other information with the
SEC. Upon approval of the common stock for quotation on the Nasdaq National
Market, these reports, proxy statements and other information may also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
EDGAR Online intends to furnish its stockholders with annual reports
containing audited financial statements and with quarterly reports for the first
three quarters of each year containing unaudited interim financial information.
61
<PAGE> 66
EDGAR ONLINE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report................................ F-2
Balance Sheets as of December 31, 1997 and 1998............. F-3
Statements of Operations for the Years Ended December 31,
1996, 1997, and 1998...................................... F-4
Statements of Changes in Stockholders' Equity (Deficit) for
the Years Ended December 31, 1996, 1997, and 1998......... F-5
Statements of Cash Flows for the Years Ended December 31,
1996, 1997, and 1998...................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 67
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
EDGAR Online, Inc.:
We have audited the accompanying balance sheets of EDGAR Online, Inc. as of
December 31, 1997 and 1998 and the related statements of operations, changes in
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of EDGAR Online, Inc. as of
December 31, 1997 and 1998 and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
Stamford, CT
February 12, 1999, except for note 13a,
which is as of March 25, 1999, and notes 13b
and c, which are as of March 30, 1999
F-2
<PAGE> 68
EDGAR ONLINE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------- DECEMBER 31,
1997 1998 1998
----------- ---------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash......................................... $ 16,809 148,380 148,380
Accounts receivable, less allowance for
doubtful accounts of $22,500 and $31,542,
respectively.............................. 49,090 134,815 134,815
Other........................................ 1,000 6,710 6,710
----------- ---------- ----------
Total current assets................. 66,899 289,905 289,905
Property and equipment, net.................... 286,672 411,720 411,720
Deferred financing costs....................... -- 77,018 --
Other assets................................... 12,683 6,300 6,300
----------- ---------- ----------
Total assets......................... $ 366,254 784,943 707,925
=========== ========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of notes payable............. $ 601,697 59,448 59,448
Accounts payable and accrued expenses........ 726,127 395,708 395,708
Deferred revenues............................ 78,355 208,451 208,451
Due to employee.............................. -- 14,575 14,575
Capital lease payable, current portion....... -- 52,477 52,477
----------- ---------- ----------
Total current liabilities............ 1,406,179 730,659 730,659
Notes payable, long-term....................... -- 1,414,410 500,000
Capital lease obligation, long-term............ -- 82,993 82,993
Accrued interest payable....................... -- 133,804 100,471
Due to officers, net........................... 548,886 644,023 644,023
----------- ---------- ----------
Total liabilities.................... 1,955,065 3,005,889 2,058,146
Stockholders' equity (deficit):
Common stock, $.01 par value, 8,000,000
shares authorized, 6,074,000 and 6,331,290
shares issued and outstanding at December
31, 1997 and 1998, respectively
(7,001,290, pro forma at December 31,
1998)..................................... 60,740 63,313 70,013
Additional paid-in capital................... 875,435 2,462,201 3,403,244
Accumulated deficit.......................... (2,524,986) (4,746,460) (4,823,478)
----------- ---------- ----------
Total stockholders' deficit.......... (1,588,811) (2,220,946) (1,350,221)
----------- ---------- ----------
Total liabilities and stockholders'
deficit........................... $ 366,254 784,943 707,925
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 69
EDGAR ONLINE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Individual subscription revenue............... $ 99,661 451,939 894,851
Corporate contract revenue.................... 70,161 218,847 292,904
Advertising revenue........................... -- 166,671 472,922
Barter advertising revenue.................... -- 206,681 263,440
Other barter revenue.......................... -- -- 79,000
--------- ----------- -----------
169,822 1,044,138 2,003,117
--------- ----------- -----------
Cost of revenues:
Software and Web site development............. 226,514 676,522 782,889
Barter advertising expense.................... -- 206,681 263,440
--------- ----------- -----------
226,514 883,203 1,046,329
--------- ----------- -----------
Gross profit.......................... (56,692) 160,935 956,788
Operating expenses:
Selling, general and administrative........... 663,750 1,193,014 1,615,122
Advertising costs............................. 42,614 167,009 297,599
Stock compensation expense.................... -- -- 1,133,000
--------- ----------- -----------
706,364 1,360,023 3,045,721
--------- ----------- -----------
Loss from operations.................. (763,056) (1,199,088) (2,088,933)
Interest expense and other, net................. 72,547 298,561 132,291
--------- ----------- -----------
Loss before income taxes.............. (835,603) (1,497,649) (2,221,224)
Income tax expense.............................. 250 250 250
--------- ----------- -----------
Net loss.............................. $(835,853) $(1,497,899) $(2,221,474)
========= =========== ===========
Basic and diluted net loss per share............ $ (0.19) (0.26) (0.36)
========= =========== ===========
Basic and diluted weighted average shares
outstanding................................... 4,302,466 5,655,151 6,129,116
========= =========== ===========
Pro forma basic and diluted loss per share...... -- -- $ (0.34)
===========
Number of shares used in computing pro forma
basic and diluted loss per share.............. -- -- 6,408,283
===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 70
EDGAR ONLINE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
COMMON STOCK
------------------- PAID-IN- ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... 4,000,000 $40,000 99,250 (191,234) (51,984)
Exercise of warrants............... 400,000 4,000 1,000 -- 5,000
Debt issued with beneficial
conversion feature............... -- -- 37,500 -- 37,500
Issuance of common stock........... 400,000 4,000 458,500 -- 462,500
Issuance of warrants for services
provided......................... -- -- 26,000 -- 26,000
Net loss........................... -- -- -- (835,853) (835,853)
--------- ------- --------- ---------- ----------
Balance at December 31, 1996....... 4,800,000 48,000 622,250 (1,027,087) (356,837)
Exercise of warrants............... 1,274,000 12,740 3,185 -- 15,925
Debt issuance with beneficial
conversion feature............... -- -- 250,000 -- 250,000
Net loss........................... -- -- -- (1,497,899) (1,497,899)
--------- ------- --------- ---------- ----------
Balance at December 31, 1997....... 6,074,000 60,740 875,435 (2,524,986) (1,588,811)
Exercise of warrants............... 53,957 540 49,461 -- 50,001
Issuance of common stock in
satisfaction of trade payables... 100,000 1,000 124,000 -- 125,000
Issuance of common stock........... 103,333 1,033 143,967 -- 145,000
Stock compensation................. -- -- 1,133,000 -- 1,133,000
Issuance of warrants for services
provided and debt financing...... -- -- 136,338 -- 136,338
Net loss........................... -- -- -- (2,221,474) (2,221,474)
--------- ------- --------- ---------- ----------
Balance at December 31, 1998....... 6,331,290 $63,313 2,462,201 (4,746,460) (2,220,946)
========= ======= ========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 71
EDGAR ONLINE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................. $(835,853) (1,497,899) (2,221,474)
--------- ---------- ----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock compensation expense........................ -- -- 1,133,000
Depreciation and amortization..................... 17,688 55,334 116,767
Accretion and amortization of debt discount....... 37,500 250,000 17,118
Provisions for bad debts.......................... -- 22,500 62,207
Noncash service expenses.......................... 26,000 -- 33,630
Noncash service revenue........................... -- (12,000) (42,250)
Changes in assets and liabilities:
Accounts receivable............................. (34,168) (37,422) (147,932)
Other assets.................................... (10,975) (875) 13,096
Accounts payable and accrued expenses........... 127,583 589,809 (205,419)
Accrued interest................................ -- -- 133,804
Due to employee................................. -- -- 14,575
Due to officers, net............................ 300,000 266,318 95,137
Deferred revenues............................... 31,190 47,165 130,096
--------- ---------- ----------
Total adjustments............................ 494,818 1,180,829 1,353,829
--------- ---------- ----------
Net cash used in operating activities........ (341,035) (317,070) (867,645)
--------- ---------- ----------
Cash flows from investing activities:
Capital expenditures................................. (112,312) (224,132) (78,127)
Other................................................ (1,764) -- --
--------- ---------- ----------
Net cash used in investing activities........ (114,076) (224,132) (78,127)
--------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of notes payable and
warrants.......................................... 91,500 545,000 1,000,000
Proceeds from issuance of common stock............... 387,500 15,925 155,000
Costs incurred in connection with the sale of common
stock............................................. -- -- (10,000)
Costs incurred in connection with debt financing..... -- -- (89,440)
Proceeds upon exercise of warrants................... 5,000 -- 50,001
Principal payments on notes payable.................. (11,083) (20,000) --
Payments on capital lease obligations................ -- -- (28,218)
--------- ---------- ----------
Net cash provided by financing activities.... 472,917 540,925 1,077,343
--------- ---------- ----------
Net increase (decrease) in cash.............. 17,806 (277) 131,571
Cash at beginning of year.............................. -- 17,086 16,809
--------- ---------- ----------
Cash at end of year.................................... $ 17,806 16,809 148,380
========= ========== ==========
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes............................................. $ -- 250 250
Interest.......................................... $ 167 -- 7,751
Accounts payable settled upon issuance of common
stock................................................ $ -- -- 125,000
Notes payable settled in exchange for services
provided............................................. $ -- 12,000 42,250
Stock warrants issued in exchange for services
provided............................................. $ 26,000 -- 33,630
Equipment acquired under capital leases................ $ -- -- 163,688
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 72
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
(1) DESCRIPTION OF BUSINESS
EDGAR Online, Inc. (the Company), formerly Cybernet Data Systems, Inc., was
incorporated in the State of Delaware in November 1995 and launched its "EDGAR
Online" Internet Web site in January 1996. The Company is a Web-based provider
of business, financial, and competitive information derived from the EDGAR
(Electronic Data Gathering, Analysis, and Retrieval) document filing system
maintained by the U.S. Securities and Exchange Commission (SEC). The Company has
entered into several arrangements with other Internet service providers to
market financial information services.
Inherent in the Company's mission are various risks and uncertainties,
including its limited operating history, unproven business model and the limited
history of commerce on the Internet. The Company's success may depend in part
upon the emergence and acceptance of the Internet as a communication and
information medium, prospective project development efforts and the acceptance
by the market place of the Company's products and services.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) REVENUE RECOGNITION
Revenue from subscriptions and corporate contracts are recognized over the
subscription period, which is typically three, six or twelve months. Revenue
from advertising is recognized as the services are provided.
(b) BARTER TRANSACTIONS
Barter advertising revenue is non-cash and relates to advertising placed on
the Company's Web site by other Internet service providers. Barter advertising
expense is non-cash and relates to Company advertising placed on the Web sites
of other Internet service providers. The amount of barter advertising revenue
and expense is recorded at the lower of the estimated fair value of advertising
placed or received.
During 1998, the Company also received computer equipment and publication
advertisements in exchange for use of the Company's Web site services. The
Company accounts for such barter transactions at the fair value of goods or
services received or services provided, whichever is more objectively
determinable. Barter revenues related to the computer equipment barter
transaction and the publication advertisements are recognized ratably over the
term of the contract. Barter expense related to the publications advertisements
transaction is recognized ratably over the year, which approximates the timing
of the publications printing. Barter expense for the computer equipment exchange
is recognized as depreciation expense over the useful lives of the assets.
The Company expects that barter transactions will represent a significantly
smaller percentage of total activity in the future.
(c) WEB SITE DEVELOPMENT COSTS
The costs incurred to develop the Company's "EDGAR Online" Internet Web
site are principally performed under contract with an Internet Web site
developer. Software development costs are required to be capitalized when a
product's technological feasibility has been established by completion of a
working model of the product and ending when a product is available for
F-7
<PAGE> 73
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
general release to customers. To date, completion of a working model of the
Company's products and general release have substantially coincided. As a
result, the Company has not capitalized any software development costs.
(d) CASH AND CASH EQUIVALENTS
The Company considers cash and all highly liquid investments with original
maturities of ninety days or less to be cash and cash equivalents.
(e) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost or at estimated fair value if
part of a barter transaction. Depreciation is computed using the straight-line
method over the estimated useful lives of the related assets, generally three to
seven years. Leasehold improvements are amortized using the straight-line method
over the estimated useful lives of the assets or the term of the leases,
whichever is shorter.
(f) ADVERTISING EXPENSES
The Company expenses advertising costs as incurred.
(g) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, and for operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
(h) DEFERRED FINANCING COSTS
Deferred financing costs relate to the issuance of the Convertible
Debenture (see note 5) and are being amortized over the term of the related
debt, using the effective interest method. Amortization expense was $12,422 in
1998.
(i) STOCK-BASED TRANSACTIONS
The Company accounts for stock-based transactions in accordance with
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123). In accordance with SFAS 123, the Company
has elected to measure stock-based employee compensation arrangements in
accordance with the provisions of APB No. 25, "Accounting for Stock Issued to
Employees," (APB 25) and comply with the disclosure provisions of SFAS No. 123.
Under APB 25, compensation cost is recognized based on the difference, if any,
on the date of grant between the fair value of the Company's common stock and
the exercise price.
F-8
<PAGE> 74
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company accounts for the issuance of equity instruments to
non-employees in exchange for services at either the fair value of the equity
instrument given or the fair value of the services rendered, whichever is more
reliably measurable.
(j) CONCENTRATION OF RISK AND FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist of accounts receivable.
The Company's customers are geographically dispersed throughout the United
States with no one customer accounting for more than 10% of sales during 1996,
1997 or 1998 or of accounts receivable at December 31, 1997 or 1998. In
addition, the Company has not experienced any significant credit losses to date
from any one customer.
The fair value of the Company's cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities at December 31, 1997 and
1998, approximate their financial statement carrying value because of the
short-term maturity of these instruments.
(k) LOSS PER SHARE
Loss per share is presented in accordance with the provisions of SFAS No.
128, "Earnings Per Share", (SFAS 128) and the Securities and Exchange Commission
(SEC) Staff Accounting Bulletin No 98. Under SFAS 128, Basic EPS excludes
dilution for common stock equivalents and is computed by dividing income or loss
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted and resulted in the issuance of common stock.
Basic earnings per share are computed using the weighted average number of
common shares outstanding during the period. Pursuant to SEC Staff Accounting
Bulletin No. 98, common stock and convertible preferred stock issued for nominal
consideration, prior to the anticipated effective date of an IPO, are required
to be included in the calculation of basic and diluted earnings per share, as if
they were outstanding for all periods presented. To date, the Company has not
had any issuances or grants for nominal consideration.
Diluted loss per share has not been presented separately, as the
outstanding stock options, warrants and convertible debentures are anti-dilutive
for each of the periods presented.
Anti-dilutive potential common shares outstanding were 1,489,099, 829,545,
and 653,400 for the years ended December 31, 1996, 1997, and 1998, respectively.
(l) BUSINESS SEGMENTS
In June 1997, the Financial Accounting Standard Board (FASB) issued SFAS
No. 131, "Disclosure about Segments of an Enterprise and Related Information"
(SFAS 131). SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. The Company has determined that it does not have any
separately reportable business segments.
F-9
<PAGE> 75
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(m) COMPREHENSIVE INCOME
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income" (SFAS 130) during 1998. SFAS 130 requires the Company to
report in its financial statements, in addition to its net income (loss),
comprehensive income (loss), which includes all changes in equity during a
period from non-owner sources including, as applicable, foreign currency items,
minimum pension liability adjustments and unrealized gains and losses on certain
investments in debt and equity securities. There were no differences between the
Company's comprehensive loss and its net loss as reported.
(n) USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(o) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides
guidance for determining whether computer software is internal-use software and
on accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. The Company does not believe that the
adoption of SOP 98-1 will have a material impact on its results of operations or
financial position.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," (SFAS 133) which establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
This statement is not expected to have a material impact on the Company's
results of operation or financial position.
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1998 is summarized as
follows:
<TABLE>
<CAPTION>
1997 1998
-------- ---------
<S> <C> <C>
Purchased software............................... $105,910 $ 109,849
Equipment, and furniture and fixtures............ 244,562 482,438
Leasehold improvements........................... 7,673 7,673
-------- ---------
Subtotal.................................... 358,145 599,960
Less accumulated depreciation.................... (71,473) (188,240)
-------- ---------
$286,672 $ 411,720
======== =========
</TABLE>
F-10
<PAGE> 76
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation and amortization expense for the years ended December 31,
1996, 1997 and 1998 was $17,688, $55,334 and $116,767, respectively.
(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at December
31, 1997 and 1998.
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Accounts payable.......................................... $614,417 $328,764
Compensation and related benefits......................... 8,771 17,240
Interest.................................................. 57,463 27,304
Other..................................................... 45,476 22,400
-------- --------
$726,127 $395,708
======== ========
</TABLE>
(5) NOTES PAYABLE
Notes payable consist of the following at December 31, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
--------- ----------
<S> <C> <C>
Convertible Debenture(a)............................... $ -- $ 914,410
Promissory notes -- related party(b)................... 500,000 500,000
Promissory notes(c).................................... 101,697 59,448
--------- ----------
Total notes payable.......................... 601,697 1,473,858
Less:
Current portion...................................... (601,697) (59,448)
--------- ----------
Notes payable, long-term............................... $ -- $1,414,410
========= ==========
</TABLE>
- -------------------------
(a) In July 1998, the Company received $1,000,000 in exchange for a $1,000,000
Convertible Debenture due July 2001 with interest accruing at 10% in years
two and three. The terms of this financing enable the lender to convert the
debenture into 670,000 shares of the Company's common stock. The lender also
received a warrant, expiring July 23, 1999, to purchase an additional
666,667 shares of the Company's common stock at $1.50 per share.
The Company has estimated the fair value of the warrant at the date of issue
and recorded $102,708 of the consideration received as a credit to
additional paid-in capital. Interest expense for 1998 includes $17,118 of
accretion of the debt discount resulting from the fair value of the warrants
and $33,333 relating to the year one interest holiday.
As part of the agreement, the Company has agreed to obtain hosting and other
Internet services at market prices for a period of five years from the
investor.
The fair value of the Convertible Debenture is estimated to approximate its
carrying value at December 31, 1998 as the debt was recorded at fair value
in July 1998 and there has been no significant change in the underlying
market rate or credit worthiness of the Company since that date.
F-11
<PAGE> 77
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(b) In January 1997, the Company entered into an agreement with a stockholder
for a $500,000 line of credit which was originally due on December 31, 1997,
but has been extended to February 28, 2000. Interest accrues at 12% of the
face amount annually. All borrowings are guaranteed by a principal
stockholder of the Company.
The agreement originally provided that the outstanding borrowings could be
converted at the sole discretion of the lending stockholder into common
stock at a conversion rate of $1.50 worth of common stock for each $1.00 of
borrowings converted. The favorable conversion rate represented a beneficial
conversion feature and, accordingly, $250,000 has been recorded as a credit
to additional paid-in capital at the issue date. Additional interest expense
of $250,000 has been included in 1997, as the original maturity of the
borrowing was December 31, 1997. In July 1998, the conversion feature was
deleted in connection with the issuance of the Convertible Debenture.
The fair value of the note at December 31, 1998 is estimated at
approximately $452,000 based on the amount of future cash flows associated
with the investment, discounted using an appropriate interest rate.
(c) In connection with a $100,000 loan under a line of credit established in
December 1995 in 1996, the Company has arranged with the lender to apply a
portion of the proceeds of credit card payments processed by the lender for
the Company to the loan balance. The loan is further reduced by the
offsetting of balances due from the lender for its monthly subscription
charge for use of the Company's Internet service. Interest accrues at 2%
over the prime rate established by a financial institution (10.25% at
December 31, 1998).
The loan is guaranteed by one of the principal stockholders and certain
Company common stock owned by the stockholder are pledged as collateral.
Outstanding amounts at December 31, 1997 and 1998 were $76,697 and $59,448,
respectively.
In 1997, the Company issued a noninterest bearing note and 40,001 warrants
exercisable at $1.25 per share in exchange for $25,000. The note was repaid
with services during the year ended December 31, 1998. The estimated value
of the warrants at the date of issuance is deemed insignificant.
At December 31, 1997 and 1998, the fair value of these notes payable
approximates their carrying value based on the amount of future cash flows
associated with the instrument, discounted using an appropriate interest
rate.
Interest expense and other financing charges for the years ended December
31, 1996, 1997, and 1998 totaled $72,547, $298,561, and $137,909, respectively.
(6) INCOME TAXES
Since its inception, the Company has incurred net operating losses and has
incurred no federal or state income tax expense. The provision for income taxes
for the years ended December 31, 1996, 1997 and 1998 consists entirely of the
State of Connecticut minimum tax. At December 31, 1998, the Company has
approximately $2,500,000 in federal and state operating loss carryforwards,
which are available to offset future taxable income, through 2012.
F-12
<PAGE> 78
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company's tax provision differed from the amount computed using the
federal statutory rate of 34% as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Expected federal income tax benefit at 34%..... $(284,105) $(509,201) $(765,650)
State taxes, net of federal expense............ (58,367) (73,749) (134,280)
Non-deductible interest expense................ 12,750 85,000 --
Other permanent differences.................... 4,226 5,610 3,882
Valuation allowance............................ 325,746 492,590 896,298
--------- --------- ---------
$ 250 $ 250 $ 250
========= ========= =========
</TABLE>
The Company's deferred tax assets and liabilities and related valuation
allowance as December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
1997 1998
--------- -----------
<S> <C> <C>
Deferred tax assets (liabilities):
Net operating loss carryforwards...................... $ 644,652 $ 1,003,915
Deferred compensation................................. 240,000 314,231
Accruals and other, net............................... (1,680) 7,924
Stock compensation expense............................ -- 453,200
Valuation allowance..................................... (882,972) (1,779,270)
--------- -----------
$ -- $ --
========= ===========
</TABLE>
Realization of the net operating loss carryforward benefit is dependent on
the Company being able to generate sufficient taxable income prior to the
expiration of the operating loss carryforwards. Due to the Company's short
operating history, a valuation allowance has been recorded for the entire amount
of the net deferred tax asset as the Company has concluded that it is not more
likely than not that there will be future taxable income sufficient to realize
the future taxable temporary differences and operating loss carryforwards prior
to their expiration.
(7) DUE TO OFFICERS
The Company has entered into compensation agreements with its two founding
stockholders that provide for combined annual compensation of $300,000
commencing in January 1996, payment of which is dependent upon the availability
of cash and other factors. Compensation expense of $300,000 has been recorded in
each of the years ended December 31, 1996, 1997 and 1998.
Due to officers represents deferred compensation of $300,000 for 1996,
$300,000 for 1997 and $185,577 for 1998 offset by other amounts due from the
officers of $51,114 and $141,554 at December 31, 1997 and 1998, respectively.
The entire liability is classified as long-term as the founding stockholders
have waived payment of these amounts until after January 1, 2000.
F-13
<PAGE> 79
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(8) STOCKHOLDERS' EQUITY
COMMON STOCK
On March 24, 1997, the Board of Directors of the Company declared and
approved a 4 for 1 stock split on its common shares. All share and per share
data has been retroactively adjusted to reflect this common stock split.
Upon the formation of the Company, the founders were issued 4,000,000
shares of the Company's common stock. In 1996, the Company sold 400,000 shares
of its common stock to an investor for $462,500. In 1998, the Company sold an
additional 103,333 shares of common stock for $145,000 in cash, net of related
offering expenses and issued 100,000 shares of common stock in satisfaction of
$125,000 of indebtedness.
STOCK WARRANTS
Since its inception, the Company has occasionally issued warrants to
purchase Company common stock in return for various services rendered or in
connection with certain debt financings.
Warrants issued in exchange for services totaled 104,000 and 63,333 for the
years ended December 31, 1996 and 1998, respectively. Based on estimated fair
values at the respective dates of issuance the Company has recorded professional
services expense and additional paid-in capital of $26,000 in 1996 and $33,630
in 1998.
Warrants issued in connection with debt financings totalled 666,667 in 1998
and have also been fair valued at their date of issuance. Additional interest
expense has been recorded for the year ended December 31, 1998 of $17,118. The
credit to additional paid-in-capital relating to the fair value of warrants
issued in connection with the debt financing during 1998 was $102,708.
Warrant activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WARRANTS WEIGHTED AVERAGE
GRANTED EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995........................ 1,570,000 $0.01
Granted................................................. 117,956 0.01
Exercised............................................... (400,000) 0.01
Canceled................................................ -- --
----------
Outstanding at December 31, 1996........................ 1,287,956 0.01
Granted................................................. -- --
Exercised............................................... (1,274,000) 0.01
Canceled................................................ -- --
----------
Outstanding at December 31, 1997........................ 13,956 0.00
Granted................................................. 770,001 1.45
Exercised............................................... (53,957) 0.93
Canceled................................................ -- --
----------
Outstanding at December 31, 1998........................ 730,000 $1.46
==========
</TABLE>
Included in the above table are 13,956 warrants outstanding at December 31,
1996 and 1997 that were granted pursuant to certain anti-dilution provisions of
the original warrant grant and accordingly have a $0.00 exercise price.
The weighted average contractual life of warrants outstanding at December
31, 1998 was .81 years. The warrants outstanding at December 31, 1997 have no
expiration.
F-14
<PAGE> 80
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(9) 1996 STOCK OPTION PLAN
In November, 1998, the Company adopted the 1996 Stock Option Plan (the 1996
Plan) whereby the Company's Board of Directors may grant stock options to
officers, employees, directors and consultants. The 1996 Plan authorizes the
issuance of options to purchase up to 800,000 shares of the Company's common
stock. Options granted may be either Incentive Stock Options (ISOs) or
Non-Qualified Stock Options. The exercise price and vesting schedule of the
options will be established on the grant date. However, the established exercise
price for ISOs may not be less than the fair market value of the Company's
common stock on the grant date. The 1996 Plan also provides that no options will
have a term of longer than ten years.
In November 1998, the Company formally granted 385,000 and 15,000
fully-vested options to purchase common stock to employees at exercise prices of
$0.25 and $1.25 per share, respectively, with a weighted average exercise price
of $0.29. The Company has recorded $1,133,000 of compensation expense in 1998
calculated as the difference between the exercise price and $3.12 per share, the
estimated fair market value of the Company's common stock at the grant date, as
determined by independent valuation. All of the options are exercisable at
December 31, 1998. There was no other option activity in 1998. At December 31,
1998, 800,000 shares of Company common stock were reserved for issuance under
the Plan.
As discussed in note 2, the Company has elected to continue to use APB 25
to measure compensation expense related to employee stock options and has
recorded compensation expense where the exercise price of the option was less
than the fair value of the stock on the date of grant. Had the Company
determined compensation expense based on the fair value of the option on the
grant date under SFAS 123, the Company's results of operations would have been
as follows:
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Net loss -- as reported..................................... $(2,221,474)
Net loss -- pro forma....................................... $(3,004,873)
Basic and diluted net loss per share -- as reported......... $ (0.36)
Basic and diluted net loss per share -- pro forma........... $ (0.49)
</TABLE>
The fair value of the options granted to employees in 1998, as calculated
under SFAS 123, ranged from $1.57 to $2.45 with a weighted average fair value of
$1.96 using the modified Black Scholes option pricing model, excluding
volatility assumption, using the following weighted average assumptions:
<TABLE>
<S> <C>
Risk free interest.......................................... 6.5%
Expected life............................................... 10 years
Expected dividend yield..................................... 0.0%
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
The Company leases space in Norwalk, Connecticut for its primary offices.
The cost of the office space which is shared by a co-tenant which is also a
stockholder of the Company is $6,600 per month. The Company also has rent
expense related to space leased from the Company's founding stockholders. Rent
expense totaled $17,775, $44,086 and $57,983 for the years ended
F-15
<PAGE> 81
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996, 1997 and 1998, respectively of which $17,775, $24,286 and
$18,383, respectively, related to space leased from the Company's founding
stockholder.
Future minimum lease payments under noncancelable operating leases and
capital leases (with initial or remaining lease terms in excess of one year) as
of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- --------
<S> <C> <C>
Year ending December 31,:
1999...................................................... $50,525 $ 63,195
2000...................................................... 15,805 63,195
2001...................................................... -- 26,076
------- --------
Total................................................ $66,330 $152,466
=======
Amount representing interest......................... (16,996)
--------
Net capital leases obligation...................... $135,470
========
</TABLE>
The amount currently payable under the capital lease at December 31, 1998
is $52,477.
(11) RELATED PARTY TRANSACTIONS
The Company provides services to two shareholders. Revenues from these
related parties totaled $6,000, $38,000 and $69,600 in 1996, 1997 and 1998,
respectively. Of the revenues received, $6,000, $12,000, and $17,250 were used
to satisfy a note payable to one shareholder. The Company also purchased
services from a shareholder, which totaled $209,463, $423,836, and $610,073 in
1996, 1997 and 1998, respectively.
(12) GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company incurred a loss of $835,853, $1,497,899 and
$2,221,474, for the years ended December 31, 1996, 1997 and 1998 and had
negative shareholders' equity of $2,220,946 at December 31, 1998. The Company
also has a working capital deficiency of $440,754 at December 31, 1998.
The Company expects to be able to raise additional capital either through
private placements of debt or equity securities or through an Initial Public
Offering (IPO) of its common stock (see note 13). There can be no assurances
that the Company will be successful in securing such private or public capital,
or that such amounts will be sufficient to satisfy future working capital.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that may be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, to obtain additional financing
or capital as may be required, and ultimately to attain profitability. There are
no assurances that these events will occur.
F-16
<PAGE> 82
EDGAR ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(13) SUBSEQUENT EVENTS (UNAUDITED)
(a) On March 25, 1999, the Board of Directors of the Company declared and
approved an increase in the number of authorized shares of common stock to
30,000,000, par value $0.01 per share, and authorized 1,000,000 shares of
preferred stock, par value $0.01 per share.
On March 25, 1999, the Company adopted the 1999 Stock Option Plan (the 1999
Plan) and the 1999 Outside Directors Stock Option Plan (the 1999 Directors
Plan). The 1999 Plan authorizes the issuance of options to purchase up to
600,000 shares of the Company's common stock under the same provisions as the
1996 Plan. The 1999 Directors Plan authorizes the issuance of options to
purchase up to 100,000 shares of the Company's common stock. No grants have been
made under the 1999 Plan or the 1999 Directors Plan.
On March 25, 1999, the Company granted 340,000 and 60,000 options at $4.50
and $4.00, respectively under the 1996 Plan. The Company will recognize $30,000
in compensation expense over the three year vesting period for options granted
with exercise prices less than fair market value at the grant date.
(b) On March 30, 1999, the Company completed the sale of an aggregate of
240,000 shares to three investors at $4.50 per share resulting in net proceeds
of $1,080,000. In addition to the shares, the investors also received 240,000
warrants which are exercisable at $1.50 per warrant if the Company does not
complete an IPO by December 31, 1999. These warrants will be automatically
cancelled following the closing of an IPO.
(c) On March 30, 1999, the Company filed a registration statement on Form
S-1 for the sale of its common stock to the public. In connection with this
filing the Company, its underwriters and the holder of the Convertible Debenture
agreed to convert the Convertible Debenture into 670,000 shares of the Company's
common stock upon the close of an IPO. In addition, certain holders of warrants
to purchase Company common stock also agreed to exercise the warrants into
696,667 shares upon the close of an IPO.
(14) PRO FORMA FINANCIAL INFORMATION
The pro forma balance sheet of December 31, 1998 given effect to the
conversion of the Convertible Debenture into 670,000 shares of Company common
stock. The pro forma Basic and Diluted loss per share gives effect to the
conversion as if the conversion took place in July 1998.
F-17
<PAGE> 83
[DESCRIPTION OF ARTWORK]
<PAGE> 84
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EDGAR
ONLINE, INC. OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF EDGAR ONLINE, INC. SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 6
Forward-Looking Statements............ 18
Use of Proceeds....................... 19
Dividend Policy....................... 19
Capitalization........................ 20
Dilution.............................. 21
Selected Financial Data............... 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 30
Management............................ 41
Certain Transactions.................. 50
Principal Stockholders................ 52
Description of the Capital Stock...... 54
Shares Eligible for Future Sale....... 55
Underwriting.......................... 58
Legal Matters......................... 60
Experts............................... 60
Additional Information................ 61
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, 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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SHARES
[LOGO]
EDGAR ONLINE, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
C.E. UNTERBERG, TOWBIN
FAHNESTOCK & CO. INC.
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid by the Registrant in connection with this offering
are as follows. All amounts other than the SEC registration fee, NASD filing fee
and Nasdaq National Market application fee are estimates.
<TABLE>
<S> <C>
SEC registration fee........................................ $9,591.00
NASD filing fee............................................. $
Nasdaq National Market listing fee.......................... $ *
Printing and engraving...................................... $ *
Legal fees and expenses..................................... $ *
Accounting fees and expenses................................ $ *
Blue sky fees and expenses (including legal fees)........... $ *
Transfer agent and registrar fees........................... $ *
Miscellaneous............................................... $ *
---------
Total............................................. $ *
=========
</TABLE>
- -------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act").
As permitted by the Delaware General Corporation Law, the Registrant's
Amended and Restated Certificate of Incorporation includes a provision that
eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Registrant or its stockholders, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) under section 174 of the Delaware General
Corporation Law (regarding unlawful dividends and stock purchases) or (iv) for
any transaction from which the director derived an improper personal benefit.
As permitted by the Delaware General Corporation Law, the Bylaws of the
Registrant provide that (i) the Registrant is required to indemnify its
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law, subject to certain very limited exceptions, (ii) the Registrant
may indemnify its other employees and agents as set forth in the Delaware
General Corporation Law, (iii) the Registrant is required to advance expenses,
as incurred, to its directors and executive officers in connection with a legal
proceeding to the fullest extent permitted by the Delaware General Corporation
Law, subject to certain very limited exceptions and (iv) the rights conferred in
the Bylaws are not exclusive.
II-1
<PAGE> 86
The Registrant intends to enter into indemnification agreements with each
of its directors and executive officers to give such directors and officers
additional contractual assurances regarding the scope of the indemnification set
forth in the Registrant's Amended and Restated Certificate of Incorporation and
to provide additional procedural protections. The Registrant, with approval by
the Registrant's Board of Directors, expects to obtain directors' and officers'
liability insurance. At present, there is no pending litigation or proceeding
involving a director, officer or employee of the Registrant regarding which
indemnification is sought, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification.
Reference is also made to Section of the Underwriting Agreement, which
provides for the indemnification of officers, directors and controlling persons
of the Registrant against certain liabilities, including liabilities under the
Securities Act. Section of the Underwriting Agreement also provides
that such Underwriters will contribute to certain liabilities of such persons
under the Securities Act.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1996, the Registrant has issued and sold (without payment
of any selling commission to any person) the following unregistered securities:
(1) In August 1996, the Registrant issued and sold 400,000 shares of
Common Stock to Bowne & Co. at a price per share of $1.25.
(2) In June 1998, the Registrant issued warrants to Hoover's Inc. to
purchase 40,001 shares of Common Stock at an exercise price per share
of $1.25 in consideration for professional services rendered.
(3) In July 1998, the Registrant issued its convertible debenture,
convertible into 670,000 shares of Common Stock, along with warrants
to purchase 666,667 shares of Common Stock at an exercise price per
share of $1.50 to Globix Corporation in exchange for $1,000,000.
(4) In August 1998, the Registrant issued warrants to each of Frederic Ury
and Neal Moscow to purchase 7,500 shares of Common Stock,
respectively, at an exercise price per share of $0.50 in consideration
for professional services rendered.
(5) In August 1998, the Registrant issued warrants to VM Equity Partners
to purchase 7,500 shares of Common Stock and 33,333 shares of Common
Stock at an exercise price per share of $0.50 and $1.50 respectively,
in consideration for professional services rendered.
(6) In November 1998, the Registrant issued warrants to each of Mitchell
Littman, Bernard Krooks and Richard Roth to purchase 2,500 shares of
Common Stock, respectively, at an exercise price per share of $0.50 in
consideration for professional services rendered.
(7) In December 1998, the Registrant issued 70,000 shares of Common Stock
to William F. Nicklin in exchange for $105,000.
(8) In December 1998, the Registrant issued 33,333 shares of Common Stock
to J. Shelby Bryan in exchange for $50,000.
(9) In December 1998, the Registrant issued 20,000 shares of Common Stock
to Juergen Goersch and 80,000 shares of Common Stock to Stefan Chopin
and Barbara Chopin in
II-2
<PAGE> 87
exchange for the cancellation of a $125,000 liability owed by the
Registrant to Pequot Systems (iXL).
(10) In January 1999, the Registrant issued warrants to VM Equity Partners
to purchase 5,167 shares of Common Stock at an exercise price per
share of $1.50 in consideration for professional services rendered.
(11) In March 1999, the Registrant issued warrants to VM Equity Partners to
purchase 6,000 shares of Common Stock at an exercise price per share
of $4.50 in consideration for professional services rendered.
(12) In March 1999, the Registrant issued 110,000 shares to VMR Luxembourg
in exchange for $495,000.
(13) In March 1999, the Registrant issued 10,000 shares to Speech
Comparison Technologies in exchange for $45,000.
(14) In March 1999, the Registrant issued 120,000 shares to [ ] in
exchange for $495,000.
(15) From November 11, 1998 through March 25, 1999, the Registrant granted
stock options to purchase an aggregate of 800,000 shares of Common
Stock to employees and directors with exercise prices ranging from
$.25 to $4.50 per share pursuant to the Registrant's 1996 Stock Option
Plan in consideration for services.
(16) In March 1999, the Registrant issued warrants to VM Equity Partners to
purchase 33,500 shares of Common Stock at an exercise price per share
of $1.492535 in consideration for professional services rendered.
(17) In March 1999, the Registrant issued warrants to C.E. Unterberg,
Towbin to purchase 12,000 shares of Common Stock at an exercise price
of $4.50 per share in consideration for professional services.
Exemption from registration for the transactions described above was
claimed pursuant to Section 4(2) of the Securities Act of 1933, as amended,
regarding transactions by the issuer not involving a public offering, in that
these transactions were made, without general solicitation or advertising, to
sophisticated investors with access to all relevant information necessary to
evaluate these investments and who represented to the Registrant that the shares
were being acquired for investment.
II-3
<PAGE> 88
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <S>
1.01 Form of Underwriting Agreement.
3.01 Certificate of Incorporation, as amended.
3.02 Amended and Restated Certificate of Incorporation.*
3.03 Bylaws.*
3.04 Amended and Restated Bylaws. *
4.01 Form of Specimen Stock Certificate for the Registrant's
Common Stock.*
4.02 10% Convertible Subordinated Debenture due 2001.
4.03 Warrant to Purchase Common Stock.
5.01 Opinion of Littman Krooks Roth & Ball P.C. regarding
legality of securities being registered.*
10.01 Form of Indemnity Agreement to be entered into between the
Registrant with each of its directors and executive
officers.*
10.02 1996 Stock Option Plan.
10.03 1999 Stock Option Plan.*
10.04 1999 Outside Director Stock Option Plan.*
10.05 Employment Agreement dated as of January 1, 1996 between the
Registrant and Marc Strausberg.*
10.06 Employment Agreement dated as of January 1, 1996 between the
Registrant and Susan Strausberg.*
10.07 Employment Agreement, dated as of , between
the Registrant and Tom Vos.*
10.08 Employment Agreement, dated as of , between
the Registrant and Greg Adams.*
10.09 Employment Agreement, dated as of , between
the Registrant and Brian Fitzpatrick.*
10.10 Employment Agreement, dated as of May 19, 1997, between the
Registrant and Jay Sears.*
10.11 Equity Purchase Agreement by and among Cybernet Data
Systems, Bowne & Co., Inc., Globix Corporation, Marc
Strausberg, Susan Strausberg and Michael Horowitz as amended
and restated.*
10.12 Securities Purchase Agreement, dated as of July 23, 1998 by
and between Cybernet Data Systems Inc. and Globix
Corporation.
10.13 Form of Registration Rights Agreement for December 1998
Investors.*
10.14 Form of Subscription Agreement, including registration
rights, for March 1999 Investors.*
10.15 Lease Agreement, dated April 4, 1997 by and between 50
Washington Street Realty Corp., Pequot Systems, Inc and
Cybernet Data Systems, Inc.
10.16 Dissemination Services Agreement dated September 11, 1998 by
and between TRW, Inc. and Cybernet Data Systems, Inc.
</TABLE>
II-4
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <S>
10.17 Trademark License Agreement dated between the
US Securities & Exchange Commission and EDGAR Online, Inc.*
10.18 Agreement dated March 1, 1998 by and between Cybernet Data
Systems, Inc and Pequot Systems, Inc.*
10.19 Form of Content License Agreement.*
23.01 Consent of Littman Krooks Roth & Ball P.C. (included in
Exhibit 5.01).*
23.02 Report on Schedule and Consent of KPMG LLP.
24.01 Power of Attorney (see Page II-5 of the Registration
Statement).
27.01 Financial Data Schedule (EDGAR Version Only).
</TABLE>
- -------------------------
* To be filed by amendment.
(b) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted because they are not required under the related instructions or are
inapplicable, or because the information has been provided in the Financial
Statement or the Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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 such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of South Norwalk, State of
Connecticut, on the day of March, 1999.
EDGAR ONLINE, INC.
By: /s/ SUSAN STRAUSBERG
---------------------------------------
Susan Strausberg
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Susan Strausberg, Marc Strausberg and Tom
Vos, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462 promulgated under the
Securities Act, and all post-effective amendments thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act, this
Registration Statement was signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ SUSAN STRAUSBERG Chief Executive Officer, and March , 1999
- --------------------------------------------------- Director
Susan Strausberg
PRINCIPAL FINANCIAL AND PRINCIPAL ACCOUNTING
OFFICER:
/s/ GREG D. ADAMS Chief Financial Officer March , 1999
- ---------------------------------------------------
Greg D. Adams
DIRECTORS:
/s/ MARC STRAUSBERG Chairman of the Board March , 1999
- ---------------------------------------------------
Marc Strausberg
</TABLE>
II-6
<PAGE> 91
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ SUSAN STRAUSBERG Director March , 1999
- ---------------------------------------------------
Susan Strausberg
/s/ TOM VOS Director March , 1999
- ---------------------------------------------------
Tom Vos
/s/ MARC BELL Director March , 1999
- ---------------------------------------------------
Marc Bell
/s/ STEFAN CHOPIN Director March , 1999
- ---------------------------------------------------
Stefan Chopin
/s/ MARK MAGED Director March , 1999
- ---------------------------------------------------
Mark Maged
/s/ BRUCE BEZPA Director March , 1999
- ---------------------------------------------------
Bruce Bezpa
</TABLE>
II-7
<PAGE> 92
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
EDGAR ONLINE, INC.
FINANCIAL STATEMENT SCHEDULE
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
CHARGED
BALANCE AT COSTS BALANCE AT
BEGINNING AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
- ----------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Receivable
Year ended December 31, 1996.......... $ -- -- -- --
Year ended December 31, 1997.......... $ -- 22,500 -- 22,500
Year ended December 31, 1998.......... $22,500 62,207 (53,165) 31,542
</TABLE>
- -------------------------
(1) Write-offs of receivables.
II-8
<PAGE> 1
EDGAR Online, Inc.
Shares */
Common Stock
($.001 par value)
Underwriting Agreement
New York, New York
-, 1999
C.E. Unterberg, Towbin
Fahnestock & Co. Inc.
c/o C.E. Unterberg, Towbin
Swiss Bank Tower
10 East 50th Street
22nd Floor
New York, NY 10022
Ladies and Gentlemen:
EDGAR Online, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, shares of Common Stock, par value $.01 per share
(the "Common Stock"), of the Company (the "Underwritten Securities") and the
persons named in Schedule II hereto (the "Selling Stockholders") propose to
grant to the Underwriters an option to purchase up to additional shares
of Common Stock (the "Option Securities"; the Option Securities, together with
the Underwritten Securities, being hereinafter called the "Securities"). In
addition, the Company proposes to issue to the Representatives - warrants (the
"Warrants") which will initially entitle the Representatives to purchase -
shares of Common Stock of the Company pursuant to the terms of a Warrant
Agreement dated as of -, 1999, between the Company and the Representatives (the
"Warrant Agreement"). To the extent there are no additional Underwriters listed
on Schedule I other than you,
- ----------
*/ Plus an option to purchase from the persons named in Schedule II hereto up
to additional shares to cover over-allotments.
<PAGE> 2
the term Representatives as used herein shall mean you, as Underwriters, and the
terms Representatives and Underwriters shall mean either the singular or plural
as the context requires.
The terms which follow, when used in this Agreement, shall have the
meanings indicated.
"Business Day" means any day other than a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies
are authorized or obligated by law to close in New York City.
"Effective Date" means each date and time that the Registration
Statement, any post-effective amendment or amendments thereto and any
Rule 462(b) Registration Statement became or become effective.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" means the date and time that this Agreement is
executed and delivered by the parties hereto.
"Preliminary Prospectus" means any preliminary prospectus referred
to in Section 1(a)(i) hereof and any preliminary prospectus included in
the Registration Statement at the Effective Date that omits Rule 430A
Information.
"Prospectus" means the prospectus relating to the Securities that is
first filed pursuant to Rule 424(b) after the Execution Time or, if no
filing pursuant to Rule 424(b) is required, means the form of final
prospectus relating to the Securities included in the Registration
Statement at the Effective Date.
"Registration Statement" means the registration statement referred
to in Section 1(a)(i) hereof, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at
the Execution Time, in the form in which it shall become effective)
and, in the event any post-effective amendment thereto or any Rule
462(b) Registration Statement becomes effective prior to the Closing
Date, also means such registration statement as so amended or any Rule
462(b) Registration Statement, as the case may be. Such term shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A.
<PAGE> 3
3
"Rule 424", "Rule 430A" and "Rule 462(b)" refer to such rules under
the Act.
"Rule 430A Information" means information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" means a registration statement
and any amendments thereto filed pursuant to Rule 462(b) relating to
the offering covered by the registration statement referred to in
Section 1(a)(i) hereof.
1. Representations and Warranties.
(1) The Company and each of the Selling Stockholders jointly and
severally represent and warrant to, and agree with, each Underwriter as set
forth below in this Section 1(a).
(1) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (file number
333--) on Form S-1, including a related preliminary prospectus, for
the registration under the Securities Act of 1933 (the "Act") of the
offering and sale of the Securities. The Company may have filed one or
more amendments thereto, including a related preliminary prospectus,
each of which has previously been furnished to you. The Company will
next file with the Commission either (A) prior to the Effective Date of
such registration statement, a further amendment to such registration
statement (including the form of final prospectus) or (B) after the
Effective Date of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b). In the case of clause (B), the
Company has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in such
registration statement and the Prospectus. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all
Rule 430A Information, together with all other such required
information, and, except to the extent the Representatives shall agree
in writing to a modification, shall be in all substantive respects in
the form furnished to you prior to the Execution Time or, to the extent
not completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior to
the Execution Time, will be included or made therein.
<PAGE> 4
4
(2) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date (as defined in Section 3 hereof)
and on any date on which Option Securities are purchased, if such date
is not the Closing Date (a "settlement date"), the Prospectus (and any
supplements thereto) will comply in all material respects with the
applicable requirements of the Act and the rules thereunder; on the
Effective Date and at the Execution Time, the Registration Statement
did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and,
on the Effective Date, the Prospectus, if not filed pursuant to Rule
424(b), will not, and on the date of any filing pursuant to Rule 424(b)
and on the Closing Date and any settlement date, the Prospectus
(together with any supplement thereto) will not include 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; provided,
however, that the Company and the Selling Stockholders make no
representations or warranties as to the information contained in or
omitted from the Registration Statement or the Prospectus (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the Representatives specifically for inclusion in the
Registration Statement or the Prospectus (or any supplement thereto).
(3) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware and has full corporate power and authority to own or lease, as
the case may be, and to operate 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.
(4) The Company's authorized equity capitalization is as set forth
in the Prospectus; the capital stock of the Company conforms in all
material respects to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock (including the
Option Securities) have been duly and validly authorized and issued and
are fully paid and nonassessable; the Securities being sold hereunder
by the Company have been duly and validly authorized, and, when issued
and delivered to and paid for by the Underwriters pursuant to this
Agreement, will be fully paid and nonassessable; the Securities have
been duly approved for quotation, subject to official notice of
issuance, on the Nasdaq National Market; the certificates for the
Securities and the Warrants are in valid and sufficient form; the
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the
<PAGE> 5
5
Securities and, except as set forth in the Prospectus, no options,
warrants or other rights to purchase, agreements or other obligations
to issue, or rights to convert any obligations into or exchange any
securities for, shares of capital stock of or ownership interests in
the Company are outstanding.
(5) The Company does not have any subsidiaries, does not directly or
indirectly own any capital stock or other equity interests in any
corporation, partnership or other entity and is not a member of or a
participant in any partnership, joint venture or similar entity.
(6) There is no franchise, contract or other document of a character
required to be described in the Registration Statement or Prospectus,
or to be filed as an exhibit thereto, which is not described or filed
as required.
(7) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms.
(8) The Company is not and, after giving effect to the offering and
sale of the Securities and the Warrants and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of 1940,
as amended (the "Investment Company Act").
(9) No consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained
under the Act and such as may be required under the blue sky laws of
any jurisdiction in connection with the purchase and distribution of
the Securities by the Underwriters in the manner contemplated herein
and in the Prospectus.
(10) Neither the issue and sale of the Securities or the Warrants
nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will conflict
with, or result in a breach or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
pursuant to, (A) the charter or by-laws of the Company, (B) 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 property is subject, or (C) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company of any
court, regulatory body, administrative agency, governmental
<PAGE> 6
6
body, arbitrator or other authority having jurisdiction over the
Company or any of its properties.
(11) No holder of securities of the Company has any right to the
registration of such securities under the Registration Statement.
(12) The consolidated financial statements and schedules of the
Company included in the Prospectus and the Registration Statement
present fairly in all material respects the financial condition,
results of operations and cash flows of the Company as of the dates and
for the periods indicated, comply as to form with the applicable
accounting requirements of the Act and the rules and regulations
thereunder and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved (except as otherwise noted therein). The selected
financial data set forth under the caption "Selected Financial Data" in
the Prospectus and Registration Statement fairly present, on the basis
stated in the Prospectus and the Registration Statement, the
information included therein.
(13) 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 (A) 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 (B)
could reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated
in the Prospectus (exclusive of any supplement thereto).
(14) The Company owns or leases all such properties as are necessary
to the conduct of its operations as presently conducted.
(15) The Company is not in violation or default of (A) any provision
of its charter or by-laws, (B) 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 (C) 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 any of its
properties.
<PAGE> 7
7
(16) KPMG Peat Marwick LLP, who have certified certain financial
statements of the Company and delivered their report with respect to
the audited consolidated financial statements and schedules included in
the Prospectus, are independent public accountants with respect to the
Company within the meaning of the Act and the applicable published
rules and regulations thereunder.
(17) 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 Warrant Agreement or
the issuance by the Company or sale by the Company of the Securities or
the Warrants.
(18) The Company has filed all foreign, Federal, state and local tax
returns that are required to be filed or has requested extensions
thereof (except in any case in which the failure so to file would not
have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto)) and has paid all taxes required
to be paid by it and any other assessment, fine or penalty levied
against it, to the extent that any of the foregoing is due and payable,
except for any such assessment, fine or penalty that is currently being
contested in good faith or as would not have a material adverse effect
on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto).
(19) No labor problem or dispute with the employees of the Company
exists or is threatened or imminent, and the Company is not aware of
any existing or imminent labor disturbance by the employees of any of
its principal suppliers or contractors, including TRW, Inc., iXL, Inc.
and Globix, Inc., in each case that could have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto).
(20) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which it is engaged; all
policies of insurance and fidelity or surety bonds insuring the Company
or its business, assets, employees, or officers and directors are in
full force and effect; the Company is in compliance with the terms of
such policies and instruments in all material
<PAGE> 8
8
respects; and there are no claims by the Company under any such policy
or instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause; the Company has not
been refused any insurance coverage sought or applied for; and the
Company does not have any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(21) The Company possesses all licenses, certificates, permits and
other authorizations issued by the appropriate Federal, state or
foreign regulatory authorities necessary for the ownership or lease of
its properties and the conduct of its business, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such license, certificate, permit or authorization
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business
or properties of the Company, whether or not arising from transactions
in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto).
(22) The Company is not in violation of any Federal or state law or
regulation relating to occupational safety and health or to the
storage, handling or transportation of hazardous or toxic materials;
the Company has received all permits, licenses or other approvals
required of it under applicable Federal and state occupational safety
and health and environmental laws and regulations to conduct its
business, and the Company is in compliance with all terms and
conditions of any such permit, license or approval, except any such
violation of law or regulation, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated
in the Prospectus (exclusive of any supplement thereto).
(23) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (A) transactions are
executed in accordance with management's general or specific
authorizations, (B) transactions
<PAGE> 9
9
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain asset accountability, (C) access to assets is permitted only
in accordance with management's general or specific authorization, and
(D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(24) The Company has not taken, directly or indirectly, any action
designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(25) The Company owns or has obtained licenses for the patents,
patent applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
referenced or described in the Prospectus as being owned by or licensed
to it (collectively, the "Intellectual Property"). Except as set forth
in the Prospectus under the caption "o", (A) there are no rights of
third parties to any such Intellectual Property, (B) there is no
material infringement by third parties of any such Intellectual
Property, (C) there is no pending or threatened action, suit,
proceeding or claim by others challenging the Company's rights in or to
any such Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such claim, (D) there is no
pending or threatened action, suit, proceeding or claim by others
challenging the validity or scope of any such Intellectual Property,
and the Company is unaware of any facts which would form a reasonable
basis for any such claim, (E) there is no pending or threatened action,
suit, proceeding or claim by others that the Company infringes or
otherwise violates any patent, trademark, copyright, trade secret or
other proprietary rights of others, and the Company is unaware of any
other fact which would form a reasonable basis for any such claim, (F)
there is no U.S. patent or published U.S. patent application which
contains claims that dominate or may dominate any Intellectual Property
described in the Prospectus as being owned by or licensed to the
Company or that interferes with the issued or pending claims of any
such Intellectual Property, and (G) there is no prior art of which the
Company is aware that may render any U.S. patent held by the Company
invalid or any U.S. patent application held by the Company unpatentable
which has not been disclosed to the U.S. Patent and Trademark Office.
The Company owns, possesses, licenses or has other rights to use, on
reasonable terms, all Intellectual Property necessary for the conduct
of the
<PAGE> 10
10
Company's business as now conducted or as proposed in the Prospectus to
be conducted.
(26) The Company [has implemented] [is implementing] a
comprehensive, detailed program to analyze and address the risk that
the computer hardware and software used by it may be unable to
recognize and properly execute date-sensitive functions involving
certain dates prior to and any dates after December 31, 1999 (the "Year
2000 Problem"), and [has determined] [reasonably believes] that such
risk will be remedied on a timely basis without material expense and
will not have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company;
and the Company believes, after due inquiry, that each supplier,
vendor, contractor or financial service organization used or served by
the Company has remedied or will remedy on a timely basis the Year 2000
Problem, except to the extent that a failure to remedy by any such
supplier, vendor, contractor, or financial service organization would
not have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company.
The Company is in compliance with Release No. 33-7558 under the Act,
dated July 29, 1998, related to Year 2000 compliance.
(27) The Company does not maintain any plan or arrangement that is
subject to the provisions of, or that provides any benefits described
in, the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder.
(28) The Warrant Agreement has been duly authorized by the Company
and, when duly executed and delivered by the Company, will constitute a
valid and binding obligation of the Company enforceable in accordance
with its terms; the Warrants will conform in all material respects to
the description of the Warrants in the Prospectus and in the Warrant
Agreement; the Warrants to be issued and sold by the Company to the
Representatives pursuant to the Warrant Agreement have been duly and
validly authorized and, when duly executed, issued and delivered as
contemplated by the Warrant Agreement against payment therefor will be
duly and validly issued, fully paid and will constitute the valid and
binding obligations of the Company, entitled to the benefits of the
Warrant Agreement and enforceable in accordance with their terms.
<PAGE> 11
11
(29) When the Securities are delivered and paid for pursuant to this
Agreement on the Closing Date, the Warrants will be exercisable for
shares of Common Stock of the Company ("Warrant Shares") in accordance
with their terms at any time or from time to time after -, 2000; the
Warrant Shares initially issuable upon the exercise of such Warrants
have been duly authorized and reserved for issuance upon such exercise
in accordance with the terms of the Warrants and, when issued upon such
exercise, will be validly issued, fully paid and nonassessable; and the
stockholders of the Company have no preemptive rights with respect to
the Warrant Shares.
Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Underwriter.
(2) Each Selling Stockholder represents and warrants to, and agrees
with, each Underwriter as set forth below in this Section 1(b).
(1) Such Selling Stockholder is the lawful owner of the Option
Securities underlying the option granted by such Selling Stockholder to
the several Underwriters pursuant to Section 2(b) hereof and upon
exercise of said option and payment for such Option Securities, as
provided herein, such Selling Stockholder will convey to the
Underwriters good and marketable title to such Option Securities, free
and clear of all liens, encumbrances, equities and claims whatsoever.
(2) Such Selling Stockholder has not taken, directly or indirectly,
any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities.
(3) Certificates in negotiable form for the Option Securities owned
by such Selling Stockholder have been placed in custody, for delivery
pursuant to the terms of this Agreement, under a Custody Agreement and
Power of Attorney duly authorized (if applicable), executed and
delivered by such Selling Stockholder, in the form heretofore furnished
to you (the "Custody Agreement") with -, as Custodian (the
"Custodian"); the Option Securities represented by the certificates so
held in custody for each Selling Stockholder are subject to the
interests hereunder of the Underwriters; the arrangements for custody
and delivery of such
<PAGE> 12
12
certificates, made by such Selling Stockholder hereunder and under the
Custody Agreement, are not subject to termination by any acts of such
Selling Stockholder, or by operation of law, whether by the death or
incapacity of such Selling Stockholder or the occurrence of any other
event; and if any such death, incapacity or any other such event shall
occur before the delivery of such Option Securities hereunder,
certificates for the Option Securities will be delivered by the
Custodian in accordance with the terms and conditions of this Agreement
and the Custody Agreement as if such death, incapacity or other event
had not occurred, regardless of whether or not the Custodian shall have
received notice of such death, incapacity or other event.
(4) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by such
Selling Stockholder of the transactions contemplated herein, except
such as may have been obtained under the Act and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Securities by the Underwriters and
such other approvals as have been obtained.
(5) None of the granting of the option to the several Underwriters
to purchase the Option Securities owned by such Selling Shareholder
pursuant to Section 2(b) hereof, the sale of such Option Securities
upon the exercise of said option or the consummation of any other of
the transactions herein contemplated by such Selling Stockholder or the
fulfillment of the terms hereof by such Selling Stockholder will
conflict with, result in a breach or violation of, or constitute a
default under any law or the charter or by-laws of such Selling
Stockholder or the terms of any indenture or other agreement or
instrument to which such Selling Stockholder or any of its subsidiaries
is a party or bound, or any judgment, order or decree applicable to
such Selling Stockholder or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over such Selling Stockholder or any of its
subsidiaries.**/
Any certificate signed by any Selling Stockholder [or any
officer of any Selling Stockholder] and delivered to
- ----------
**/ Note: References to corporate concepts (e.g., charter, by-laws and
subsidiaries) to be deleted if all Selling Shareholders are natural persons.
<PAGE> 13
13
the Representatives or counsel for the Underwriters in connection with
the offering of the Securities shall be deemed a representation and
warranty by such Selling Stockholder, as to matters covered thereby, to
each Underwriter.
2. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the
Company agrees to sell (i) to each Underwriter, and each Underwriter
agrees, severally and not jointly, to purchase from the Company, at a
purchase price of $- per share, the amount of the Underwritten
Securities set forth opposite such Underwriter's name in Schedule I
hereto and (ii) to each Representative, and each Representative agrees
to purchase from the Company, at a purchase price of $[0.01] per
Warrant, the amount of Warrants set forth opposite such
Representative's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Selling
Stockholders hereby grant an option to the several Underwriters to
purchase, severally and not jointly, up to shares of the Option
Securities at the same purchase price per share as the Underwriters
shall pay for the Underwritten Securities. Said option may be exercised
only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole
or in part at any time (but not more than once) on or before the 30th
day after the date of the Prospectus upon written or telegraphic notice
by the Representatives to the Selling Stockholders or to their
authorized representative as designated in the Custody Agreement
setting forth the number of shares of the Option Securities as to which
the several Underwriters are exercising the option and the settlement
date. Delivery of certificates for the shares of Option Securities, and
payment therefor, shall be made as provided in Section 3 hereof. The
maximum number of Option Securities which each Selling Stockholder
agrees to sell is set forth in Schedule II hereto. In the event that
the Underwriters exercise less than their full over-allotment option,
the number of Option Securities to be sold by each Selling Stockholder
listed on Schedule II hereto shall be, as nearly as practicable, in the
same proportion as the maximum number of Option Securities to be sold
by each Selling Stockholder and the total number of Option Securities
to be sold. The number of shares of the Option Securities to be
purchased by each Underwriter shall be the same percentage of the total
number of shares of the Option Securities to be purchased by the
several Underwriters as such Underwriter is purchasing of the
Underwritten Securities, subject to such adjustments as you in your
absolute discretion shall make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the
Underwritten Securities, the Warrants and the Option Securities (if the
option provided for in Section 2(b) hereof shall have been exercised on
or before the third Business Day prior to the Closing Date) shall be
made at 10:00 AM, New York City time, on -, 1999, or
<PAGE> 14
14
at such time on such later date not more than three Business Days after
the foregoing date as the Representatives shall designate, which date
and time may be postponed by agreement between the Representatives and
the Company or as provided in Section 9 hereof (such date and time of
delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made to the
Representatives for the respective accounts of the several Underwriters
against payment by the several Underwriters through the Representatives
of the respective aggregate purchase prices of the Securities being
sold by the Company and each of the Selling Stockholders to or upon the
order of the Company or the Selling Stockholders by wire transfer
payable in same day funds to the accounts specified by the Company and
the Selling Stockholders. Delivery of the Underwritten Securities and
the Option Securities shall be made through the facilities of The
Depository Trust Company unless the Representatives shall otherwise
instruct. Delivery of the Warrants shall be made to the Representatives
for the Representatives' own account against payment by the
Representatives of the purchase price thereof to or upon the order of
the Company by wire transfer payable in same day funds to an account
specified by the Company.
Each Selling Stockholder will pay all applicable state transfer
taxes, if any, involved in the transfer to the several Underwriters of
the Option Securities to be purchased by them from such Selling
Stockholder and the respective Underwriters will pay any additional
stock transfer taxes involved in further transfers.
If the option provided for in Section 2(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Selling
Stockholders will deliver the Option Securities (at the expense of the
Company) to the Representatives on the date specified by the
Representatives (which shall be within three Business Days after
exercise of said option), against payment by the several Underwriters
through the Representatives thereof to or upon the order of the Selling
Stockholders by wire transfer payable in same day funds to the accounts
specified by the Selling Stockholders. Delivery of the Option
Securities shall be made through facilities of The Depository Trust
Company unless the Representatives shall otherwise instruct.
If settlement for the Option Securities occurs after the Closing
Date, the Company and the Selling Stockholders will deliver to the
Representatives on the settlement date for the Option Securities, and
the obligation of the Underwriters to purchase the Option Securities
shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant to
Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as
set forth in the Prospectus.
<PAGE> 15
15
5. Agreements.
(1) The Company agrees with the several Underwriters that:
(1) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of
the Registration Statement or supplement to the Prospectus or any Rule
462(b) Registration Statement unless the Company has furnished you a
copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object.
Subject to the foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Company will
cause the Prospectus, properly completed, and any supplement thereto to
be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The Company
will promptly advise the Representatives (i) when the Registration
Statement, if not effective at the Execution Time, shall have become
effective, (ii) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule
424(b) or when any Rule 462(b) Registration Statement shall have been
filed with the Commission, (iii) when, prior to termination of the
offering of the Securities, any amendment to the Registration Statement
shall have been filed or become effective, (iv) of any request by the
Commission or its staff for any amendment of the Registration
Statement, or any Rule 462(b) Registration Statement, or for any
supplement to the Prospectus or of any additional information, (v) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (vi) of the receipt
by the Company of any notification with respect to the suspension of
the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any such
stop order or the suspension of any such qualification and, if issued,
to obtain as soon as possible the withdrawal thereof.
(2) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it
<PAGE> 16
16
shall be necessary to amend the Registration Statement or supplement
the Prospectus to comply with the Act or the rules thereunder, the
Company promptly will (A) notify the Representatives of any such event,
(B) prepare and file with the Commission, subject to the second
sentence of Section 5(a)(i), an amendment or supplement which will
correct such statement or omission or effect such compliance and (C)
supply any supplemented Prospectus to you in such quantities as you may
reasonably request.
(3) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(4) The Company will furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a
copy of the Registration Statement (without exhibits thereto) and, so
long as delivery of a prospectus by an Underwriter or dealer may be
required by the Act, as many copies of each Preliminary Prospectus and
the Prospectus and any supplement thereto as the Representatives may
reasonably request.
(5) The Company will arrange, if necessary, for the qualification of
the Securities for sale under the laws of such jurisdictions as the
Representatives may designate and will maintain such qualifications in
effect so long as required for the distribution of the Securities.
(6) The Company will not, for a period of one year following the
Execution Time, without the prior written consent of C.E. Unterberg,
Towbin, offer, sell, contract to sell, pledge or otherwise dispose of
(or enter into any transaction which is designed to, or could be
expected to, result in the disposition (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise)
by the Company or any affiliate of the Company or any person in privity
with the Company or any affiliate of the Company) directly or
indirectly, including the filing (or participation in the filing) of a
registration statement with the Commission in respect of, or establish
or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of the rules promulgated under
Section 16 of the Exchange Act with respect to, any other shares of
Common Stock or any securities convertible into, or exchangeable for,
shares of Common Stock, or publicly announce an intention to effect any
such transaction; provided, however, that the Company may issue and
sell Common Stock pursuant to any employee stock option plan, stock
ownership plan or dividend reinvestment plan of the Company in effect
at the
<PAGE> 17
17
Execution Time and the Company may issue Common Stock issuable upon the
conversion of securities or the exercise of warrants outstanding at the
Execution Time.
(7) The Company will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
company to facilitate the sale or resale of the Securities.
(8) The Company and the Selling Stockholders jointly and severally
agree to pay the costs and expenses relating to the following matters:
(A) the preparation, printing or reproduction and filing with the
Commission of the Registration Statement (including financial
statements and exhibits thereto), each Preliminary Prospectus, the
Prospectus, and each amendment or supplement to any of them; (B) the
printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus,
and all amendments or supplements to any of them, as may, in each case,
be reasonably requested for use in connection with the offering and
sale of the Securities; (C) the preparation, printing, authentication,
issuance and delivery of certificates for the Securities, including any
stamp or transfer taxes in connection with the original issuance and
sale of the Securities; (D) the printing (or reproduction) and delivery
of this Agreement, any blue sky memorandum and all other agreements or
documents printed (or reproduced) and delivered in connection with the
offering of the Securities; (E) the registration of the Securities
under the Exchange Act and the listing of the Securities on the Nasdaq
National Market; (F) any registration or qualification of the
Securities for offer and sale under the securities or blue sky laws of
the several states (including filing fees and the reasonable fees and
expenses of counsel for the Underwriters relating to such registration
and qualification); (G) any filings required to be made with the
National Association of Securities Dealers, Inc. (including filing fees
and the reasonable fees and expenses of counsel for the Underwriters
relating to such filings); (H) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Securities; (I) the fees
and expenses of the Company's accountants and the fees and expenses of
counsel (including local and special counsel) for the Company and the
Selling Stockholders; and (J) all other costs and expenses incident to
the performance by the Company and the Selling Stockholders of their
obligations hereunder. The Company and the Selling Stockholders may
agree, as among themselves and without limiting the rights of the
Underwriters under this
<PAGE> 18
18
Section 5(a)(viii), as to the respective amounts of such costs and
expenses for which they each shall be responsible.
(2) Each Selling Stockholder agrees with several Underwriters that:
(1) Such Selling Stockholder will not, for a period of one year
following the Execution Time, without the prior written consent of C.E.
Unterberg, Towbin, offer, sell, contract to sell, pledge or otherwise
dispose of (or enter into any transaction which is designed to, or
could be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by such Selling Stockholder or by the Company or any
affiliate of the Company or any person in privity with the Company or
any affiliate of the Company) directly or indirectly, including the
filing (or participation in the filing) of a registration statement
with the Commission in respect of, or establish or increase a put
equivalent position or liquidate or decrease a call equivalent position
within the meaning of the rules promulgated under Section 16 of the
Exchange Act with respect to, any shares of capital stock of the
Company or any securities convertible into or exercisable or
exchangeable for such capital stock, or publicly announce an intention
to effect any such transaction, other than shares of Common Stock
disposed of as bona fide gifts approved by C.E. Unterberg, Towbin.
(2) Such Selling Stockholder will not take any action designed to or
which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.
(3) Such selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, so long as
delivery of a prospectus relating to the Securities by an underwriter
or dealer may be required under the Act, of (A) any material change in
the Company's condition (financial or otherwise), prospects, earnings,
business or properties, (B) any change in information in the
Registration Statement or the Prospectus relating to such Selling
Stockholder or (C) any new material information relating to the Company
or relating to any matter stated in the Prospectus which comes to the
attention of such Selling Stockholder.
(4) Such Selling Stockholder will comply with the agreement
contained in Section 5(a)(viii).
<PAGE> 19
19
6. Conditions to the Obligations of the Underwriters. The obligations
of the Underwriters to purchase the Underwritten Securities and the Option
Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company and the Selling Stockholders made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder and to the following
additional conditions:
(1) If the Registration Statement has not become effective prior to the
Execution Time, unless the Representatives agree in writing to a later time, the
Registration Statement will become effective not later than (i) 6:00 PM New York
City time on the date of determination of the public offering price, if such
determination occurred at or prior to 3:00 PM New York City time on such date or
(ii) 9:30 AM on the Business Day following the day on which the public offering
price was determined, if such determination occurred after 3:00 PM New York City
time on such date; if filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b), the Prospectus, and any such supplement, will
be filed in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or threatened.
(2) The Company shall have furnished to the Representatives the opinion
of Littman Krooks Roth & Ball P.C., counsel for the Company, dated the Closing
Date and addressed to the Representatives, to the effect that:
(1) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and
has full corporate power and authority to own or lease, as the case may be,
and to operate 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;
(2) the Company's authorized equity capitalization is as set forth in
the Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock (including the Option Securities) have
been duly and validly authorized and issued and are fully paid and
nonassessable; the Securities being sold hereunder by the Company have been
duly and validly authorized, and, when issued and delivered to and paid for
by the Underwriters pursuant to this Agreement, will be fully paid and
nonassessable; the Company has been notified
<PAGE> 20
20
by the Nasdaq National Market that the Securities are duly approved for
quotation, subject to official notice of issuance, on the Nasdaq
National Market; the certificates for the Securities are in valid and
sufficient form; and the holders of outstanding shares of capital stock
of the Company are not entitled to preemptive or other rights to
subscribe for the Securities; and, except as set forth in the
Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital
stock of or ownership interests in the Company are outstanding;
(3) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or its property of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the
Prospectus, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit thereto, which is not
described or filed as required;
(4) the Registration Statement has become effective under the Act;
any required filing of the Prospectus, and any supplements thereto
pursuant to Rule 424(b), has been made in the manner and within the
time period required by Rule 424(b); to the knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement has been issued, no proceedings for that purpose have been
instituted or threatened and the Registration Statement and the
Prospectus (other than the financial statements and other financial
information contained therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the applicable
requirements of the Act and the rules thereunder; and such counsel has
no reason to believe that on the Effective Date or at the Execution
Time the Registration Statement contains or contained any untrue
statement of a material fact or omits or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of its date and on the
Closing Date included or includes any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading (in each case, other than the financial
statements and other financial information contained therein, as to
which such counsel need not express an opinion);
(5) this Agreement has been duly authorized, executed and delivered
by the Company;
<PAGE> 21
21
(6) the Company is not and, after giving effect to the offering and
sale of the Securities and the Warrants and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment company"
as defined in the Investment Company Act;
(7) no consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained under
the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters in the manner contemplated in this Agreement
and in the Prospectus and such other approvals (specified in such opinion)
as have been obtained;
(8) neither the issue and sale of the Securities and the Warrants,
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 of, or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant to, (A) the charter or
by-laws of the Company, (B) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition or covenant or instrument to which the Company is a
party or bound or to which its property is subject, or (C) 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;
(9) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement; and
(10) the Warrant Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation of
the Company enforceable in accordance with its terms; the Warrant Agreement
and the Warrants conform in all material respects to the descriptions
thereof contained in the Prospectus; the Warrants have been duly and
validly authorized, executed, issued and delivered and constitute the valid
and binding obligations of the Company, entitled to the benefits of the
Warrant Agreement and enforceable in accordance with their terms; the
certificates for the Warrants are in valid and sufficient form; the
Warrants are exercisable for the Warrant Shares in accordance with their
terms; the Warrant Shares initially issuable upon the exercise of the
Warrants have been duly authorized and reserved for issuance upon such
exercise and, when issued upon such exercise, will be validly issued, fully
paid and
<PAGE> 22
22
nonassessable; and the stockholders of the Company have no preemptive
rights with respect to the Warrant Shares.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of New York, the
General Corporation Law of the State of Delaware or the Federal laws of the
United States, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus in
this paragraph (b) include any supplements thereto at the Closing Date.
(3) The Company shall have furnished to the Representatives the opinion
of McAulay Nissen Goldberg Kiel & Hand, LLP, special intellectual property
counsel for the Company, dated the Closing Date and addressed to the
Representatives, to the effect that:
(1) the statements set forth in the Prospectus under the headings
["Risk Factors--We are dependent on intellectual property and face a risk
of infringement claims." and "Business--Intellectual Property"] fairly and
accurately present the matters contained therein with respect to the
Intellectual Property owned by, or licensed to, the Company; and
(2) to the knowledge of such counsel, there is no pending or threatened
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or its
Intellectual Property of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the Prospectus.
In rendering such opinion, such counsel may rely as to matters of fact, to the
extent they deem proper, on certificates of responsible officers of the Company
and public officials. References to the Prospectus in this paragraph (c) include
any supplements thereto at the Closing Date.
(4) The Selling Stockholders shall have furnished to the
Representatives the opinion of *, counsel for the Selling Stockholders, dated
the Closing Date and addressed to the Representatives, to the effect that:
(1) this Agreement and the Custody Agreement have been duly
[authorized,] executed and delivered by the Selling Stockholders, the
Custody Agreement is valid and binding on the Selling Stockholders and each
Selling Stockholder has full legal right and authority to sell, transfer
and deliver in the
<PAGE> 23
23
manner provided in this Agreement and the Custody Agreement the Option
Securities underlying the option granted by such Selling Stockholder to
the several Underwriters pursuant to Section 2(b) hereof;
(2) the delivery by each Selling Stockholder to the several
Underwriters of certificates for the Option Securities underlying the
option granted by such Selling Stockholder to the several Underwriters
pursuant to Section 2(b) hereof upon exercise of said option and
against payment therefor as provided herein, will pass good and
marketable title to such Option Securities to the several Underwriters,
free and clear of all liens, encumbrances, equities and claims
whatsoever;
(3) no consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by any
Selling Stockholder of the transactions contemplated herein, except
such as may be have been obtained under the Act and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Securities by the Underwriters and
such other approvals (specified in such option) as have been obtained;
and
(4) none of the granting of the option to the several
Underwriters to purchase the Option Securities owned by such Selling
Shareholder pursuant to Section 2(b) hereof, the sale of such Option
Securities upon the exercise of said option or the consummation of any
other of the transactions herein contemplated by any Selling
Stockholder or the fulfillment of the terms hereof by any Selling
Stockholder will conflict with, result in a breach or violation of, or
constitute a default under any law or the charter or by-laws of the
Selling Stockholder or the terms of any indenture or other agreement or
instrument known to such counsel and to which any Selling Stockholder
or any of its subsidiaries is a party or bound, or any judgment, order
or decree known to such counsel to be applicable to any Selling
Stockholder or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over any Selling Stockholder or any of its subsidiaries.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of New York, the
General Corporation Law of the State of Delaware or the Federal laws
<PAGE> 24
24
of the United States, to the extent they deem proper and specified in
such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel for the
Underwriters, and (B) as to matters of fact, to the extent they deem
proper, on certificates of a Selling Stockholder [or responsible officers
of a Selling Stockholder] and public officials.
(5) The Representatives shall have received from Cravath, Swaine &
Moore, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date and addressed to the Representatives, with respect to the
issuance and sale of the Securities, the Registration Statement, the
Prospectus (together with any supplement thereto) and other related matters
as the Representatives may reasonably require, and the Company and each
Selling Stockholder shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such matters.
(6) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such certificate
have carefully examined the Registration Statement, the Prospectus, any
supplements to the Prospectus and this Agreement and that:
(1) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date;
(2) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(3) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto), there
has been no material adverse change in the condition (financial or
otherwise), prospects, earnings, business or properties of the Company,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
<PAGE> 25
25
(7) Each Selling Stockholder shall have furnished to the
Representatives a certificate, signed by such Selling Stockholder [or by
the Chairman of the Board or the President and the principal financial or
accounting officer of such Selling Stockholder], dated the Closing Date, to
the effect that the signer or signers of such certificate have carefully
examined the Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that the representations and warranties
of such Selling Stockholder in this Agreement are true and correct in all
material respects on and as of the Closing Date to the same effect as if
made on the Closing Date.
(8) At the Execution Time and at the Closing Date, KPMG Peat Marwick
LLP shall have furnished to the Representatives letters, dated respectively
as of the Execution Time and as of the Closing Date, in form and substance
satisfactory to the Representatives, confirming that they are independent
accountants of the Company within the meaning of the Act and the applicable
published rules and regulations adopted by the Commission thereunder and
stating in effect that:***/
(1) in their opinion the audited financial statements and financial
statement schedules included in the Registration Statement and the
Prospectus and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations adopted by the Commission;
- ----------
***/ Note: This section is drafted on the assumption that there will not be
any unaudited interim first quarter financial statements included in the
Prospectus; if first quarter financial statements are included, this section
will need to be revised accordingly to cover such statements.
<PAGE> 26
26
(2) on the basis of a reading of the latest unaudited financial
statements made available by the Company; carrying out certain specified
procedures (but not an examination in accordance with generally accepted
auditing standards) which would not necessarily reveal matters of significance
with respect to the comments set forth in such letter; a reading of the minutes
of the meetings of the stockholders, directors and the audit and compensation
committees of the Company; and inquiries of certain officials of the Company who
have responsibility for financial and accounting matters of the Company as to
transactions and events subsequent to December 31, 1998, nothing came to their
attention which caused them to believe that:
(1) with respect to the period subsequent to December 31, 1998, there
were any changes, at a specified date not more than five days prior to the
date of the letter, in the total liabilities of the Company or capital
stock of the Company or increases in the stockholders' deficit of the
Company or decreases in working capital (or increases in working capital
deficit, as the case may be) of the Company as compared with the amounts
shown on the December 31, 1998, consolidated balance sheet included in the
Registration Statement and the Prospectus, or for the period from January
1, 1999 to such specified date there were any decreases, as compared with
the corresponding period in the preceding year in revenues or gross profit,
or for the period from January 1, 1999 to such specified date there were
any increases, as compared with the corresponding period in the preceding
year, in loss from operations or net loss or in per share amounts of net
loss of the Company, except in all instances for changes or increases or
decreases set forth in such letter, in which case the letter shall be
accompanied by an explanation by the Company as to the significance thereof
unless said explanation is not deemed necessary by the Representatives; or
(2) the information included in the Registration Statement and
Prospectus in response to Regulation S-K, Item 301 (Selected Financial
Data), Item 302 (Supplementary Financial Information) and Item 402
(Executive Compensation) is not in conformity with the applicable
disclosure requirements of Regulation S-K; and
(3) they have performed certain other specified procedures as a result
of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Company) set forth in the Registration Statement and the Prospectus,
including the information set forth under the captions ["Summary Financial
Information", "Dilution",
<PAGE> 27
27
"Capitalization", "Selected Financial Data", "Management's Discussion
and Analysis of Financial Condition and Results of Operations", "Business",
"Management", and "Certain Transactions"] in the Prospectus, agrees with
the accounting records of the Company, excluding any questions of legal
interpretation.
References to the Prospectus in this paragraph (h) include any
supplement thereto at the date of the letter.
(9) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (h) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, business or properties of the Company,
whether or not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto) the effect of which, in any case referred to in clause (i)
or (ii) above, is, in the sole judgment of the Representatives, so material and
adverse as to make it impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of any
supplement thereto).
(10) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from each
officer, director stockholder and option holder of the Company addressed to the
Representatives.
(11) The Company shall have caused the Securities to be eligible for
trading on the Nasdaq National Market upon issuance, and satisfactory evidence
thereof shall have been provided to the Representatives.
(12) At the time of Closing, the Company shall have executed and
delivered the Warrant Agreement to the Representatives.
(13) Prior to the Closing Date, the Company shall have furnished to the
Representatives such further information, certificates and documents as the
Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives
<PAGE> 28
28
and counsel for the Underwriters, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date by the Representatives. Notice of such cancellation shall be given to the
Company in writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Cravath, Swaine & Moore, counsel for the
Underwriters, at Worldwide Plaza, 825 Eighth Avenue, New York, New York, on the
Closing Date.
7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or any Selling
Stockholder to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally through C.E. Unterberg, Towbin on 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 proposed
purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company and each of the
Selling Stockholders jointly and severally agree to indemnify and hold harmless
each Underwriter, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Securities
as originally filed or in any amendment thereof, or in any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement thereto,
or arise out of or are based upon 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 arise out of or are based upon any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Common Stock or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered above, and agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that (i) the Company and the Selling Stockholders will not be
liable in any such case to the extent that any such loss,
<PAGE> 29
29
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion therein and (ii) such indemnity with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or any
director, officer, employee or agent of such Underwriter or any person
controlling such Underwriter) from whom the person asserting any such loss,
claim, damage or liability purchased the Securities that are the subject thereof
if such person did not receive a copy of the Prospectus (or the Prospectus as
supplemented) excluding documents incorporated therein by reference at or prior
to the confirmation of the sale of such Securities to such person in any case
where such delivery is required under the Act and any untrue statement or
omission of a material fact contained in any Preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as supplemented). This indemnity
agreement will be in addition to any liability which the Company or the Selling
Stockholders may otherwise have.
(b) Each Underwriter severally and not jointly agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers who signs
the Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act and each Selling Stockholder, to
the same extent as the foregoing indemnity from the Company and the Selling
Stockholders to each Underwriter, but only with reference to written information
relating to such Underwriter furnished to the Company by or on behalf of such
Underwriter through the Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have. The
Company and each Selling Stockholder acknowledge that the statements set forth
[in the last paragraph of the cover page regarding delivery of the Securities
and under the heading "Underwriting"] constitute the only information furnished
in writing by or on behalf of the several Underwriters for inclusion in any
Preliminary Prospectus or the Prospectus.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
<PAGE> 30
30
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and the Selling Stockholders, jointly and
severally, and the Underwriters severally agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, the Selling Stockholders and one
or more of the Underwriters may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and by the Underwriters on the other from the
offering of the Securities; provided, however, that in no case shall any
Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
the Selling Stockholders, jointly and severally, and the Underwriters severally
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the Selling
Stockholders
<PAGE> 31
31
on the one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the total net proceeds from the offering (before deducting
expenses) as set forth on the cover page of the Prospectus, benefits received by
each Selling Stockholder shall be deemed to be equal to the aggregate purchase
price of the Option Securities sold by such Selling Stockholder and benefits
received by the Underwriters shall be deemed to be equal to the total
underwriting discounts and commissions as set forth on the cover page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether any untrue or any alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to information
provided by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an Underwriter within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter, and each person who controls
the Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The liability of each Selling Stockholder under such Selling
Stockholder's representations and warranties contained in Section 1 hereof and
under the indemnity and contribution agreements contained in this Section 8
shall be limited to an amount equal to the aggregate purchase price of the
Option Securities sold by such Selling Stockholder to the Underwriters. The
Company and the Selling Stockholders may agree, as among themselves and without
limiting the rights of the Underwriters under this Agreement, as to the
respective amounts of such liability for which they each shall be responsible.
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated
<PAGE> 32
32
severally to take up and pay for (in the respective proportions which the amount
of Securities set forth opposite their names in Schedule I hereto bears to the
aggregate amount of Securities set forth opposite the names of all the remaining
Underwriters) the Securities which the defaulting Underwriter or Underwriters
agreed but failed to purchase; provided, however, that in the event that the
aggregate amount of Securities which the defaulting Underwriter or Underwriters
agreed but failed to purchase shall exceed 10% of the aggregate amount of
Securities set forth in Schedule I hereto, the remaining Underwriters shall have
the right to purchase all, but shall not be under any obligation to purchase
any, of the Securities, and if such nondefaulting Underwriters do not purchase
all the Securities, this Agreement will terminate without liability to any
nondefaulting Underwriter, the Selling Stockholders or the Company. In the event
of a default by any Underwriter as set forth in this Section 9, the Closing Date
shall be postponed for such period, not exceeding five Business Days, as the
Representatives shall determine in order that the required changes in the
Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to the Company, the Selling
Stockholders and any nondefaulting Underwriter for damages occasioned by its
default hereunder.
10. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company prior
to delivery of and payment for the Securities, if at any time prior to such time
(i) trading in the Company's Common Stock shall have been suspended by the
Commission or the Nasdaq National Market or trading in securities generally on
the New York Stock Exchange or the Nasdaq National Market shall have been
suspended or limited or minimum prices shall have been established on either of
such Exchange or the Nasdaq National Market, (ii) a banking moratorium shall
have been declared either by Federal or New York State authorities or (iii)
there shall have occurred any outbreak or escalation of hostilities, declaration
by the United States of a national emergency or war, or other calamity or crisis
the effect of which on financial markets is such as to make it, in the sole
judgment of the Representatives, impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Prospectus
(exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, of each Selling Stockholder and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
any Selling Stockholder or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancelation of this Agreement.
<PAGE> 33
33
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed and confirmed to them, care of C.E. Unterberg, Towbin,
Swiss Bank Tower, 10 East 50th Street, 22nd Floor, New York, New York, 10022
(fax no.: (212) * ); or, if sent to the Company, will be mailed, delivered or
telefaxed and confirmed to it at [address], attention of [name] (fax no.: * );
or, if sent to the Selling Stockholders, will be mailed, delivered or telefaxed
and confirmed to them, care of [name], [address], attention of [name] (fax no.:
* ).
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed within the State of New York.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for convenience only
and shall not affect the construction hereof.
<PAGE> 34
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
EDGAR Online, Inc.
By: _________________________
Name:
Title:
[Selling Stockholder]
By: _________________________
Name:
[Title:]
[Selling Stockholder]
By: _________________________
Name:
[Title:]
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
C.E. Unterberg, Towbin
By: __________________________
Name:
Title:
<PAGE> 35
For itself, Fahnestock & Co. Inc. and the other several
Underwriters named in Schedule I to the foregoing
Agreement.
<PAGE> 36
SCHEDULE I
----------
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF WARRANTS
UNDERWRITERS TO BE PURCHASED TO BE PURCHASED
- ------------ --------------- ---------------
<S> <C> <C>
C.E. Unterberg, Towbin . . . . . . * *
Fahnestock & Co. Inc. . . . . . . * *
--------- ---------
Total . . . . . . . . .
========= =========
</TABLE>
<PAGE> 37
SCHEDULE II
-----------
MAXIMUM NUMBER OF OPTION
SELLING STOCKHOLDERS: SECURITIES TO BE SOLD
- --------------------- ---------------------
[name]
[address, fax no.]............
[name]
[address, fax no.]............
Total.......................
=======
<PAGE> 38
EXHIBIT A
[Letterhead of officer, director, shareholder or option
holder of EDGAR Online, Inc.]
EDGAR Online, Inc.
Public Offering of Common Stock
*, 1999
C.E. Unterberg, Towbin
Fahnestock & Co. Inc.
c/o C.E. Unterberg, Towbin
Swiss Bank Tower
10 East 50th Street, 22nd Floor
New York, New York 10022
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between EDGAR Online,
Inc., a Delaware corporation (the "Company"), and [each of] you as
representatives of the Underwriters named therein, relating to an underwritten
public offering (the "Offering") of Common Stock, $.001 par value (the "Common
Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned will not, without the prior written
consent of C.E. Unterberg, Towbin, offer, sell, contract to sell, pledge or
otherwise dispose of (or enter into any transaction which is designed to, or
could be expected to, result in the disposition (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise) by you or
by the Company or any affiliate of the Company or any person in privity with the
Company or any affiliate of the Company) directly or indirectly, including the
filing (or participation in the filing) of a registration statement with the
Securities and Exchange Commission in respect of, or establish or increase a put
equivalent
<PAGE> 39
2
position or liquidate or decrease a call equivalent position within
the meaning of the rules promulgated under Section 16 of the Securities Exchange
Act of 1934 with respect to, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for such capital
stock, or publicly announce an intention to effect any such transaction, for a
period of one year after the date of this Agreement, other than shares of Common
Stock disposed of as bona fide gifts approved by C.E. Unterberg, Towbin.
If for any reason the Underwriting Agreement shall be terminated prior
to the Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above shall likewise be terminated.
Yours very truly,
[Signature of officer, director,
shareholder or option holder]
[Name and address of officer,
director, shareholder or
option holder]
<PAGE> 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "CYBERNET DATA SYSTEMS, INC.", FILED IN THIS OFFICE ON THE
THIRD DAY OF NOVEMBER, A.D. 1995, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
[SEAL OF THE SECRETARY OF /s/ Edward J. Freel
STATE, STATE OF DELAWARE] ---------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7703889
DATE: 11-08-95
<PAGE> 2
CERTIFICATE OF INCORPORATION
OF
CYBERNET DATA SYSTEMS, INC.
---------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is CYBERNET DATA SYSTEMS, INC.
SECOND: The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware is 32
Lockerman Square, Suite L-100, City of Dover 19904, County of Kent; and the name
of the registered agent of the corporation in the State of Delaware at such
address is the Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue in one million. The par value of each of such
shares is one mill. All such shares are of one class and are shares of Common
Stock.
No holder of any of the shares of stock of the corporation, whether
now or hereafter authorized and issued, shall be entitled as of right to
purchase or subscribe for any unissued stock of any class, or any
additional shares of any class to be issued by reason of any increase of
the authorized capital stock of any class of the corporation, or bonds,
certificates of indebtedness, debentures, or other securities convertible
into stock of any class of the corporation, or carrying any right to
purchase stock of any class of the corporation, but any such unissued stock
or any such additional authorized issue of any stock or of other securities
convertible into stock, or carrying any right to purchase stock, may be
issued and
-1-
<PAGE> 3
disposed of pursuant to resolution of the Board of Directors to such persons,
firms, corporations, or associations, and upon such terms, as may be deemed
advisable by the Board of Directors in the exercise of its discretion.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
Delia Taliento 375 Hudson Street, 11th Floor
New York, New York 10014
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
section 291 or Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the Bylaws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total
-2-
<PAGE> 4
number of directors which the corporation would have if there were no
vacancies. No election of directors need be by written ballot.
2. After the original or other Bylaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws of the
corporation may be exercised by the Board of Directors of the corporation;
provided, however, that any provision for the classification of directors
of the corporation for staggered terms pursuant to the provisions of
subsection (d) of section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by
the stockholders entitled to vote of the corporation unless provisions for
such classification shall be set forth in this certificate of
incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) of section 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
provisions of section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
-3-
<PAGE> 5
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on November 2, 1995.
Delia Taliento
--------------------
Incorporator
-4-
<PAGE> 6
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "CYBERNET DATA SYSTEMS, INC.", FILED IN THIS OFFICE ON THE
THIRTIETH DAY OF NOVEMBER, A.D. 1995, AT 9 0'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL OF THE SECRETARY OF STATE, STATE OF DELAWARE]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2558560 8100 AUTHENTICATION: 7732435
950278964. DATE: 12-04-95
<PAGE> 7
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT OF
ANY PART OF THE CAPITAL
OF
CYBERNET DATA SYSTEMS, INC.
-------------------
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"corporation") is CYBERNET DATA SYSTEMS, INC.
2. The corporation has not received any payment for any of its
stock.
3. The certificate of incorporation of the corporation is hereby
amended by striking out Article FOURTH thereof and by substituting in lieu of
said Article the following new Article:
"FOURTH: The total number of shares that the corporation shall have
authority to issue is two million (2,000,000) shares of common stock with
a par value of one mill ($.001) each."
4. The amendment of the certificate of incorporation of the
corporation herein certified was duly adopted, pursuant to the provisions of
Section 241 of the General Corporation Law of the State of Delaware, by the
sole incorporator, no directors having been named in the certificate of
incorporation and no directors having been elected.
Signed on November 3, 1995.
/s/ Delia Taliento
-------------------------------------
Delia Taliento, Sole incorporator
<PAGE> 8
FILING #0001950233 PG 02 of 02 VOL 8-00251
FILED 02/26/1999 02:45 PM PAGE 03313
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
STATE OF
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THAT THE SAID "CYBERNET DATA SYSTEMS, INC.", FILED A CERTIFICATE OF
AMENDMENT, CHANGING ITS NAME TO "EDGAR ONLINE, INC.", THE NINETEENTH DAY OF
JANUARY, A.D. 1999, AT 9 O'CLOCK A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CORPORATION IS DULY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING
AND HAS A LEGAL CORPORATE EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO
FAR AS THE RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT
BUSINESS.
/S/ Edward J. Freel
Delaware State Seal -----------------------------------
Edward J. Freel, Secretary of State
2558560 0320 Authentication: 9597228
991074082 Date: 02-25-99
<PAGE> 9
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:06 AM 01/19/1999
981494423-2556560
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
Cybernet Data Systems, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Cybernet Data Systems,
Inc. resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended
by changing the Article thereof numbered "FIRST" so that, as amended, said
Article shall be and read as follows:
FIRST: The name of the corporation (hereinafter called the "corporation")
is EDGAR(R) Online, Inc.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and held
upon notice in accordance with Section 222 of the General Corporation law of the
State of Delaware at which meeting the necessary number of shares are required
by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provision of
Section 242 of the General Corporation Law of the State of Delaware.
RESOLVED, Article Fourth of the certificate of incorporation is hereby amended
as follows:
FOURTH: The total number of shares of common stock which this Corporation
shall have authority to issue is 6,000,000 shares with a par value of
$0.001 per share.
The Corporation declared a 4 for 1 common stock split-up payable to all
common stock shareholders of record as of the close of business on May 1,
1997. Said common stock has a par value of $0.001. Such shares have been
issued by the Corporation.
FIFTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
<PAGE> 10
IN WITNESS WHEREOF, said corporation has caused this certificate to be signed
by Tom Vos, an Authorized Officer, this 18th day of January, 1999.
By: /s/ Tom Vos
--------------------------
Authorized Officer
Name: Tom Vos
Title: Chief Operating Officer
<PAGE> 11
STATE OF CONNECTICUT
OFFICE OF THE SECRETARY OF THE STATE SS: HARTFORD
I hereby certify that this is a true copy of record
in this Office.
In Testimony whereof, I have hereunto set my hand,
and affixed the Seal of said State, at Hartford,
this 1st day of March A.D. 1999
- --------------------------------------------------
/s/ Susan Bigarcuicy
- --------------------------------------------------
SECRETARY OF THE STATE
<PAGE> 1
NEITHER THIS DEBENTURE NOR THE SHARES OF COMMON STOCK UNDERLYING THIS
DEBENTURE (COLLECTIVELY THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE
STATE SECURITIES LAWS OR (ii) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH DEBENTURE, WHICH OPINION IS
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE PLEDGED,
SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
CYBERNET DATA SYSTEMS, INC.
(INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE)
NO. D-1
$1,000,000 DATED: JULY 23, 1998
10% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2001
FOR VALUE RECEIVED, CYBERNET DATA SYSTEMS, INC., a Delaware corporation (the
"Company"), promises to pay to Globix Corporation or registered assigns (the
"Holder"), the principal amount of One Million ($1,000,000) Dollars (the
"Principal Amount") in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts, with interest (computed on the basis of a 360 day year of twelve
30 day months) on the unpaid balance of such principal amount at the rate of 10%
per annum from and after July 23, 1999. Interest on the unpaid principal amount
shall be paid in advance semi-annually commencing on July 23, 1999. Principal
and any accrued and unpaid interest shall be payable in one installment on the
due date of July 23, 2001 (the "Due Date"), unless this Debenture is fully
converted or redeemed before such date as provided herein.
1. The Debenture. This Debenture is designated as 10% Convertible
Subordinated Debenture due 2001 in the principal amount of $1,000,000 (the
"Debenture"). This Debenture has been issued by the Company, along with a Common
Stock Purchase Warrant (the "Warrant"), pursuant to the terms and subject to the
conditions of a Securities Purchase Agreement between the Company and the Holder
of even date hereof (the "Securities Purchase Agreement"). Reference is made to
the Securities Purchase Agreement for certain agreements of the parties
applicable to this Debenture. Notwithstanding any provision to the contrary
contained herein, this Debenture is subject to and entitled to certain terms,
conditions, covenants and agreements contained in the Securities Purchase
Agreement. Any transferee of this Debenture, by his acceptance hereof, assumes
the obligations of the Holder in the Securities Purchase Agreement.
The Holder of this Debenture may, at his option and either in person or by
duly authorized attorney, surrender the same at the office of the Company and,
without expense to the Holder (other than transfer taxes, if any, arising in
connection with a transfer hereof), receive in exchange therefor a Debenture or
Debenture, for the same aggregate unpaid principal amount as the Debenture or
Debenture so surrendered for exchange and each payable to such person or persons
as may be designated by such Holder. Every Debenture so made and delivered in
exchange for this Debenture shall in all other respects be in the same form and
have the same terms as this Debenture.
<PAGE> 2
2. Subordination.
2.1 The indebtedness evidenced by the Debenture shall be subordinated
and junior in right of payment to all Senior Indebtedness (as defined below)
to the extent and in the manner set forth in Sections 2.2 through 2.7 hereof.
2.2 In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, debt readjustment or composition or other
similar proceeding relative to the Company or its creditors or its property,
(ii) any proceeding for voluntary liquidation, dissolution or other winding
up of the Company, whether or not involving insolvency or bankruptcy
proceedings or (iii) any assignment for the benefit of creditors or any other
marshaling of the assets of the Company, then and in any such event the
holders of all Senior Indebtedness shall first be paid in full the principal
thereof and prepayment charges, if any, and interest at the time due thereon
before any payment or distribution of any character, whether in cash,
securities or other property, shall be made on account of the Debenture.
2.3 Until the Senior Indebtedness is paid in full, the holder of the
Debenture shall be subordinated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets or securities of
the Company applicable to Senior Indebtedness. For the purposes of such
subordination, no payments or distributions to the holders of Senior
Indebtedness of assets or securities which otherwise would have been payable
or distributable to holder of the Debenture shall, as between the Company,
its creditors (other than the holders of Senior Indebtedness) and the holder
of the Debenture, be deemed to be a payment by the Company to or on account
of the Senior Indebtedness, and no payments or distributions to the holder of
the Debenture of assets or securities, by virtue of the subordination herein
provided for shall, as between the Company, its creditors (other than the
holders of Senior Indebtedness) and the holder of the Debenture, be deemed to
be a payment by the Company to or on account of the Debenture.
Notwithstanding the foregoing, unless previously converted, this Debenture
may be paid on the Due Date.
2.4 Upon any distribution of assets or securities of the Company
referred to in this Section 2, the holder of the Debenture shall be entitled
to rely upon a certificate of any liquidating trustee or agent or other
person making any distribution to the holder of the Debenture for the purpose
of ascertaining the persons entitled to participate in such distribution, the
holders of Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section 2.
2.5 In the event and during the continuation of any default in the
payment of principal of, or prepayment charge, if any, or interest on, any
Senior Indebtedness beyond any applicable period of grace, or in the event
that any event of default with respect to any Senior Indebtedness shall have
occurred and be continuing permitting the holders of such Senior Indebtedness
(or a trustee on behalf of the holders thereof) to accelerate the maturity
thereof, then unless and until such default or event of default shall have
been cured or waived or shall have ceased to exist, no payment of principal,
premium, if any, or interest shall be made by the Company on the Debenture.
2.6 No right of any present or future holder of any Senior Indebtedness
of the Company to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part
of the Company or by any act or failure to act, in good faith, by any such
holder, or by any non-compliance by the Company with the covenants,
agreements and conditions of the Debenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
2.7 "Senior Indebtedness" means all loans, advances, reimbursement
obligations regarding letters of credit, liabilities, covenants, guarantees
and duties now existing on or arising from time to time thereafter and
renewals, extensions and refundings of any such indebtedness, whether for
principal, premium or interest or otherwise of the Company or any subsidiary
of the Company to, but only to, (i)
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any bank or other commercial financing institution or (ii) Bowne & Co. Inc.,
and its successors, assigns and affiliates, whether direct or indirect,
absolute or contingent, secured or unsecured, due or to become due,
including, without limitation, (i) any debt, liability or obligation owing
from the Company or any Subsidiary to others which such bank or other
commercial financing institution may have obtained by assignment, pledge,
purchase or otherwise, (ii) any overdraft or overadvance to the Company, and
(iii) all interest, charges, expenses and attorney's fees for which the
Company or any subsidiary of the Company is now or hereafter becomes liable
to any such bank or other lending institution under any agreement or by law
(unless in the instrument creating or evidencing such indebtedness, or
pursuant to which the same is outstanding, it is provided that such
indebtedness or such renewal, extension or refunding thereof is subordinated
in right of payment to the Debenture).
3. Conversion of Debenture.
3.1 The holder of this Debenture shall have the right, at its option, at
any time after the date of this Debenture, up to and including the Maturity
Date to convert, subject to the terms and provisions of this Section 3, in
whole or in part, the principal of any this Debenture into shares of Common
Stock of the Company (calculated to the nearest one one-hundredth (1/100) of
a share), at the price of $1.492537 per share or, in case an adjustment of
such price has taken place pursuant to the provisions of this Section 3,
then at the price as last adjusted (the "Conversion Price") upon surrender
of the Debenture to the Company at any time during normal business hours,
together with written notice (the "Conversion Notice") that the holder
elects to convert this Debenture, in whole or in part, into such shares of
Common Stock in accordance with the provisions of this Section 3, and
specifying the name or names in which the shares of Common Stock issuable
upon such conversion shall be registered, together with the addresses of the
persons so named, and, if so required by the Company, accompanied by a
written instrument or instruments of transfer in the form annexed hereto
duly executed by the registered holder or his attorney duly authorized in
writing.
3.2 As promptly as practicable after the surrender, as herein provided,
of this Debenture for conversion and the receipt of the Conversion Notice
relating thereto, the Company shall deliver to the Holder, or upon the
written order of the Holder of the Debenture so surrendered, a certificate
or certificates representing the number of fully-paid and non-assessable
shares of Common Stock of the Company into which this Debenture shall be
converted in accordance with the provisions of this Section 3. Subject to
the following provisions of this Section 3.2, such conversion shall be
deemed to have been made at the close of business on the date that this
Debenture shall have been surrendered for conversion together with the
Conversion Notice, so that the rights of the Holder as a holder of the
Debenture shall cease at such time and the person or persons entitled to
receive the shares of Common Stock upon conversion of this Debenture shall
be treated for all purposes as having become the record holder or holders of
such shares of Common Stock at such time and such conversion shall be at the
Conversion Price in effect at such time; provided, however, that no such
surrender on any date when the stock transfer books of the Company shall be
closed shall be effective to constitute the person or persons entitled to
receive the shares of Common Stock upon such conversion as the record holder
or holders of such shares of Common Stock on such date, but such surrender
shall be effective to constitute the person or persons entitled to receive
such shares of Common Stock as the record holder or holders thereof for all
purposes at the close of business on the next succeeding day on which such
stock transfer books of the Company are open and such conversion shall be at
the Conversion Price in effect at the close of business on such next
succeeding day.
If the last day for the exercise of the conversion right shall not be a
business day, then such conversion right may be exercised on the next
succeeding business day.
3.3 Upon such conversion, all principal due under this Debenture shall
be discharged and the Company released from all obligations thereunder;
provided, however, that all accrued and unpaid interest shall either be paid
at such time or converted in the same manner as the conversion of the
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principal amount, in either event at the option of the Holder.
3.4 The Conversion Price in effect from time to time shall be
proportionately decreased in the event that the Company shall at any time
(i) make a subdivision of shares of Common Stock outstanding or (ii) pay a
dividend in shares of Common Stock or make a distribution in shares of
Common Stock. The Conversion Price in effect from time to time shall be
proportionately increased in the event that the Company shall at any time
combine the shares of its Common Stock outstanding. An adjustment made
pursuant to this Section 3.4 shall, in the case of a subdivision or
combination, become effective retroactively immediately after the effective
date thereof and shall, in the case of a dividend or distribution, become
effective retroactively immediately after the record date for the
determination of stockholders entitled thereto.
3.5 Whenever the Conversion Price is adjusted pursuant to Section 3.4
hereof, the Company shall promptly cause a notice stating that such
adjustment has been effected and the adjusted Conversion Price to be given
to such holder of the Debenture at its address appearing on the Debenture
registry books. Any calculation required to be made under this Section 3
shall be made to the nearest cent or the nearest one-hundredth of a share,
as the case may be.
3.6 No fractional shares or scrip representing fractional shares shall
be issued upon the conversion of this Debenture. If the conversion of this
Debenture results in a fraction, an amount equal to such fraction multiplied
by the Closing Price (as hereinafter defined) shall be paid to the persons
who would otherwise be entitled to receive such fractional interests in cash
by the Company.
3.7 In case of any reclassification or change of outstanding shares of
Common Stock issuable upon conversion of the Debenture (other than a change
in par value, or from par value to no par value, or from no par value to par
value), or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of outstanding shares of Common Stock, other than a change in number
of the shares issuable upon conversion of the Debenture) or in case of any
sale or conveyance to another entity of all or substantially all of the
assets of the Company, or in the case of an exchange of outstanding shares
of Common Stock for the shares or other securities of another corporation or
entity, or in the event of a dividend or other distribution of the
securities of a subsidiary of the Company or of any other entity to holders
of shares of Common Stock, the holder of this Debenture shall have the right
thereafter to convert this Debenture into the kind and amount of shares of
stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, conveyance, dividend
or distribution by a holder of the number of shares of Common Stock of the
Company into which this Debenture might have been converted immediately
prior to such reclassification, change, consolidation, merger, sale,
conveyance, dividend or distribution. The above provisions of this Section
3.7 shall similarly apply to successive reclassifications and changes of
shares of Common Stock and to successive consolidations, mergers, sales,
conveyances, dividends or distributions.
3.8 The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon conversion of the Debenture as herein provided, such number of
shares of Common Stock as shall then be issuable upon the conversion of this
Debenture. The Company covenants that all shares of Common Stock which shall
be so issuable shall be duly and validly issued, fully-paid and
non-assessable.
3.9 Before taking any action which would cause an adjustment reducing
the Conversion Price below the then par value of the shares of Common Stock
issuable upon conversion of the Debenture, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully-paid and
non-assessable shares of such
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<PAGE> 5
Common Stock at such adjusted Conversion Price, and at least thirty days
prior to the record date for determining shareholders of record with respect
to any such action, the Company shall give the Holder written notice of such
action by certified or registered mail, return receipt requested.
3.10 The issuance of certificates for shares of Common Stock upon the
conversion of Debenture shall be made without charge to the converting
holder for any tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as
may be directed by, the holder of the Debenture converted; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
any such certificate in a name other than that of the holder of the
Debenture converted, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax
or shall have established to the satisfaction of the Company that such tax
has been paid.
3.11 Upon conversion of this Debenture, the registered holder may be
required to execute and deliver to the Company an instrument, in form
reasonably satisfactory to the Company, representing that the shares of the
Common Stock issuable upon conversion hereof are being acquired for
investment and not with a view to distribution within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
3.12 Upon any partial conversion of this Debenture, the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
thereof a new Debenture or Debenture in principal amount equal to the unpaid
and unconverted principal amount of such surrendered Debenture, such new
Debenture or Debenture to be dated and to bear interest from the date to
which interest has been paid up to the date of such surrendered Debenture.
3.13 Except as hereinafter provided, in case the Company shall at any time
after the date hereof issue or sell any shares of Common Stock issued upon
the exercise of any options, rights or warrants, to subscribe for shares of
Common Stock and shares of Common Stock issued upon the direct or indirect
conversion or exchange of securities for shares of Common Stock, for a
consideration per share less than the Conversion Price then in effect at the
time of issuance, then forthwith upon such issuance or sale, the Conversion
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) equal to the quotient derived by
dividing (A) an amount equal to the sum of (X) the product of (a) the
Conversion Price per share of Common Stock on the date immediately prior to
the issuance or sale of such shares, multiplied by (b) the total number of
shares of Common Stock outstanding immediately prior to such issuance or
sale, plus (Y) the aggregate of the amount of all consideration, if any,
received by the Company upon such issuance or sale, by (B) the total number
of shares of Common Stock outstanding immediately after such issuance or
sale; provided, however, that in no event shall the Conversion Price be
adjusted pursuant to this computation to an amount in excess of the
Conversion Price in effect immediately prior to such computation. For the
purposes of any computation to be made in accordance with this Section 3.13,
the following provisions shall be applicable: (i) In case of the issuance or
sale or shares of Common Stock for a consideration part or all of which
shall be cash, the amount of the cash consideration therefor shall be deemed
to be the amount of cash received by the Company for such shares; (ii)In
case of the issuance or sale (otherwise then as a dividend or other
distribution on any stock of the Company) of shares of Common Stock for a
consideration part or all of which shall be other than cash, the amount of
the consideration therefor other than cash shall be deemed to be the value
of such consideration as determined in good faith by the Board of Directors
of the Company.
3.14 Except as herein provided, in case the Company shall at any time
after the date hereof issue options, rights or warrants to subscribe for
shares of Common Stock, or issue any securities convertible into or
exchangeable for shares of Common Stock, for a consideration per share less
than the
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Conversion Price immediately prior to the issuance of such options, rights or
warrants, or such convertible or exchangeable securities, or without
consideration, the Conversion Price in effect immediately prior to the
issuance of such options, rights or warrants, or such convertible or
exchangeable securities, as the case may be, shall be reduced to a price
determined by making a computation in accordance with the provisions of
Section 3.13 hereof.
3.15 No adjustment of the Conversion Price shalUpon the issuance or sale
of the Debenture or the Warrant or the shares of Common Stock issuable upon
the conversion of the Debenture or the exercise of the Warrant; (b) Upon the
issuance or sale of Common Stock (or other securities exercisable or
convertible into Common Stock) which Common Stock is issued at no less than
80.4% of the Conversion Price then in effect; (c) Upon the issuance or sale
of Common Stock (or other securities exercisable or convertible into Common
Stock) which Common Stock is issued at less than 80.4% of the Conversion
Price then in effect ("Subject Issuances") unless and until the aggregate
consideration received by the Company of all Subject Issuance during the one
year period commencing from the first Subject Issuance equals or exceeds Five
Hundred Thousand ($500,000) Dollars, in which event such adjustment shall be
calculated from the first Subject Issuance; (d) If the amount of said
adjustment shall be less than 5 cents ($.05) per share, provided, however,
that in such case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of and together
with the next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least 5 cents ($.05) per share; (e)
exercise of any warrants, options, convertible notes, debentures or other
similar convertible securities which are outstanding as of the date hereof
("Preexisting Derivative Securities") or Common Stock issuable upon the
exercise of any Preexisting Derivative Securities;(f) any warrants or options
which may be issued after the date hereof to directors, officers, employees,
advisors or consultants of the Company pursuant to stock option plans or
otherwise; or (g) any issuance of Common Stock (or other securities
exercisable or convertible into Common Stock) issued in connection with any
mergers, acquisitions, purchases of businesses or assets or similar
transactions.
4. Optional Redemption.
4.1 The Debenture may be redeemed, at the holder's option, in whole only,
upon notice ("Notice of Redemption") to the Company, at any time prior to
maturity, at a redemption price equal to the principal amount thereof and
accrued and unpaid interest if but only if there is a Change of Control of
the Company.
4.2 "Change of Control" means any of the following (i) the sale, lease,
conveyance or other disposition of all or substantially all of the Company's
assets as an entirety or substantially as an entirety or substantially as an
entirety to any person or "group" (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other
than the officers and members of the Board of Directors of the Company as of
the date of this Debenture) in one or a series of transactions; (ii) the
approval by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company; (iii) any transaction or series of
transactions (as a result of a tender offer, merger, consolidation or
otherwise) that results in any person (other than the officers or members of
the Board of Directors of the Company as of the date of this Debenture),
including a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) that includes such person, acquiring "beneficial ownership" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more
of the aggregate voting power of all classes of common equity of the Company;
or (iv) individuals who at time of the issuance of this Debenture constituted
the Board of Directors (together with any new directors whose election to the
Board of Directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the members of
the Board of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute during such
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period a majority of the members of the Board of Directors then in office
5. Restrictions Upon Transferability. Neither this Debenture nor the shares
of Common Stock issuable upon conversion of this Debenture have been registered
under the Securities Act and may not be sold or transferred in whole or in part
unless the Holder shall have first given notice to the Company describing such
sale or transfer and furnished to the Company either (a) an opinion of counsel,
which counsel and opinion (in form and substance) shall be reasonably
satisfactory to the Company, to the effect that the proposed sale or transfer
may be made without registration under the Securities Act or (b) an interpretive
letter from the SEC to the effect that no enforcement action will be recommended
if the proposed sale or transfer is made without registration under the
Securities Act; provided, however, that the foregoing shall not apply if there
is in effect a registration statement with respect to this Debenture at the time
of the proposed sale or transfer.
6. Events of Default and Remedies.
6.1 An "Event of Default" shall occur if:
(a) The Company defaults in the payment of this Debenture, when and as the
same shall become due and payable whether at maturity thereof, or by
acceleration or otherwise, which default shall continue for a period of five
(5) days following written notice by the holder to the Company; or
(b) The Company fails to comply with any of the covenants, conditions or
agreements set forth in this Debenture and such default shall continue for a
period of ten (10) days following written notice by the holder to the
Company; or
(c) The Company shall file or consent by answer or otherwise to the entry
of an order for relief or approving a petition for relief or reorganization
or arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
shall make an assignment for the benefit of its creditors, or shall consent
to the appointment of a custodian, receiver, trustee or other officer with
similar powers of itself or of any substantial part of this property, or
shall be adjudicated a bankrupt or insolvent, or shall take corporate action
for the purpose of any of the foregoing, or if a court or governmental
authority of competent jurisdiction shall enter an order appointing a
custodian, receiver, trustee or other officer with similar powers with
respect to the Company or any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding up or liquidation of the Company, or if any
such petition shall be filed against the Company and such petition shall not
be dismissed within ninety (90) days.
6.2 In case an Event of Default (other than an Event of Default resulting
from the Company's failure to pay the principal of, or any interest upon,
this Debenture when the same shall be due and payable in accordance with the
terms hereof, after giving effect to applicable "cure" provisions herein,
which event of default shall not require prior written notice) or bankruptcy,
insolvency or reorganization shall occur and be continuing, the holder of the
Debenture, by notice in writing to the Company may declare all unpaid
principal and accrued interest on this Debenture due and payable without any
other act on the part of the holder of the Debenture. Such acceleration may
be annulled and past defaults (except, unless theretofore cured, a default in
payment of principal or interest on the Debenture) may be waived by the
holder of the Debenture then outstanding or its duly authorized agent.
6.3 Should the indebtedness represented by this Debenture or any part
thereof be collected in any proceeding, or this Debenture be placed in the
hands of attorneys for collection after default, the Company agrees to pay as
an additional obligation under this Debenture, in addition to the principal
due and payable hereon, all reasonable costs of collecting this Debenture,
including reasonable
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attorneys' fees.
7. Amendments. This Debenture may be amended, modified, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the Company and the holder of the Debenture.
8. No Waiver. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver hereof, nor shall any
waiver on the part of any party of any right, power or privilege hereunder, nor
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, power or privilege hereunder. The rights and remedies provided herein are
cumulative and are not exclusive of any rights or remedies which any party may
otherwise have at law or in equity.
9. Loss, Theft, Destruction or Mutilation of Debenture. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Debenture, and of indemnity or security
reasonably satisfactory to the Company, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of this Debenture, if mutilated, the Company will make and deliver a new
Debenture of like tenor and of the same series, in lieu of this Debenture. This
Debenture made and delivered in accordance with the provisions of this Section
shall be dated as of the date hereof.
10. Notice. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, by facsimile or sent by
certified, registered, or express mail, postage prepaid, and shall be deemed
given when so delivered personally or one day by overnight courier or, if
mailed, five days after the date of deposit in the United States, as follows (i)
if to the Company, 50Washington Street, Norwalk, CT 06854 and (ii) if to the
holder of this Debenture, at such addresses as set forth in the Securities
Purchase Agreement of the holder of this Debenture.
11. No Personal Guarantees. It is expressly understood that this Debenture is
issued without any personal guarantee from any officer, director, shareholder,
employee or agent of the Company with respect to the obligations hereunder.
12. Governing Law. This Debenture shall be governed by a construed in
accordance with the laws of the State of New York, without giving effect to
conflict of law principles.
13. Successors and Assigns. All the covenants, stipulations, promises and
agreements in this Debenture contained by or on behalf of the Company shall bind
its successors and assigns, whether or not so expressed.
14. Enforceability: If any provision of this Debenture shall be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Debenture, and
this Debenture shall be construed as if any invalid, illegal or unenforceable
provisions had not been contained herein; provided however, that default in the
performance or observance by the Company of any provision of this Debenture
which has been held to be invalid, illegal or unenforceable shall,
notwithstanding such invalidity, illegality or unenforceability, constitute an
Event of Default hereunder, if such default would have constituted an Event of
Default without regard to such invalidity, illegality or unenforceability.
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IN WITNESS WHEREOF, the Company has caused this Debenture to be signed in its
corporate name by a duly authorized officer and to be dated as of the date first
above written.
CYBERNET DATA SYSTEMS, INC.
By /s/ Marc Strausberg
----------------------------------------
Marc Strausberg, Chief Executive Officer
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<PAGE> 1
Neither this Warrant nor the shares of Common Stock issuable upon exercise of
this Warrant have been registered under the Securities Act of 1933, as amended,
and this Warrant cannot be sold or transferred, and the shares of Common Stock
issuable upon exercise of this Warrant cannot be sold or transferred, unless and
until they are so registered or upon receipt of an opinion of Warrantholder's
counsel, satisfactory to the Corporation, that such registration is not then
required under the circumstances of such sale or transfer. Transfer of this
Warrant is subject to certain restrictions as set for the herein. The transfer
or sale of this Warrant is subject to the terms of a Stockholders' Agreement,
dated July 23, 1998, a copy of which is on file at the office of Cybernet Data
Systems, Inc.
WARRANT TO PURCHASE
COMMON STOCK OF
CYBERNET DATA SYSTEMS, INC.
EXPIRING JULY 23, 1999
NAME: Globix Corporation
ADDRESS: 295 Lafayette Street
New York, New York 10012
Number of shares of Common Stock to be issued upon exercise in full: 666,667
Purchase price per share: $1.50
For Value Received, Cybernet Data Systems, Inc., a Delaware corporation
(the "CORPORATION"), promises to issue to the holder of this Warrant
("WARRANTHOLDER") 666,667 shares of Common Stock of the Corporation, $.01 par
value, (the "COMMON STOCK"), pursuant to the terms of this Warrant set forth
herein, upon the payment by the Warrantholder to the Corporation of the purchase
price per share set forth above (the "PURCHASE PRICE") and to deliver to the
Warrantholder a certificate or certificates representing the Common Stock
purchased.
1.Covenants of the Corporation. The Corporation will at all times reserve and
keep available out of its authorized shares of Common Stock, solely for the
purpose of issue upon the exercise of this Warrant as herein provided, such
number of shares of Common Stock as shall then be issuable upon the exercise of
this Warrant. The Corporation covenants that all underlying shares of Common
Stock which shall be so issued shall be duly and validly issued and fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
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2.Exercise.
2.1.Exercise Period. The Warrantholder may exercise the purchase rights
represented by this Warrant at any time from July 23, 1998 to July 23, 1999
("Exercise Time").
3.Exercise of Warrant.
3.1.Dividends. No payment or adjustment shall be made upon any exercise of
this Warrant on account of any previous cash dividends.
3.2.Purchase Price. The Purchase Price shall be $1.50 per share.
3.3.Partial Exercise of Warrant. This Warrant may be exercised, in whole
or in part. It may be exercised by the Warrantholder at any time during the
exercise period, for all or part of the number of shares of Common Stock
purchasable upon complete exercise of the Warrant. Upon any partial exercise of
this Warrant, there shall be countersigned and issued to the Holder hereof a new
Warrant in respect to the shares as to which this Warrant shall not have been
exercised. This Warrant may be exchanged at the office of the Company by
surrender of this Warrant, properly endorsed, either separately or in
combination with one or more other Warrants, for one or more new Warrants of the
same aggregate number of shares as here evidenced by the Warrant or Warrants
exchanged. No fractional shares will be issued upon the exercise of rights to
purchase hereunder. The Company is not required to issue fractional shares upon
the exercise of this Warrant. Warrants for fractional shares shall be rounded
down to the nearest whole number. This Warrant is transferable at the office of
the Company in the manner and subject to the limitations set forth herein.
3.4.Exercise of Warrant. In order to exercise this Warrant, the
Warrantholder shall deliver to the Corporation (i) a written notice of such
holder's election to exercise this Warrant (in the form attached hereto as
Exhibit A), and (ii) payment of the Purchase Price for the number of shares
being purchased, in cash or by a certified or cashier's check. The Corporation
may require the Warrantholder to furnish a written statement that the shares of
Common Stock are being purchased for his, her or its own account and not with a
view to the distribution thereof. Upon receipt of written notice, the
Corporation shall as promptly as practicable execute or cause to be executed and
delivered to such holder a certificate or certificates representing the Common
Stock purchased.
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3.5.Adjustment to Purchase Price.
(a)Dividends and Subdivisions.In case the Corporation shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares or declare a dividend or make any other distribution upon the Common
Stock of the Corporation payable in Common Stock, the Purchase Price shall be
proportionately reduced and the number of shares of Common Stock as shall then
be issuable upon the exercise of this Warrant immediately prior to such
subdivision, dividend or distribution shall be proportionately increased, and
conversely, in case the outstanding shares of Common Stock of the Corporation
shall be combined into a smaller number of shares, the Purchase Price shall be
proportionately increased and the number of shares of Common Stock as shall then
be issuable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced.
(b)Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets to another Person
or other transaction which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as "ORGANIC CHANGE." Prior to the consummation of any Organic
Change, the Corporation shall make appropriate provisions and reasonable
judgments of the Board of Directors of the Corporation to insure that each of
the Registered Holders of the Warrants shall thereafter have the right to
acquire and receive in lieu of or in addition to (as the case may be) the shares
of Common Stock immediately theretofore acquirable and receivable upon the
exercise of such Registered Holder's Warrants, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of such Registered Holder's Warrants had such Organic
Change not taken place.
(c)Record Date. In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution payable in Common Stock, then such record date
shall be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution, as the case may be.
3.6.Notice of Adjustment. Upon any adjustment in the number of shares of
Common Stock issuable upon the exercise of this Warrant, then and in each case
the Corporation shall give written notice thereof, which notice shall state the
number of shares of Common Stock issuable upon exercise of this Warrant
resulting from such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
3.7.Issue Tax. The issuance of certificates for shares of Common Stock
upon exercise of this Warrant shall be made without charge to the holder hereof
for any issuance tax in respect thereof, provided that the Corporation shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the holder of this Warrant.
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<PAGE> 4
3.8.Closing of Books. The Corporation will not close its books against the
transfer of any shares of Common Stock issued or issuable upon the exercise of
this Warrant.
3.9.Transferability and Registration Under Securities Act.
(a)This Warrant may not be sold, assigned, pledged or transferred
except in compliance with the terms and conditions of that certain Stockholders'
Agreement dated July 23, 1998, a copy of which can be obtained from the
executive office of the Corporation.
(b)The Warrantholder, by acceptance hereof, acknowledges and agrees
that (A) the Warrants have not been registered under the Securities Act of 1933,
as amended (the "1933 ACT"), or the securities laws of any state, based upon an
exemption from such registration requirements for non-public offerings pursuant
to Section 4(2) under the 1933 Act; (B) the Warrants are and will be "restricted
securities", as said term is defined in Rule 144 of the Rules and Regulations
promulgated under the 1933 Act; (C) the Warrants may not be sold or otherwise
transferred unless (i) such transfer is in compliance with Section 3.9(a)
herein, and (ii) they have either been first registered under the 1933 Act and
all applicable state securities laws, or (x) unless exemptions from such
registration provisions are available with respect to said resale or transfer,
and (y) the undersigned shall have first delivered to the Corporation a written
opinion of counsel (which counsel and opinion (in form and substance) shall be
reasonably satisfactory to the Corporation), to the effect that the proposed
sale or transfer is exempt from the registration provisions of the 1933 Act and
all applicable state securities laws. Such restrictions of this Section 3.9
shall be deemed to apply to the transferability and registration of any shares
of Common Stock or other securities acquired upon exercise hereof; (D) the
Corporation is under no obligation to register this Warrant under the 1933 Act
or any state securities laws, or to take any action to make any exemption from
any such registration provisions available, except as provided in that certain
registration rights agreement between the Corporation and the holder of this
Warrant of even date herewith; and (E) stop transfer instructions will be placed
with the transfer agent for the Warrants.
3.10.Notice. Any notice or other document required or permitted to be
given or delivered to the Warrantholder and holder of shares issued upon
exercise of this Warrant shall be sent by certified or registered mail, return
receipt requested, to the Warrantholder at the address now shown on this Warrant
or at such other address as the holder shall furnish to the Corporation in
writing. Any notice or other document required or permitted to be given or
delivered to the Corporation at 50 Washington Street, 9th floor, South Norwalk,
CT 06854 or such other address as shall have been furnished to the Warrantholder
and holder of the Common Stock by the Corporation.
3.11.No Voting Rights; Limitation of Liability. This Warrant shall not
entitle the registered Holder hereof to any voting rights or other rights as a
stockholder of the Company prior to the Exercise Time. No provisions hereof, in
the absence of affirmative action by the Warrantholder to purchase Common Stock
hereunder, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such holder for the Purchase
Price or as a shareholder of the Corporation (whether such liability is asserted
by the Corporation or creditors of the Corporation).
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<PAGE> 5
3.12.Replacement. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing this Warrant, and in the case of any such loss, theft or
destruction, upon receipt of an indemnity undertaking from the holder of this
Warrant or such other Person satisfactory to the Company (it being acknowledged
that an unsecured indemnity from any original Warrantholder or an affiliated
transferee shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company shall execute and deliver in lieu of
such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its President or a Vice President, thereunto duly authorized, the execution
hereof to be attested by its Secretary; and the affixing of its corporate seal
on this 23rd day of July, 1998.
(Corporate Seal) CYBERNET DATA SYSTEMS, INC.
ATTEST:
By: /s/ Susan J. Strausberg By: /s/ Marc Strausberg
----------------------------- ----------------------------------
Secretary President
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<PAGE> 6
EXHIBIT A
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ shares of Common
Stock and herewith tenders in payment for such Common Stock cash or a check
payable to the order of Cybernet Data Systems, Inc. (the "CORPORATION") in the
amount of $______________, all in accordance with the terms hereof. The
undersigned hereby represents and warrants that it is obtaining the Common Stock
solely for investment purposes and not with any intention to distribute such
Common Stock and acknowledges that such Common Stock have not been registered
under the Securities Act of 1933 and that such Common Stock can not be sold or
transferred unless so registered or upon receipt of an opinion of counsel,
reasonably acceptable to the Corporation and its counsel, that registration is
not then required. The undersigned requests that a certificate for such Common
Stock be registered in the name of ____________________, whose address is
________________________ ____________________________________, and that such
Certificate be delivered to ________________________________________, whose
address is_____________________________.
Dated: Signature:________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
6
<PAGE> 1
CYBERNET DATA SYSTEMS, INC 1996 STOCK OPTION PLAN
1. GENERAL PROVISIONS
(a) PURPOSE
This 1996 Stock Option Plan ("Plan") is intended to promote the
interests of Cybernet Data Systems, Inc., a Delaware corporation
(the "Corporation"), and its shareholders by providing individuals
who render valuable services to the Corporation (or any Parent or
Subsidiary, as defined below), on whose judgment, initiative, and
efforts the successful conduct of the business of the Corporation
depends, and who are responsible for the management, growth, and
protection of the business, with the opportunity to acquire
ownership interests, through the issuance of options to acquire
shares of the Common Stock (each, an "Option"), in the Corporation
so as to encourage them to continue in the employ of the Corporation
(or any Parent or Subsidiary) and to maximize their performance.
(b) TERMINOLOGY
For the purposes of this Plan, any capitalized term shall have the
meaning assigned under Section 3(h) hereof.
(c) ADMINISTRATION OF THE PLAN
(i) This Plan shall be administered either the Board or a
committee of two (2) or more Board members appointed by the
Board to which the Board has delegated administrative
functions under the Plan (the "Committee"). Members of any
committee to which the Board has delegated any administrative
functions shall serve for such terms as the Board shall
determine and subject to the Board's right of removal. All
delegations of authority to any committee shall be and remain
revocable by the Board.
(ii) The Committee shall have full power and authority to
implement, interpret and administer the Plan, to establish all
such rules and regulations as it deems appropriate, and to
make such determinations under the Plan and any outstanding
Option grants or share issuances as it deems necessary or
advisable. Decisions of the Committee shall be final and
binding on all parties who have an interest in the Plan or any
outstanding Option or share issuance.
(iii) The Committee shall have the absolute discretion and authority
to determine,
<PAGE> 2
subject to the provisions of this Plan, the terms of any
Option grant. In addition to any other matters over which the
Committee has discretion hereunder, the Committee shall
determine which, if any, eligible individuals will be granted
Options in accordance with the Plan. The Committee will
determine the number of shares to be covered by each such
grant, the status of the granted Option as either an Incentive
Option or a Non-Statutory Option, the time or times at which
each granted Option is to become exercisable, the vesting
schedule (if any) applicable to shares issued pursuant to the
granted Options, the performance goals to be attained in order
for Options to be granted and the maximum term for which the
Option may remain outstanding.
(iv) The Committee may, in its absolute discretion, without
amendment to the Plan, (i) accelerate the date on which any
Option granted under the Plan becomes exercisable or otherwise
adjust any of the terms of such Option (except that no such
adjustment shall, without the consent of an optionee, reduce
the optionee's rights under any previously granted and
Outstanding Option) and (ii) otherwise adjust or waive any
condition imposed on any Option grant made hereunder.
(v) In addition, the Committee may, in its absolute discretion and
without amendment to the Plan, grant Options on the condition
that the Optionee surrender to the Committee for cancellation
such other Options (including, without limitation, Options
with higher exercise prices) as the Committee specifies.
Notwithstanding Section 1 (e)(i) herein, prior to the
surrender of such other Options, Options granted pursuant to
the preceding sentence of this Section 1 (c)(v) shall not
count against the limit set forth in such Section 1(e)(i).
(vi) No member of the Committee shall be liable for any action,
omission or determination relating to the Plan, and the
Corporation (and any affiliate that may adopt the Plan),
jointly and severally, shall indemnify and hold harmless each
member of the Committee and each other director or employee of
the Corporation (or affiliate) to whom any duty or Power
relating to the administration or interpretation of the Plan
has been delegated against any cost or expense (including
counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee)
arising out of any action, omission or determination unless
such action, omission or determination was taken or made by
such member, director or employee in bad faith and without
reasonable belief that it was in the best interests of the
Corporation and its affiliates as the case may be.
(d) SELECTION OF OPTIONEES AND PARTICIPANTS
The persons eligible to receive issuances under the Plan are limited
to Employees,
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<PAGE> 3
non-employee members of the Board of the Corporation (or of any
Parent or Subsidiary) and consultants and other independent
contractors who provide valuable services to the Corporation (or of
any Parent or Subsidiary).
(e) STOCK SUBJECT TO THE PLAN
(i) Common Stock of the Corporation will be issued under the Plan.
The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed 800,000
shares, subject to adjustment from time to time in accordance
with the provisions of this Section 1.
(ii) Shares reserved for issuance under granted Options but not in
fact issued pursuant to Options granted under the Plan due to
the expiration or termination of the Option or the
cancellation of the Option in accordance with Section 2(h),
will again become available for issuance under the Plan.
(iii) In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split,
combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without
receipt of consideration, then appropriate adjustments shall
be made to (i) the aggregate number and/or class of shares
issuable under the Plan and (ii) the aggregate number and/or
class of shares and the Option price per share in effect under
each outstanding Option in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined
by the Committee shall be final, binding and conclusive.
(f) AMENDMENT OF THE PLAN AND AWARDS
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever. However,
no such amendment or modification shall adversely affect the rights
and obligations of an optionee with respect to Options at the time
outstanding under the Plan, nor adversely affect the rights of any
issuee with respect to Common Stock issued under the Plan prior to
such action unless such issuee consents to such amendment. In
addition, the Board shall not, without the approval of the
Corporation's shareholders, amend the Plan so as to (i) increase the
maximum number of shares issuable under the Plan (except for
adjustments required under Section 1 (e)(iii)), (ii) materially
increase the benefits accruing to individuals who participate in the
Plan, or (iii) materially modify the eligibility requirements for
participation in the Plan. The Board may amend the Plan, subject to
the limitations cited above, in such manner as it deems necessary to
permit the granting of Options meeting the requirements of future
amendments or issued regulations, if any, to the Code or to
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<PAGE> 4
the Exchange Act.
(g) EFFECTIVE
(i) The Plan shall become effective when shareholder approval of
the Plan is obtained. Options may be granted, pursuant to the
terms of the Plan, from and after the effective date.
(ii) The Plan shall terminate upon the date on which all shares
available for issuance under the Plan have been issued
pursuant to the exercise of Options granted under Section 2.
The termination of the Plan shall have no effect on any
outstanding Options under or shares issued and outstanding
under the Plan, and such securities shall thereafter continue
to have force and effect in accordance with the provisions of
the agreements evidencing such Options and issuances.
(h) NO EMPLOYMENT OR SERVICE RIGHTS
(i) No Special Employment Rights. Nothing contained in the Plan
shall confer upon any person any right with respect to the
continuation of his or her employment by or service with the
Corporation, Parent or a Subsidiary or interfere in any way
with the right of the Corporation, subject to the terms of any
separate employment or consulting agreement to the contrary,
at any time to terminate such employment or service or to
increase or decrease the compensation of the person from the
rate in existence at the time of the grant of an Option.
Nothing in the Plan shall interfere with or otherwise restrict
in any way the rights of the Corporation (or any Parent or
Subsidiary) to engage in any Corporate Transaction.
(ii) No Rights to Option. No person shall have any claim or right
to receive an Option hereunder. The Committee's granting of an
Option to an optionee at any time shall neither require the
Committee to grant an Option to such optionee or any other
optionee or other person at any time nor preclude the
Committee from making subsequent grants to such optionee or
any other optionee or other person.
2. OTHER GRANTS
(a) TERMS AND CONDITIONS OF OPTIONS
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<PAGE> 5
The Committee may grant Options pursuant to the Plan. Such Options
shall be evidenced by agreements in such form as the Committee shall
from time to time approve; provided, however, that each such
instrument shall comply with the terms and conditions of the
relevant parts of this Section 2. All Options granted under the Plan
shall be clearly identified in the agreement evidencing such Options
as either Incentive Options or as Non-Statutory Options or a
combination of both.
(b) OPTION EXERCISE PRICE.
The Option exercise price per share shall be fixed by the Committee,
subject to Section 2(g) in the case of Incentive Options. In the
case of Non-Statutory Options, such price per share shall not be
less than 20% of the Fair Market Value of a share of Common Stock.
(c) TERM AND EXERCISE OF OPTIONS.
Each Option granted under the Plan shall be exercisable at such time
or times, during such period, and for such number of shares as shall
be determined by the Committee and set forth in the stock Option
agreement evidencing such Option.
(d) OPTION EXERCISABLE IN WHOLE OR IN PART
Each Option shall be exercisable in whole or in part. The partial
exercise of an Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof
(e) NO ASSIGNMENT.
During the lifetime of the optionee, the Option shall be exercisable
only by the optionee and shall not be assignable or transferable by
the optionee otherwise than by will or by the laws of descent and
distribution following the optionee' s death.
(f) TERMINATION OF SERVICE.
The following provisions shall govern the exercise period applicable
to any Options held by the optionee at the time of cessation of
Service or death:
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<PAGE> 6
(i) Should the optionee cease to remain in Service for any reason
other than death or Permanent Disability, then the period
during which each outstanding Option held by such optionee, to
the extent otherwise exercisable, is to remain exercisable
shall be limited to the three (3) month period following the
date of such cessation of Service.
(ii) Should such Service terminate by reason of Permanent
Disability or should the optionee die while holding one or
more outstanding Options, then the period during which each
such Option to the extent otherwise exercisable is to remain
exercisable shall be limited to the twelve (12) month period
following the later of date of the optionee's cessation of
Service or death. During the limited exercise period following
the optionee's death, the Option may be exercised by the
personal representative of the optionee's estate or by the
person or persons to whom the Option is transferred pursuant
to the optionee' s will or in accordance with the laws of
descent and distribution.
(iii) The Committee shall have full power and authority to extend
(either at the time the Option is granted or at any time while
the Option remains outstanding) the period of time for which
the Option is to remain exercisable following the optionee's
cessation of Service, from the limited period otherwise
applicable under Section 2(a), to such greater period of time
as the Committee may deem appropriate under the circumstances.
(iv) Notwithstanding the above no Option shall be exercisable after
the specified expiration date of the Option term.
(v) Each such Option shall, during the applicable limited exercise
period, be exercisable only with respect to the shares for
which the Option was exercisable on the date of the optionee's
cessation of Service.
(g) INCENTIVE OPTIONS
(i) The terms and conditions specified in this Section 2 shall be
applicable to Incentive Options granted under the Plan, except
to the extent such provisions are inconsistent with the
provisions this Section 2(g). Options which are specifically
designated as Non-Statutory Options when issued under the Plan
shall not be subject to such terms and conditions set forth
herein.
(ii) The exercise price of an Incentive Option shall be the Fair
Market Value of a share of Common Stock, subject to Section
2(g)(iii). The aggregate Fair Market Value of shares of
Corporation Stock with respect to which Incentive Options
granted hereunder are exercisable for the first time by an
optionee during any calendar year
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<PAGE> 7
under the Plan and any other stock Option plan of the
Corporation (or any "subsidiary corporation" of the
Corporation within the meaning of Section 424 of the Code)
shall not exceed $100,000. Such Fair Market Value shall be
determined as of the date on which each such Incentive Option
is granted. In the event that the aggregate Fair Market Value
of shares of Corporation Stock with respect to such Incentive
Options exceeds $100,000, then Incentive Options granted
hereunder to such optionee shall, to the extent and in the
order in which they were granted, automatically be deemed to
be Non-Statutory Options, but all other terms and provisions
of such Incentive Options shall remain unchanged.
(iii) No Incentive Option may be granted to an individual if, at the
time of the proposed grant, such individual owns stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation or any of its
"subsidiary corporations" (within the meaning of Section 424
of the Code), unless (I) the exercise price of such Incentive
Option is at least 110% of the Fair Market Value of a share of
Corporation Stock at the time such Incentive Option is granted
and (II) such Incentive Option is not exercisable after the
expiration of five years from the date such Incentive Option
is granted.
(iv) No Incentive Option may be granted to an individual if at the
time of the proposed grant, such individual is not an employee
of the Corporation.
(v) No Incentive Option may be granted after 10 years from the
date the Plan is adopted, or the date such plan is approved by
the shareholders, whichever is earlier.
(vi) No Incentive Option may be exercisable after the expiration of
10 years from the date such Incentive Option is granted.
(vii) An Incentive Option shall not be transferable by an optionee
otherwise than by will or the laws of descent and
distribution, and shall be exercisable during the optionee's
lifetime, only by such optionee.
(h) CANCELLATION AND NEW GRANT OF OPTIONS
The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding Options under the Plan and
the grant in substitution therefor of new Options under the Plan
covering the same or a different numbers of shares of Common Stock
but having an Option price per share established at the time of such
cancellation and regrant in accordance with the provisions of this
Plan.
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<PAGE> 8
3. MISCELLANEOUS
(a) LOANS
(i) The Committee may assist any optionee in the exercise of one
or more Options granted to such optionee including the
satisfaction of any Federal and State income and employment
tax obligations arising therefrom, by (i) authorizing the
extension of a loan from the Corporation to such optionee, or
(ii) permitting the optionee to pay the Option price or
purchase price for the purchased Common Stock in installments
over a period of years.
(ii) The terms of any loan or installment method of payment
(including the interest rate, at no less than the applicable
federal rate as in effect from time to time, and terms of
repayment) shall be established by the Committee in its sole
discretion. Loans or installment payments shall be secured by
the purchased shares of Common Stock but otherwise may be
authorized with or without security or collateral. However,
any loan made to a consultant or other non-employee advisor
must be secured in addition by property other than the
purchased shares of Common Stock. In all events the maximum
credit available to each optionee may not exceed the sum of
(i) the aggregate Option price payable for the purchased
shares plus (ii) any Federal and State income and employment
tax liability incurred by the optionee in connection with such
exercise or purchase.
(b) VESTING OF SHARES AND REPURCHASE RIGHTS
(i) The Committee, in its absolute discretion, may issue fully and
immediately vested shares of Common Stock, or the Committee
may impose such vesting requirements as it deems appropriate
with the Corporation retaining a right to repurchase any
unvested shares. The terms of the vesting schedule and of the
Corporation's repurchase rights shall be as determined by the
Committee and set forth in the agreement governing such
issuance.
(ii) Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash
dividend) which the holder of unvested Common Stock may have
the right to receive by reason of a stock dividend, stock
split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the
same vesting and repurchase limitations applicable to the
unvested Common Stock with respect to which it was paid
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<PAGE> 9
or arose, and (ii) such escrow arrangements as the Committee
shall deem appropriate.
(iii) No person to whom shares of Common Stock have been issued
pursuant to the Plan may transfer any such shares which have
not vested.
(c) MARKET STAND-OFF AGREEMENTS
The Committee may require each person to whom any shares are issued
under this Plan to enter into an agreement which restricts or
prohibits the sale of any stock of the Corporation by such person
for a reasonable period of time following a public offering of any
shares of stock by the Corporation.
(d) RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under Section 12(g) of the Exchange Act,
the Committee may subject any shares issued pursuant to the Plan to
a right of first refusal with respect to any proposed disposition of
such shares other than a transfer permitted by Section 2(e). Such
right of first refusal shall be exercisable by the Corporation (or
its assignees) in accordance with the terms and conditions specified
in the instrument governing the issuance of such shares.
(e) SECURITIES LAWS: LEGEND
(i) Options or Shares of Common Stock shall not be issued or
delivered under this Plan unless and until the Corporation
shall have determined that there has been full and adequate
compliance with all applicable requirements of the Federal and
state securities laws and all other applicable legal and
regulatory requirements. Without limiting the generality of
the above, and notwithstanding any other provision of the
Plan, the Plan shall at all time comply with the provisions of
Rule 16b-3 (including, without limitation, its plan amendment
provisions) promulgated under the Exchange Act, or any
successor rule ("Rule 16b-3") in the event Options are granted
to such persons as are required to file reports under Section
16(a) of the Exchange Act. In such cases, the Plan shall be
administered by (i) the Committee if the Committee may
administer the Plan in compliance with Rule 16b-3 with respect
to a plan intended to qualify thereunder as a discretionary
plan, or (ii) a committee designated by the Committee to
administer the Plan, which Committee shall
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<PAGE> 10
be constituted in such a manner as to permit the Plan to
comply with Rule 1 6b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan.
(ii) Shares issued under the Plan shall bear such legends as the
Committee deems necessary or appropriate, including such
restrictive legends as the Committee shall require to reflect
the terms of any agreement between the optionee and the
Corporation.
(f) SHAREHOLDER RIGHTS
(i) Subject to the rights of the Corporation set forth herein or
in any other agreement entered into between the Corporation
and an issuee of shares under the Plan, each person to whom
shares of Common Stock have been issued under the Plan shall
have all the rights of a shareholder with respect to those
shares whether or not his/her interest in such shares is
vested. Accordingly, the issuee shall have the right to vote
such shares and to receive any cash dividends or other
distributions paid or made with respect to such shares.
(ii) No person shall have any rights as a stockholder with respect
to any shares of Corporation Stock covered by or relating to
any Option granted pursuant to the Plan until the date the
person becomes the owner of record with respect to such
shares. Except as otherwise expressly provided in Section 1(e)
hereof, no adjustment to any Option shall be made for
dividends or other rights for which the record date occurs
prior to the date such stock certificate is issued.
(g) ACCELERATION
The Committee may, in its discretion, provide for the automatic
acceleration upon a Change of Control and\or Corporate Transaction
at the time of which any Option will become exercisable or for the
lapse of any repurchase right tied to vesting by including a
provision to such effect in the documents evidencing the rights of
the optionee. Every optionee under the Plan shall be entitled to ten
(10) business days' prior notice to the occurrence of any Corporate
Transaction, to the extent that the occurrence of any such Corporate
Transaction is within the Corporation's knowledge.
(h) DEFINITIONS
The following definitions shall be in effect under this Plan:
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<PAGE> 11
(i) BOARD shall mean the Board of Directors of the
Corporation.
(ii) CODE shall mean the Internal Revenue Code of 1986, as
amended.
(iii) COMMON STOCK shall mean the common stock of the
Corporation.
(iv) CORPORATE TRANSACTION shall mean either of the following
stockholder- approved transactions to which the
Corporation is a party:
(1) any transaction or series of related transactions
(including, without limitation, any
reorganization, merger or consolidation) in which
more than fifty percent (50%) of the Corporation's
outstanding voting stock is transferred to a
person or persons different from those who held
the stock immediately prior to such transaction,
or
(2) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in
complete liquidation or dissolution of the
Corporation.
(v) EMPLOYEE shall mean an individual who is in the employ
of the Corporation or any Parent or Subsidiary, subject
to the control and direction of the employer entity as
to both the work to be performed and the manner and
method of performance.
(vi) EXCHANGE ACT shall mean the Securities Exchange Act of
1934, as amended.
(vii) FAIR MARKET VALUE per share of Common Stock on any
relevant date under the Plan shall be the value
determined in accordance with the following provisions:
(1) If the Common Stock is not at the time listed or
admitted to trading on any Stock Exchange but is
traded on the NASDAQ National Market System, the
Fair Market Value shall be the closing selling
price per share of Common Stock on the date in
question, as the price is reported by the National
Association of Securities Dealers through the
NASDAQ National Market System or any successor
system. If there is no closing selling price for
the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling
price on the last preceding date for which such
quotation exists.
(2) If the Common Stock is at the time listed or
admitted to trading on any Stock Exchange, then
the Fair Market Value shall be the closing
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<PAGE> 12
selling price per share of Common Stock on the
date in question on he Stock Exchange determined
by the Committee to be the primary market for the
Common Stock, as such price is officially quoted
in the composite tape of transactions on such
exchange. If there is no closing selling price for
the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling
price on the last preceding date for which such
quotation exists.
(3) If the Common Stock is at the time neither listed
nor admitted to trading on any Stock Exchange nor
traded on the NASDAQ National Market System, then
such Fair Market Value shall be determined by
taking into account such factors as the Committee
shall deem appropriate.
(viii) INCENTIVE OPTION shall mean a stock Option which
satisfies the requirements of Section 422 of the Code.
(ix) NON-STATUTORY OPTION shall mean a stock Option not
intended to meet the requirements of Section 422 of
the Code.
(x) PARENT shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations
ending with the Corporation, provided each corporation
in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one
of the other corporations in such chain.
(xi) PERMANENT DISABILITY shall have the meaning assigned
to such term in Section 22(e)(3) of the Code.
(xii) SERVICE shall mean the provision of services to the
Corporation or any Parent or Subsidiary by an
individual in the capacity of an Employee, a
non-employee member of the Board or a consultant or
independent contractor.
(xiii) SUBSIDIARY shall mean each corporation (other than the
Corporation) in an unbroken chain of corporations
beginning with the Corporation, provided each such
corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in
one of the other corporations in such chain.
(i) USE OF PROCEEDS: EXPENSES
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<PAGE> 13
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general
corporate purposes. The expenses of the Plan shall be paid by the
Corporation.
(j) WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any Options granted under hereunder shall be subject to the
satisfaction of all applicable Federal, State and local income and
employment tax withholding requirements.
(k) REGULATORY APPROVALS
The implementation of the Plan, the granting of any Options and the
issuance of Common Stock upon the exercise of the Option grants made
hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the Options granted under it, and the
Common Stock issued pursuant to it.
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<PAGE> 14
CYBERNET DATA SYSTEMS, INC. STOCK OPTION AGREEMENT
RECITALS
The Board of Directors of Cybernet Data Systems, Inc. (the "Corporation") has
adopted the Cybernet Data Systems, Inc. 1996 Stock Option Plan (the "Plan") for
the purpose of attracting and retaining the services of persons who contribute
to the growth and financial success of the Corporation.
Optionee is a person who the Committee believes has and will contribute to the
growth and financial success of the Corporation and this Agreement is executed
pursuant to and is intended to carry out the purposes of the Plan.
AGREEMENT
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set forth in
this Agreement, the Corporation hereby grants to Optionee, as of the grant
date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that
number of shares of the Corporation's Common Stock (the "Option Shares")
as is specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term at the option price
per share (the "Option Price") specified in the Grant Notice.
2. OPTION TERM. This option shall expire at the close of business on the
expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. During the lifetime of Optionee, this option
shall be exercisable only by Optionee and shall not be assignable or
transferable by the optionee otherwise than by will or by the laws of
descent and distribution following the optionee's death.
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<PAGE> 15
4. DATES OF EXERCISE. This option may be exercisable for the Option Shares in
one or more installments as is specified in the Grant Notice. As the
option becomes exercisable in one or more installments, the installments
shall accumulate and the option shall remain exercisable for such
installments until the Expiration Date or the sooner termination of the
option term under Paragraph 5 or Paragraph 6 of this Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be
exercisable) prior to the Expiration Date should any of the following
provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason other than
death or permanent disability while this option is outstanding, then
the period for exercising this option, if it is otherwise
exercisable, shall be reduced to a three (3) month period commencing
with the date of such cessation of Service, but in no event shall
this option be exercisable at any time after the Expiration Date.
Upon the expiration of such three (3) month period or (if earlier)
upon the Expiration Date, this option shall terminate and cease to
be outstanding.
(b) Should Optionee die while this option is outstanding, then the
personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the law of descent and distribution shall
have the right to exercise this option. Such right shall lapse and
this option shall cease to be exercisable upon the earlier of (A)
the expiration of the twelve (12) month period measured from the
date of Optionee's death or (B) the Expiration Date. Upon the
expiration of such twelve (12) month period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be
outstanding.
(c) Should Optionee become permanently disabled and cease by reason
thereof to remain in Service while this option is outstanding, then
the Optionee shall have a period of twelve (12) months (commencing
with the date of such cessation of Service) during which to exercise
this option but in no event shall this option be exercisable at any
time after the Expiration Date. Optionee shall be deemed to be
permanently disabled if Optionee is unable to engage in any
substantial gainful activity for the Corporation or the parent or
subsidiary corporation retaining his/her services by reason of any
medically determinable physical or mental impairment, which can be
expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months.
Upon the expiration of such limited period of exercisability or (if
earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
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<PAGE> 16
(d) During the limited period of exercisability applicable under
subparagraph (a), (b) or (c) above, this option may be exercised for
any or all of the Option Shares for which this option is, at the
time of the Optionee's cessation of Service, exercisable in
accordance with the exercise schedule specified in the Grant Notice
and the provisions of Paragraph 6 of this Agreement.
(e) For purposes of this Paragraph 5 and for all other purposes under
this Agreement:
(i) The Optionee shall be deemed to remain in SERVICE for so long
as the Optionee continues to render periodic services to the
Corporation or any Parent or Subsidiary corporation, whether
as an Employee, a non-employee member of the board of
directors, or an independent contractor or consultant.
(ii) The Optionee shall be deemed to be an EMPLOYEE of the
Corporation and to continue in the Corporation's employ for so
long as the Optionee remains in the employ of the Corporation
or one or more of its Parent or Subsidiary corporations,
subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of
performance.
(iii) A corporation shall be considered to be a SUBSIDIARY
corporation of the Corporation if it is a member of an
unbroken chain of corporations beginning with the Corporation,
provided each such corporation in the chain (other than the
last corporation) owns, at the time of determination, stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
(iv) A corporation shall be considered to be a PARENT corporation
of the Corporation if it is a member of an unbroken chain
ending with the Corporation, provided each such corporation in
the chain (other than the Corporation) owns, at the time of
determination, stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the
other corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
(a) This Option, to the extent not previously exercised, shall terminate
and cease to be exercisable upon the consummation of one or more of
the following stockholder-approved transactions (a "Corporate
Transaction") unless this Option is expressly
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<PAGE> 17
assumed by the successor corporation or parent thereof:
(i) any transaction or series of related transactions (including,
without limitation, any reorganization or merger or
consolidation) in which more than 50% of the Corporation's
voting stock is transferred to a person or persons different
from those who held the stock immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
(b) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make
changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
7. ADJUSTMENT IN OPTION SHARES
(a) In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend,
combination of shares, exchange of shares, or other change affecting
the outstanding Common Stock as a class without receipt of
consideration, then appropriate adjustments shall be made to (i) the
total number of Option Shares subject to this option, (ii) the
number of Option Shares for which this option is to be exercisable
from and after each installment date specified in the Grant Notice
and (iii) the Option Price payable per share in order to reflect
such change and thereby preclude a dilution or enlargement of
benefits hereunder.
(b) If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain
outstanding, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain
to the number and class of securities which would have been issuable
to the Optionee in the consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the
Option Price payable per share, provided the aggregate Option Price
payable hereunder shall remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall not have any
of
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<PAGE> 18
the rights of a shareholder with respect to the Option Shares until such
individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any part of
the Option Shares for which this option is at the time exercisable,
Optionee (or in the case of exercise after Optionee' 5 death, the
Optionee's executor, administrator, heir or legatee, as the case may
be) must take the following actions:
(i) Execute and deliver to the Secretary of the Corporation a
Stock Vesting and Repurchase Agreement (the "Repurchase
Agreement") in substantially the form of Exhibit B to the
Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares in one
or more forms approved under the Plan.
(iii) Furnish to the Corporation appropriate documentation that the
person or persons exercising the option, if other than
Optionee, have the right to exercise this option.
(b) Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as
amended, at the time the option is exercised, then the Option Price
may also be paid as follows:
(i) in shares of Common Stock held by the Optionee and valued at
fair market value on the Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to
which the Optionee is to provide irrevocable written
instructions (a) to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Option Price payable for the purchased shares plus all
applicable Federal and State income and employment taxes
required to be withheld by the Corporation by reason of such
purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
(c) For purposes of this Agreement, the Exercise Date shall be the date
on which the
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<PAGE> 19
executed Repurchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on
any relevant date shall be determined in accordance with
subparagraphs (i) through (iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ
National Market System, the fair market value shall be the
closing selling price of one share of Common Stock on the date
in question, as such price is reported by the National
Association of Securities Dealers through its NASDAQ system or
any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the closing
selling price on the last preceding date for which such
quotation exists shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value
shall be the closing selling price per share of Common Stock
on the date in question on the stock exchange determined by
the Committee to be the primary market for the Common Stock,
as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of
Common Stock on such exchange on the date in question, then
the fair market value shall be the closing selling price on
the exchange on the last preceding date for which such
quotation exists.
(iii) If the Common Stock at the time is neither listed nor admitted
to trading on any stock exchange nor traded in the over-the-
counter market, or if the Committee determines that the value
determined pursuant to subparagraphs (i) and (ii) above does
not accurately reflect the fair market value of the Common
Stock, then such fair market value shall be determined by the
Committee after taking into account such factors as the
Committee shall deem appropriate.
(d) As soon after the Exercise Date as practical, the Corporation shall
mail or deliver to Optionee or to the other person or persons
exercising this option a certificate or certificates representing
the shares so purchased and paid for, with the appropriate legends
affixed thereto.
(e) In no event may this option be exercised for any fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
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<PAGE> 20
(a) The exercise of this option and the issuance of Option Shares upon
such exercise shall be subject to compliance by the Corporation and
the Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange on
which shares of the Corporation's Common Stock may be listed at the
time of such exercise and issuance.
(b) In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in
writing as may be requested by the Corporation in order for it to
comply with the applicable requirements of Federal and State
securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the
benefit of; and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the successors and
assigns of the Corporation.
12. NOTICES. Any notice required to be given or delivered to the Corporation
under the terms of this Agreement shall be in writing and addressed to the
Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be
in writing and addressed to Optionee at the address indicated below
Optionee's signature line on the Grant Notice. All notices shall be deemed
to have been given or delivered upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
13. LOANS. The Committee may, in its absolute discretion and without any
obligation to do so, assist the Optionee in the exercise of this option by
(i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for
the purchased Common Stock in installments over a period of years. The
terms of any such loan or installment method of payment (including the
interest rate, the requirements for collateral and the terms of repayment)
shall be established by the Committee in its sole discretion.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are made and
granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of
the Committee with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and
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<PAGE> 21
binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of New York without
resort to that State's conflict-of-laws rules.
16. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the
event this option is designated an Incentive Option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax treatment as an
Incentive Option under the Federal tax laws if (and to the extent)
this option is exercised for one or more Option Shares: (i) more
than three (3) months after the date the Optionee ceases to be an
Employee for any reason other than death or permanent disability (as
defined in Paragraph 5) or (ii) more than one (1) year after the
date the Optionee ceases to be an Employee by reason of death or
permanent disability.
(b) This option shall have a maximum term often (10) years measured from
the Grant Date.
(c) This option shall be neither transferable nor assignable by Optionee
other than by will or by the laws of descent and distribution
following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee once.
(d) Should this option be designated as immediately exercisable in the
Grant Notice, then this option shall not become exercisable in the
calendar year in which granted if (and to the extent) the aggregate
fair market value (determined at the Grant Date) of the
Corporation's Common Stock for which this option would otherwise
first become exercisable in such calendar year would, when added to
the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which
this option or one or more other Incentive Options granted to the
Optionee prior to the Grant Date (whether under the Plan or any
other option plan of the Corporation or its parent or subsidiary
corporations) first become exercisable during the same calendar
year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. To the extent the exercisability of this option is
deferred by reason of the foregoing limitation, the deferred portion
will first become exercisable in the first calendar year or years
thereafter in which the One Hundred Thousand Dollar ($100,000)
limitation of this Paragraph 18.B would not be contravened.
8
<PAGE> 22
(e) Should this option be designated as exercisable in installments in
the Grant Notice, then no installment under this option (whether
annual or monthly) shall qualify for favorable tax treatment as an
Incentive Option under the Federal tax laws if (and to the extent)
the aggregate fair market value (determined at the Grant Date) of
the Corporation's Common Stock for which such installment first
becomes exercisable hereunder will, when added to the aggregate fair
market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other
Incentive Options granted to the Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation
or any parent or subsidiary corporation) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate.
17. SECURITIES MATTERS.
(a) The Corporation shall be under no obligation to effect the
registration pursuant to any securities law of any interests in the
Plan or any Option Shares to be issued hereunder. Notwithstanding
anything herein to the contrary, the Corporation shall not be
obligated to cause to be issued or delivered any certificates
evidencing shares of Corporation Stock pursuant to the Plan unless
and until the Corporation is advised by its counsel that the
issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority, and the
requirements of any securities exchange on which shares of the
Corporation may be traded. The Committee may require, as a condition
of the issuance and delivery of certificates evidencing Option
Shares that the Optionee make such covenants, agreements, and
representations, and that such certificates bear such legends, as
the Committee, in its sole discretion, deems necessary or desirable.
(b) The exercise of the Option shall be effective only at such time as
counsel to the Corporation shall have determined that the issuance
and delivery of Option Shares pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental
authority, and the requirements of any securities exchange on which
shares of Corporation Stock are traded. The Committee may, in its
sole discretion, defer the effectiveness of any exercise of the
Option in order to allow the issuance of Option Shares to be made
pursuant to registration or an exemption from registration or other
methods for compliance available under federal or state securities
laws. The Committee shall inform the Optionee in writing of its
decision to defer the effectiveness of the exercise of the Option.
During the period that the effectiveness of the exercise of the
Option has been deferred, the Optionee may, by written notice,
withdraw such exercise and obtain a refund of any amount
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<PAGE> 23
paid with respect thereto.
(c) All Option Shares shall constitute "restricted securities" and may
not be transferred except in compliance with the registration
requirements of applicable law or an exemption therefrom.
(d) Certificates for Option Shares, when issued, may have substantially
the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately
transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER
HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE
DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER) THAT SUCH OFFER SALE, PLEDGE, TRANSFER
OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE
LAWS.
This legend shall not be required for Option Shares issued pursuant
to an effective registration statement in accordance with applicable
federal and state securities laws
18. WITHHOLDING. Optionee hereby agrees to make appropriate arrangements with
the Corporation or parent or subsidiary corporation employing Optionee for
the satisfaction of all Federal, State or local income tax withholding
requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
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<PAGE> 24
CYBERNET DATA SYSTEMS, INC. ________________________________
Name of Optionee
By: ___________________________ _________________________________
Name Signature
Title: ________________________
Date: _____________ Date:_______________
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<PAGE> 25
NOTICE OF GRANT OF STOCK OPTIONS
Notice is hereby given of the following stock option grant (the
"Option") pursuant to the 1998 STOCK OPTION PLAN (the "Plan") to purchase shares
of the Common Stock of Cybernet Data Systems, Inc. (the "Corporation"):
Optionee:
Grant Date:
Grant Number:
Option Exercise Price:
Vesting Commencement Date:
Number of Option Shares:
Expiration Date: 10 years from grant.
Type of Option: _____ Incentive Option_____ Non-Statutory Stock Option
Date Exercisable:
End of 2 years from Vesting Commencement Date- 50% of Option Shares;
End of 3 years from Vesting Commencement Date- 25% of Option Shares;
End of 4 years from Vesting Commencement Date- 25% of Option Shares;
provided, however, that in the event of a Corporate Transaction, as defined
below, all Options shall become fully exercisable immediately prior to the
consummation of such Corporate Transaction. The term "Corporate Transaction"
means (i) any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) in which more than
fifty percent (50%) of the Corporation's outstanding voting stock is transferred
by any person or persons, other than the Corporation, to a person or persons
different from those who held the stock immediately prior to such transaction,
or (ii) the sale, transfer or other disposition of all or substantially all of
the Corporation's assets in complete liquidation or dissolution of the
Corporation.
Optionee understands that the Option is granted pursuant to the Corporation's
Plan. By signing below, optionee agrees to be bound by the terms and conditions
of the Plan and the terms and conditions of the Option as set forth in the Stock
Option Agreement attached hereto as Exhibit A. Optionee understands that any
Option Shares purchased under the Option will be subject to the terms and
conditions set forth in the Stock Purchase Agreement attached hereto as Exhibit
B.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES ACQUIRED
UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO REPURCHASE RIGHTS BY THE
CORPORATION AND ITS ASSIGNS UPON THE OCCURRENCE OF CERTAIN EVENTS. THE TERMS AND
CONDITIONS OF SUCH RIGHTS ARE SPECIFIED IN THE STOCK PURCHASE AGREEMENT.
<PAGE> 26
Nothing in this Notice or in the Plan shall confer upon the Optionee any right
to continue in the Service of the Corporation for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation or the Optionee, which rights are hereby expressly reserved by each,
to terminate Optionee's Service at any time for any reason whatsoever, with or
without cause.
Date: ________________________, 199__
Cybernet Data Systems, Inc.
By____________________________________
Title:________________________________
Optionee ______________________________________
SSN#:
Address:
______________________________________
<PAGE> 1
CYBERNET DATA SYSTEMS, INC.
SECURITIES PURCHASE AGREEMENT
JULY 23, 1998
<PAGE> 2
CYBERNET DATA SYSTEMS, INC.
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made as of the
23rd day of July, 1998 by and between Cybernet Data Systems, Inc., a Delaware
corporation (the "Company") and Globix Corporation, a Delaware corporation (the
"Purchaser").
The parties hereby agree as follows:
1. PURCHASE AND SALE OF INITIAL SECURITIES.
1.1 SALE AND ISSUANCE OF DEBENTURE AND WARRANTS.
(a) Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase at the Closing and the Company agrees to sell and
issue to the Purchaser at the Closing (i) a Convertible Debenture in the form of
Exhibit A attached hereto (the "Debenture") and (ii) a Warrant in the form of
Exhibit B (the "Warrant" and with the Debenture, the "Initial Securities") for a
purchase price of One Million ($1,000,000) Dollars.
1.2 CLOSING; DELIVERY.
(a) The purchase and sale of the Initial Securities shall take
place at the offices of special counsel to the Company, Littman Krooks Roth &
Ball P.C., 655 Third Avenue, New York, NY 10017, on July 23, 1998 at 10:00 a.m.,
or at such other time and place as the Company and the Purchaser mutually agree
upon, orally or in writing (which time and place are designated as the
"Closing").
(b) At the Closing, the Company shall deliver to the Purchaser
the Debenture and the Warrant being purchased thereby against payment of the
purchase price therefor by certified check payable to the Company, or by wire
transfer to the Company's designated bank account.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser that:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business. The Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure so to qualify would
have a material adverse effect on its business or properties.
2.2 CAPITALIZATION. The authorized capital of the Company (including
all issued and outstanding shares of capital stock, options and warrants)
consists, or will consist, immediately prior to the Closing, as set forth in
Exhibit C.
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<PAGE> 3
2.3 SUBSIDIARIES. The Company does not currently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Registration Rights Agreement in
the form attached as Exhibit D (the "Registration Rights Agreement"), and the
Stockholders Agreement in the form attached hereto as Exhibit E (the
"Stockholders Agreement" and collectively with this Agreement and the
Registration Rights Agreement, the "Agreements"), the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Initial Securities and the Common Stock, par value
$.01 ("Common Stock") issuable upon conversion of the Debenture and exercise of
the Warrant (together, the "Securities") has been taken or will be taken prior
to the Closing, and the Agreements, when executed and delivered by the Company,
shall constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors' rights generally, as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, or (ii) to the extent the indemnification provisions contained in the
Registration Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 VALID ISSUANCE OF SECURITIES. The Initial Securities that are
being issued to the Purchaser hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than the Stockholders Agreement and applicable state and
federal securities laws. Based in part upon the representations of the Purchaser
in this Agreement and subject to the provisions of Section 2.6 below, the
Initial Securities will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion or exercise of
the Initial Securities, as the case may be, has been duly and validly reserved
for issuance, and upon issuance, shall be duly and validly issued, fully paid
and nonassessable and free of restrictions on transfer other than restrictions
on transfer under the Stockholders Agreement and applicable federal and state
securities laws and will be issued in compliance with all applicable federal and
state securities laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for applicable state securities laws and
the Securities Act of 1933, as amended (the "Securities Act").
2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of the Agreements or the right
of the Company to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition or
affairs of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. Neither the Company is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
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<PAGE> 4
There is no action, suit, proceeding or investigation by the Company currently
pending or which the Company intends to initiate.
2.8 INTELLECTUAL PROPERTY. To its knowledge, the Company owns or
possesses sufficient legal rights to all trademarks, service marks, tradenames,
copyrights, trade secrets, licenses, information and proprietary rights and
processes necessary for its business without any conflict with, or infringement
of, the rights of others. The Company has not received any communications
alleging that the Company has violated or, by conducting its business, would
violate any of the trademarks, service marks, tradenames, copyrights, trade
secrets or other proprietary rights or processes of any other person or entity.
The Company is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interest of the Company or that would conflict with the
Company's business. Neither the execution or delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant or instrument under which
the Company is now obligated. The Company does not believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company.
2.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws or of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound or, to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of the Agreements and the consummation of
the transactions contemplated hereby or thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company.
2.10 PRIVATE PLACEMENT. Subject in part to the truth and accuracy of
the Purchaser representations set forth in this Agreement, the offer, sale and
issuance of the Initial Securities as contemplated by this Agreement is exempt
from the registration requirements of the Securities Act.
2.11 TITLE TO PROPERTY AND ASSETS. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.12 PERMITS. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business, the lack of
which could materially and adversely affect the business, properties, prospects,
or financial condition of the Company. The Company is
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<PAGE> 5
not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
2.13 FINANCIAL STATEMENTS. The unaudited financial statements for
the year ended December 31, 1997 and for the three months ended March 31, 1998
("Financial Statements") together with the related notes, of the Company
previously delivered to the Purchaser fairly present the financial position of
the Company as of the respective dates specified and the results of its
operations and changes in financial position for the respective periods covered
thereby. The Financial Statements and related notes were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company that:
3.1 AUTHORIZATION. The Agreements, when executed and delivered by
the Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies, or
(b) to the extent the indemnification provisions contained in the Registration
Rights Agreement may be limited by applicable federal or state securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Securities to be acquired by the Purchaser will be acquired
for investment for the Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Purchaser represents that it has full power and authority to
enter into this Agreement. The Purchaser has not been formed for the specific
purpose of acquiring the Securities.
3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an opportunity
to discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Stock with the Company's management and
has had an opportunity to review the Company's facilities. The Purchaser
understands that such discussions, as well as any written information issued by
the Company, were intended to describe the aspects of the Company's business
which it believes to be material. The Purchaser has had full access to the
financial statements of the Company.
3.4 RESTRICTED SECURITIES. The Purchaser understands that the
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and
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<PAGE> 6
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. The Purchaser acknowledges that the
Company has no obligation to register or qualify the Securities for resale
except as set forth in the Registration Rights Agreement. The Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Securities,
and on requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
3.5 NO PUBLIC MARKET. The Purchaser understands that no public
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.
3.6 LEGENDS. The Purchaser understands that the Securities and any
securities issued in respect of or exchange for the Securities, may bear one or
all of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend set forth in the other Agreements.
(c) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented by the certificate
so legended.
3.7 ACCREDITED INVESTOR. The Purchaser is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Act.
3.8 NO REGULATORY APPROVAL. THE SECURITIES OFFERED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OR ADEQUACY OF THIS AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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<PAGE> 7
3.9 NO GENERAL SOLICITATION. The Purchaser is unaware of, is no way
relying on, and did not become aware of the offering of the Initial Securities
through or as a result of, any form of general solicitation or general
advertising including, without limitation, any article, notice, advertisement or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, in connection with the offering and sale of
the Initial Securities and is not subscribing for Initial Securities and did not
become aware of the offering of the Initial Securities through or as a result of
any seminar or meeting to which the Purchaser was invited by, or any
solicitation of a subscription by, a person not previously known to the
Purchaser in connection with investments in securities generally.
3.10 NO FINDERS. The Purchaser has taken no action which would give
rise to any claim by any person for brokerage commissions, finders' fees or the
like relating to this Agreement or the transactions contemplated hereby, except
for VM Partners whose fee shall be the sole responsibility of the Company.
3.11 KNOWLEDGE AND EXPERIENCE. The Purchaser has such knowledge and
experience in financial, tax, and business matters, and, in particular,
investments in securities, so as to enable it to utilize the information made
available to it in connection with the offering of the Securities to evaluate
the merits and risks of an investment in the Securities and the Company and to
make an informed investment decision with respect thereto. The Purchaser is not
relying on the Company or any of its employees or agents with respect to the
legal, tax, economic and related considerations of an investment in the
Securities, and the Purchaser has relied on the advice of, or has consulted
with, only his own advisors. The Purchaser has significant prior investment
experience, including investment in non-listed and non-registered securities.
The Purchaser is knowledgeable about investment considerations in
development-stage companies. The Purchaser has a sufficient net worth to sustain
a loss of its entire investment in the Company in the event such a loss should
occur. The Purchaser's overall commitment to investments which are not readily
marketable is not exces sive in view of its net worth and financial
circumstances and the purchase of the Securities will not cause such commitment
to become excessive. The investment is a suitable one for the Purchaser.
3.12 NO NEED FOR LIQUIDITY. The Purchaser has adequate means of
providing for such Purchaser's current financial needs and foreseeable
contingencies and has no need for liquidity of the investment in the Securities
for an indefinite period of time.
3.13 RISK FACTORS. Buyer has conducted its own due diligence with
respect to all aspects of this transaction and is not relying on the due
diligence investigation by any other third parties.
4. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT CLOSING. The obligations
of the Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 PERFORMANCE. The Company shall have performed and complied with
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
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<PAGE> 8
4.3 COMPLIANCE CERTIFICATE. Intentionally deleted.
4.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Initial Securities pursuant to this Agreement shall be obtained and
effective as of the Closing.
4.5 REGISTRATION RIGHTS AGREEMENT. The Company and the Purchaser
shall have executed and delivered the Registration Rights Agreement.
4.6 STOCKHOLDERS AGREEMENT. The Company, the Purchaser, and certain
other stockholders of the Company shall have executed and delivered the
Stockholders Agreement.
4.7 OPINION OF COUNSEL. The Company shall have delivered an opinion
of counsel substantially in the form in the form of Exhibit F.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company to the Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in Section 3 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
5.2 PERFORMANCE. All covenants, agreements and conditions contained
in this Agreement to be performed by the Purchaser on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Initial Securities pursuant to this Agreement shall be obtained and
effective as of the Closing.
6. MISCELLANEOUS.
6.1 SURVIVAL. Unless otherwise set forth in this Agreement, the
warranties, representations and covenants of the Company and the Purchaser
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing.
6.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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<PAGE> 9
6.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
New York, without giving effect to principles of conflicts of law.
6.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
6.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or five (5) days after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, addressed to
the party to be notified at such party's address as set forth below, or as
subsequently modified by written notice, and (a) if to the Company, with a copy
to Littman Krooks Roth & Ball, 655 Third Avenue, New York, New York 10017,
Attention: Mitchell C. Littman, Esq. or (b) if to the Purchaser, to 295
Lafayette Street, New York, New York 10012, Attention: Office of the President,
with a copy to Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsylvania Plaza,
New York, New York 10119, Attention: Arnold N. Bressler, Esq.
6.7 FINDER'S FEE. Except for the finder's fee payable to VM Partners
by the Company, each party represents that it neither is nor will be obligated
for any finder's fee or commission in connection with this transaction. The
Purchaser agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Purchaser or any of its officers, employees, or
representatives is responsible. The Company agrees to indemnify and hold
harmless the Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.8 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended with the written consent of the Company and the Purchaser. Any amendment
or waiver effected in accordance with this Section 6.9 shall be binding upon the
Purchaser and each transferee of the Initial Securities (or the Common Stock
issuable upon conversion or exercise thereof), each future holder of all such
securities, and the Company.
6.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of
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<PAGE> 10
the Agreement shall be interpreted as if such provision were so excluded and (c)
the balance of the Agreement shall be enforceable in accordance with its terms.
6.11 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
6.12 ENTIRE AGREEMENT. This Agreement, and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.
6.13 CONFIDENTIALITY. Each party hereto agrees that, except with the
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Securities purchased hereunder. The provisions of this Section 6.13
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby. Purchaser shall, however, have the right
to make such disclosures as it shall deem necessary under applicable securities
laws and to its attorneys, auditors and lenders who also shall be subject to
such confidentiality requirements.
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<PAGE> 11
The parties have executed this Securities Purchase Agreement as of the
date first written above.
COMPANY:
Cybernet Data Systems, Inc.
By: /s/ Marc Strausberg
----------------------------------
Name: /s/ Marc Strausberg
--------------------------------
(print)
Title: President
------------------------------
PURCHASER:
Globix Corporation
By: /s/ Marc H. Bell
----------------------------------
Name: /s/ Marc H. Bell
----------------------------------
(print)
Title: President
-------------------------------
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<PAGE> 1
LEASE AGREEMENT
50 WASHINGTON STREET REALTY CORP.
"Landlord"
to
Pequot Systems, Inc. and Cybernet Data Services, Inc.
50 Washington St.
South Norwalk, CT. 06854
"Tenant"
This lease (the "lease") is made and dated April 4, 1997, by and
between 50 WASHINGTON STREET REALTY CORPORATION, as landlord, ("Landlord") 50
Washington Street, South Norwalk, CT. and Pequot Systems, Inc. and Cybernet Data
Systems, Inc. as Tenant, 50 Washington Street, South Norwalk, CT. ("Tenant").
W I T N E S S E T H:
1. DEFINITIONS. In addition to terms described elsewhere in this Lease, the
following terms have the following meanings:
(A) "Demised Premises": 6600 sq. ft., 9th Floor (See Exhibit A)
(B) "Base Rent": $12.00 per sq. ft., $79200.00 annually,
$6600.00 per month. Payment of the first
month's rent is payable upon Tenant's
execution of the lease.
(C) "Term" Three (3) years.
(D) "First Option" Tenant has the right to renew this Lease
Agreement for an additional two (2) years
upon receipt of a written notification by
the Landlord 90 days prior to the
expiration of this agreement at the rate
of $13.50 per sq. ft.
(E) "Term Commencement Date": May 1, 1997
<PAGE> 2
(F) "Term Ending Date": April 30, 2000
(G) "Rent Commencement Date": May 1, 1997
(H) "Occupancy": Upon full execution of the lease by both
parties.
(I) "Tenant Use of Electric" Tenant will pay to the Landlord the
amount billed by the South Norwalk
Electric Company for the energy used by
the tenant and billed to that Tenant
space. A copy of the bill will be
provided for verification.
(J) "Permitted Use" Computer systems and operations company.
(K) "Parking Spaces" 21 spaces.
(L) "Security Deposit" $13200.00 due at time of tenant execution
of the lease.
(M) "Demolition Clause" Tenant agrees not to commence any
demolition of the premises without the
written permission of the Landlord.
(N) "Landlord Improvements" Landlord agrees to build-out the space as
follows:
1). Install a fire-safe door at the
entrance of the restroom corridor.
(See Exhibit B).
2). Construct a wall approximately 9 ft
by 28 ft, taped, primed, and painted
to match existing color. (See Exhibit
B).
3). Remove shower stall and sinks in
the training room. (See Exhibit B).
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<PAGE> 3
4). Inspect HVAC system for proper
operation.
5). Inspect lighting and replace any
burned-out bulbs or ballasts.
(O) "Tenant's Work" Tenant will renovate part of the office
space to enable the build-out for two
(2) new offices. Landlord agrees to pay
for this build-out and bill-back the
Tenant for the build-out in 36 equal
payments commencing with the first rent
payment on May 1, 1997 and ending with
the last rental payment on April 1, 2000
(See Exhibit C).
(P) "Signage" Landlord will provide signs in lobby
directory and in the elevators. Tenant
has the right to install a sign,
approved by the Landlord in advance as to
size, in the 9th floor lobby area as a
directional sign to their space.
(Q) "Interior Cleaning" Provided by the Landlord.
(R) "Pro-rata Share" Tenant will pay their pro-rata share
(.0351%) of any increase in the Common
Area Maintenance expense and Real
Estate Tax over the base year of 1997.
(S) "Right of First Refusal" Tenant has the right of first refusal
for any adjacent space that is or becomes
available to lease.
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<PAGE> 4
Executed on this 4th day of April 1997.
LANDLORD: TENANT:
50 WASHINGTON ST. REALTY CORP. Pequot Systems, Inc.
Cybernet Data Systems, Inc.
By: /s/ Illegible signature By: /s/ Juergen Goersch
Name: /s/ Illegible signature Name: /s/ Juergen Goersch
Title: President Title: VP
Cybernet Data Systems, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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<PAGE> 5
TABLE OF CONTENTS
FOR OFFICE BUILDING LEASE
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 Demised Premises 1
ARTICLE 2 Term 1
ARTICLE 3 Use 2
ARTICLE 4 Rent 3
ARTICLE 5 Services Provided by Landlord 3
ARTICLE 6 Quiet Enjoyment 5
ARTICLE 7 Repairs and Maintenance 5
ARTICLE 8 Adjustment of Base Rental 5
ARTICLE 9 Alterations and Improvements 7
ARTICLE 10 Assignment and Subletting 8
ARTICLE 11 Compliance with Laws 10
ARTICLE 12 Fire or Other Casualty 11
ARTICLE 13 Eminent Domain 11
ARTICLE 14 Indemnity 11
ARTICLE 15 Waiver of Subrogation 12
ARTICLE 16 Subordination 12
ARTICLE 17 Access by Landlord 13
ARTICLE 18 Landlord's Lien 13
ARTICLE 19 Defaults and Remedies 13
ARTICLE 20 Nonwaiver 16
ARTICLE 21 Holding Over 16
ARTICLE 22 Notice 16
ARTICLE 23 Limitation of Landlord's Liability 17
ARTICLE 24 Estoppel Certificate 17
ARTICLE 25 Attorneys' Fees 17
ARTICLE 26 Administrative Charge for Late Payment 18
ARTICLE 27 Relocation and Substitution of Premise 18
ARTICLE 28 Miscellaneous 18
ARTICLE 29 Signage 20
ARTICLE 30 Parking 21
ARTICLE 31 Redevelopment Regulations 21
ARTICLE 32 Mechanics Liens 21
ARTICLE 33 Option to renew 22
</TABLE>
EXHIBITS
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EXHIBIT "A" Floor Plan Showing Demised premises
EXHIBIT "B1" Rules and Regulations
EXHIBIT "B" Landlord's Work
EXHIBIT "C" Tenant's Work
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LEASE
AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between the
Landlord and Tenant, whether one or more.
WITNESSETH:
1. Demised Premises
1.1. Subject to and upon the terms, provisions and conditions
hereinafter set forth, Landlord hereby leases the Demised Premises to Tenant in
the Building. The area hereby leased in the Building is hereafter called the
"Demised premises" and is shown outlined on the floor plan drawings which are
attached hereto marked Exhibit "A-1" and made a part hereof and incorporated in
here by reference for all purposes. The rentable area contained within the
Demised premises shall be deemed for all purposes, to be the number of square
feet set forth herein above.
2. Term
2.1. Subject to and upon the terms and conditions set forth
herein and as noted on the Lease Cover Page, or in any exhibit or addendum
hereto, this Lease is for a term to commence on the Term Commencement Date which
shall be either the date upon which the Demised premises are ready for occupancy
(as defined in Article 2.2 below) or the date Tenant or anyone claiming under or
through Tenant first occupies the Demised premises for the conduct of its
business, whichever date occurs earlier, and shall end on the Term Ending Date,
or on such date as the term of this Lease shall sooner cease and terminate as
hereinafter provided. Promptly following the Commencement Date, Landlord and
Tenant shall, upon request of Landlord (and not otherwise) enter into a
supplementary agreement fixing the Commencement Date of this Lease, but the
failure of Landlord and Tenant to execute such supplementary agreement shall
have no effect whatsoever on Landlord's and Tenant's obligations hereunder. This
lease is not recordable by the Tenant.
2.2. The Demised Premises shall be completed and prepared for
Tenant's occupancy in the manner, and subject to the terms, conditions and
covenants set forth in Exhibit "B" which is attached hereto and made a part
hereof for all purposes. The installations, facilities, materials and work so to
be furnished, installed and performed in the Demised Premises by Landlord at its
expense are hereinafter (and in Exhibit "B") referred to as "Landlord's Work."
All other installations, facilities, materials and work which may be undertaken
by or for the account of Tenant to prepare, equip, decorate and furnish the
Demised Premises for Tenant's occupancy, shall be at Tenant's sole cost and
expense, and are hereinafter (and in Exhibit "B")
<PAGE> 8
called "Tenant's Finish Work."
2.2.l. In connection with Landlord's Work and/or
Tenant's Finish Work, Landlord and Tenant further covenant as follows:
2.2.1.1. The Demised Premises shall be
deemed ready for occupancy on the date that Landlord's Work in the Demised
Premises shall have been substantially completed and it shall be so deemed,
notwithstanding the fact that minor or insubstantial details of construction,
mechanical adjustment or decoration remain to be performed, the non-completion
of which do not materially interfere with Tenant's use of the Demised premises.
2.2.1.2. Paragraph deleted.
2.2.1.3. If and when Tenant shall take
actual possession of the Demised Premises, it shall be conclusively presumed
that the same were in satisfactory condition as of the date of such taking of
possession, unless, within seven (7) days after such date Tenant shall give
Landlord written notice specifying with particularity the respects in which the
Demised Premises were not in satisfactory condition. After taking possession of
the Demised Premises, any such notice from Tenant shall in no manner whatsoever
relieve Tenant from the payment of rent, or allow a delay in the payment of rent
by Tenant, or otherwise excuse Tenant from performance of its obligations under
this Lease.
2.3. The effective date of this Lease shall be the date of
acceptance of this Lease by Landlord.
2.4. Not withstanding the fact that the "Commencement Date" of
this Lease shall be a date subsequent to the effective date of this Lease,
Landlord and Tenant intend and agree that each shall have vested rights
immediately upon execution of this Lease and it is intended that this Lease
shall be fully binding upon the parties hereto and shall be in full force and
effect from and after execution hereof by both Tenant and Landlord.
2.5. Tenant covenants and agrees to pay Landlord a Security
Deposit, upon execution of this Lease. Upon the occurrence of any event of
default (hereinafter described) by Tenant, Landlord may, from time to time and
without prejudice to any other remedy, apply said Security Deposit to the extent
necessary to pay any arrears of Base Rental or any other damages,
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injury, expense or liability caused to Landlord by such event of default.
Landlord shall, subject to the terms of this Lease, return to Tenant any
remaining balance of such Security Deposit within a reasonable period of time
not exceeding thirty (30) days after the termination of this Lease. The Security
Deposit shall not be considered an advance payment of Base Rental or a measure
of Landlord's damages in case of default by Tenant. If at any time during the
term hereof, the Security Deposit, or any portion thereof, is applied to
delinquent Base Rent, or as otherwise permitted by the terms of this Lease,
Tenant shall, not later than ten (10) days after written notice from Landlord,
restore the Security Deposit to its original amount as set out in the first
sentence of this Article 2.5.
3. Use
3.1. The Demised Premises are to be used and occupied by
Tenant solely for the purpose of general and executive offices, and the Tenant
shall not use the Demised Premises for any other purpose unless noted on the
Lease Cover Page or without the express prior written consent of Landlord, which
consent Landlord may deny at Landlord's sole discretion.
4. Rent
4.1. As rental for the use and occupancy of the Demised
Premises (hereinafter sometimes called "Annual Base Rent") Tenant shall pay (and
hereby agrees to pay) in lawful money of the United States of America, to
Landlord, at the Building office (or at such other address as designated by
Landlord), in advance, without demand, deduction, set-off or abatement, the
following:
4.1.1. For each month of the primary term hereof,
(plus the partial month, if any, at the commencement date of this Lease),
payable in advance, on the first day of each such month, the sum of one-twelfth
of the Annual Base Rent per month, and
If the commencement date is not the first day of a calendar month, or the term
of this Lease does not end on the last day of a calendar month, Tenant will pay,
in advance, on the commencement date, or the first day of the last month of the
term of this Lease, a pro rata part of such monthly amount as rental for the
first or last partial month, as the case may be. Tenant shall also pay to
Landlord, as additional rent, all other sums of money as shall become due from
and payable by Tenant to Landlord under the terms of this Lease. Landlord shall
have the same remedies for default for the payment of additional rent as are
available to Landlord in the case of a default in the payment of Annual Base
Rent.
4.2. Any payment of Annual Base Rent received after
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the tenth (10th) day of the month, or any payment of additional rent, or any
other sums due to Landlord hereunder received later than ten (10) days after the
due date, shall be considered a late payment, and such amounts shall bear
interest from the due date until paid at the lesser of: (1) twelve percent (12%)
per annum; or (2) two percent (2%) below the highest nonusurious interest rate
permitted by applicable law. Any such interest shall be payable as additional
rent hereunder and shall be payable to Landlord immediately on demand.
5. Services Provided by Landlord
5.1. Subject to the terms of this Lease, Landlord agrees to
furnish to Tenant:
5.1.1. Air conditioning and heating in season, Monday
through Friday 8:00 a.m. to 8:00 p.m. and Saturdays 9:00 a.m. to 3:00 p.m. and
at such temperatures and in such amounts as are commercially reasonable. Since
this system is under the control of Energy Management, Tenant will pay any cost
increase in the heat or air conditioning for their space for the extended time
period between shutdown at 7:00 PM and 8:00 PM.
5.l.2. Hot and cold water at those points of general
supply provided on the floor on which the Demised Premises are located.
5.l.3. Janitor service on a five (5) day week basis;
provided however, if Tenant's floor covering or other improvements in the
Demised Premises is other than Building standard, Tenant shall pay the
additional cleaning costs attributable thereto as additional rent hereunder.
Tenant shall pay additional rent provided for in this paragraph not later than
ten (10) days after presentation of a statement therefor by Landlord, and
Tenant's failure to timely pay such amount shall constitute a default under this
Lease.
5.l.4. Building standard fluorescent bulb replacement
in all common areas and all incandescent bulb replacement in public areas,
restrooms, and stairwells. Tenant shall pay for all bulb replacement within the
Demised Premises.
5.1.5. Electrical facilities to furnish sufficient
power for typewriters, calculating machines and other machines of similar low
electrical consumption; but not including electricity required for duplicating
and electronic data processing equipment, special lighting in excess of Building
standard, or any other item of electrical equipment, the electrical power
requirement of which singly consumes more than 0.25 kilowatts
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per hour at rated capacity or requires a voltage other than 120 volts single
phase; and provided further that if any installation of said electrical
equipment requires additional air conditioning capacity above that provided by
the Building's standard system, then the additional air conditioning
installation and operating costs shall be the sole obligation of Tenant. Tenant
shall pay to Landlord, monthly as billed, such charges as may be separately
metered or fairly allocated if the Demised Premises are less than the area
covered by the meter (the cost of any such meter and its installation to be
borne by Tenant) or as Landlord's engineer may compute for any electrical
service in excess of that stated above.
5.2. Failure by Landlord to any extent to furnish these
defined services, or any cessation or interruption thereof, resulting from
causes beyond the reasonable control of Landlord, shall not render Landlord
liable in any respect for damages to either persons or property, nor shall the
same be construed an eviction of Tenant, nor work an abatement of rent, nor
relieve or excuse Tenant from fulfillment or performance of any covenant or
agreement hereof. Should any of the equipment or machinery break down, or for
any cause cease to function properly, Tenant shall have no claim for rebate of
rent or damages on account of an interruption of services occasioned thereby or
resulting therefrom. In the event of any such interruption of such services,
Landlord shall use, reasonable diligence to restore such service in any
circumstance in which such restoration is within reasonable control of Landlord.
5.3. Should Tenant desire any additional services beyond those
described in Subarticle 5.1 above, or desire rendition of such services outside
the normal times such services are provided by Landlord, then Landlord may (at
Landlord's option), upon reasonable advance notice from Tenant to Landlord,
furnish such services and Tenant agrees to pay Landlord such charges as may be
agreed upon between Landlord and Tenant, but in no event at a charge less than
Landlord's actual cost, plus overhead for the additional services provided, it
being agreed that the cost to Landlord of such additional services shall be
excluded from the "Basic Cost" as that term is defined in Article 8 of this
Lease.
5.4.1 Landlord shall furnish Tenant with two keys for each
corridor door entering the Demised Premises. Additional keys will be furnished
at a charge determined by Landlord on a written order signed by Tenant or
Tenant's duly authorized representative. All keys shall remain the property of
Landlord. No additional locks shall be allowed on any door of the Demised
Premises without the express written permission of Landlord first received, and
Tenant shall not make or permit to be made any duplicate keys. Upon termination
of this Lease, Tenant shall deliver to Landlord all keys to
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the Demised Premises and shall give to Landlord a full explanation of any
combinations for all locks for safes, and vault doors, if any, in the Demised
Premises.
5.4.2 Landlord shall furnish Tenant with access cards upon
tenant's request. Each card shall require a $7.00 deposit, which will be
refundable at the time of returning those cards. Tenant shall review the
instructions of the access cards which is part of rules and regulation, and
follow it carefully.
5.5. Landlord shall provide and install, at Tenant's cost, all
signs, letters or numerals on the doors in the Demised Premises; all such signs,
letters and numerals shall be in the Building's standard as determined by the
Landlord, and no others shall be used or permitted on the Demised Premises.
Landlord shall also provide and install, at Tenant's expense, a listing for
Tenant's business on the Building directory board.
5.6. All installations now or hereafter placed on the Demised
Premises in excess of "Building standard items," as determined by Landlord,
shall be for Tenant's account and at Tenant's cost (and Tenant shall pay all
taxes related to their improvements and increases in insurance thereon), which
costs shall be payable by Tenant to Landlord as additional rent hereunder
promptly on being invoiced therefor; and failure by Tenant to pay the same in
full within thirty (30) days after receipt of a statement therefor shall
constitute an event of default by Tenant hereunder, giving rise to all remedies
available to Landlord under this Lease and at law for nonpayment of rent.
6. Quiet Enjoyment
6.1. Provided Tenant complies with its covenants, duties,
agreements and obligations hereunder, Tenant shall quietly have, hold and enjoy
the Demised Premises subject to the terms and provisions of this Lease.
7. Repairs and maintenance
7.1. Landlord shall, at Landlord's expense (except as may be
otherwise provided for herein) make the necessary repairs of damage to the
building corridors, lobby. structural members of the Building, HVAC systems,
lighting systems, and equipment used to provide services referred to herein,
unless any such damage is caused by the acts or omissions of Tenant, its agents,
employees, representatives or invitees, in which event Tenant agrees to pay the
costs of such repairs. Tenant will promptly give Landlord written notice of any
damage requiring repair by Landlord as provided above.
7.2. Tenant shall not injure the Demised Premises or
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the Building, but Tenant shall maintain and keep the Demised Premises in a
clean, attractive condition, and in good repair, excepting only damage to be
repaired by Landlord as provided for above. Upon termination of this Lease,
Tenant will surrender and deliver the Demised Premises to Landlord in the same
condition in which they existed at the commencement of the Lease, excepting only
ordinary wear and tear and damage arising from any cause not required to be
repaired by Tenant.
8. Adjustment of Annual Base Rent
8.1. The Annual Base Rent provided for herein includes the
Basic Cost (as that term is hereafter defined) for the last full calendar year
ending on December 31, preceding the Commencement Date of the lease. The Basic
Cost for the calendar year set out in the preceding sentence is herein called
the "Basic Year Cost."
8.2. The term "Basic Cost," as used herein, shall mean all
operating expenses incurred and/or paid with respect to ownership, maintenance
and operation of the Building. All operating expenses shall be determined in
accordance with generally accepted accounting principles applicable to the real
estate industry. The term "operating expenses" as used herein shall mean all
expenses, costs and disbursements (not including specific costs especially
billed to and paid by specific tenants, nor rental commissions) of every kind
and nature which Landlord shall pay or become obligated to pay because of, or in
connection with, the ownership, maintenance and operation of the Building,
including, but not limited to, the following:
8.2.l. Wages and salaries of all employees engaged in
operation and maintenance of the Building, or access control to and from the
Building, including taxes, insurance, and benefits relating thereto.
8.2.2. All supplies, tools, equipment, and material
used in operation and maintenance of the Building.
8.2.3. Management fees relating to management of the
Building.
8.2.4. Costs of all utilities for the Building,
including but not limited to, costs of water and power, heating, lighting, air
conditioning, and ventilating for the Building.
8.2.5. Costs of all maintenance, cleaning,
janitorial, and service agreements relating to the Building and all equipment
and systems therein (including, without limitation, elevator maintenance and
security); and costs of window cleaning.
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8.2.6. Costs of all insurance relating to the
Building including but not limited to, the cost of casualty and liability
insurance and rent insurance and insurance covering Landlord's personal property
used in connection therewith.
8.2.7. All taxes and assessments and other
governmental charges whether federal, state, county or municipal and whether
they be by taxing districts or authorities presently taxing the Demised Premises
or by others subsequently created or otherwise, and any other taxes and
improvement assessments attributable to the Building (and the parcel of land on
which it is erected) or its operation, excluding, however, federal and state
taxes on Landlord's income. It is agreed and understood that Tenant will be
responsible for all ad valorem taxes on its personal property and on the value
of leasehold improvements to the extent that the same exceed Building standard
allowances.
8.2.8. Paragraph deleted.
8.2.9. The cost of capital expenditures made to the
Building by reason of the laws and requirements of any public authorities or the
requirements of any insurance companies or bodies.
If Landlord shall purchase any item of capital equipment or
make any capital expenditure designed to result in savings or reductions in
operating expenses, then the cost thereof shall be included in operating
expenses. The costs of capital equipment or capital expenditures are so to be
included in operating expenses (for each year during the term of this Lease) on
a straight line basis, to the extent that such items are amortized over such
period of time as reasonably can be estimated as the time in which such savings
or reductions in operating expenses are expected to equal Landlord's costs for
such capital equipment or capital expenditure, with an interest factor equal to
the prime interest rate then charged by the Chase Manhattan Bank, plus one
percent (1%), at the time of Landlord's having incurred said costs. If Landlord
shall lease any such item of capital equipment designed to result in savings and
reductions in operating expenses, then the rentals and other costs paid or
incurred in connection with such leasing shall be included in operating expenses
for the year in which they were incurred.
8.3. At the end of each calendar year during the term of this
Lease, Landlord shall compute the Basic Cost (calculated as herein provided) for
such calendar year or portion thereof. The Base Year Cost shall then be
subtracted from the actual Basic Cost for the applicable year, and the remainder
shall be multiplied by the Tenant's Prorata share, the product of
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such multiplication being herein called the "Escalation Payment." Tenant shall
thereupon be obligated to pay to Landlord such Escalation Payment as additional
rent within ten (10) days after Landlord shall have submitted to Tenant a bill
or invoice therefor.
8.4. After Landlord shall have submitted to Tenant a bill or
invoice for the first Escalation Payment due under Subarticle 8.3 above,
Landlord may thereafter submit to Tenant a bill or invoice each month for
one-twelfth (1/12) of such last previous Escalation Payment, or for one-twelfth
(1/12) of such greater amount as may be later estimated by Landlord to be due by
Tenant under this Article 8 as the Escalation Payment for such then current
year. The amount of the first such bill or invoice shall be determined by
multiplying the monthly amount due by the number of calendar months of the then
current year which shall have commenced as of the date of the bill or invoice.
In the event of such billing or invoicing procedure by Landlord, then Tenant
shall be bound and obligated (and hereby agrees) to pay such indicated amounts
contemporaneously with each required payment of rental hereunder, on the first
day of each calendar month, monthly in advance, for each and every month in the
term of this Lease in lawful money of the United States of America.
8.5. Once each calendar year, Landlord shall perform such
computations as are necessary to determine the Escalation Payment properly
payable by Tenant under this Article 8, whereupon, if Tenant shall have overpaid
pursuant to the monthly estimates referred to above, Landlord shall refund to
Tenant the amount of the excess (less any sums due and owing by Tenant to
Landlord); but if Tenant shall have underpaid, Landlord shall invoice Tenant for
the amount of the underpayment and such underpayment shall be due from Tenant to
Landlord within thirty (30) days thereafter.
8.6. Whenever the term "Tenant's Prorata Share", it shall be
deemed (and it is agreed by Tenant) that such share or proportion is the percent
on the Lease Cover Page.
9. Alterations and Improvements
9.1. Tenant will make no alteration, change, improvement,
repair, replacement or addition to the Demised Premises without the prior
written consent of Landlord which will not be unreasonably withheld. If Landlord
grants such prior written consent, then the work to be done in connection
therewith shall be done at Tenant's sole cost and expense, but by workmen of
Landlord or workmen and/or contractors approved in advance, in writing, by
Landlord and in a manner and upon terms and conditions and at a time
satisfactory to Landlord. In any instance where Landlord grants such consent,
Landlord may grant such consent contingent and conditioned upon Tenant's
contractors, laborers, material, men and others furnishing labor or
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materials for Tenant's job working in harmony and not interfering with any labor
utilized by Landlord, Landlord's contractors or mechanics or by any other tenant
or such tenant's contractors or mechanics; and if at any time such entry by one
or more persons furnishing labor or materials for Tenant's work shall cause
disharmony or interference, the consent granted by Landlord to Tenant may be
withdrawn immediately upon notice to Tenant.
9.2. Any and all permitted alterations, additions,
improvements, or changes (when made to the Demised Premises by Tenant) shall at
once become property of Landlord and shall be surrendered to Landlord upon
termination of this Lease by lapse of time or otherwise; provided, however, this
clause shall not apply to moveable equipment or furniture owned by Tenant.
Tenant hereby expressly waives all rights to any payment or compensation for any
alterations, changes or improvements to the Demised Premises. Notwithstanding
the provision that such alterations, improvements and changes will remain in the
Demised Premises upon termination of this Lease, if Landlord so requests in
writing, Tenant, shall prior to termination of this Lease, remove any and all
alterations, fixtures and property placed or installed by Tenant in the Demised
Premises and will repair any damages caused by such removal.
9.3. Tenant may remove its trade fixtures, moveable office
furniture, and equipment not attached to the Building provided:
9.1.1. Such removal is made not later than two (2)
days following termination of this Lease.
9.3.2. Tenant is not in default of any obligation or
covenant of this Lease at the time of such removal.
9.3.3. Tenant shall promptly repair all damage caused
by such removal.
9.4. If any property not belonging to Landlord
remains at the Demised Premises after expiration of the term of this lease,
tenant hereby authorizes landlord to make such disposition of such property as
landlord may desire without liability for compensation or damages to Tenant in
the event that such property is property of Tenant; and in the event that such
property is the property of someone other than Tenant, Tenant agrees to
expressly indemnify and hold Landlord harmless from any and all claims, damages,
suits, liability, loss and expenses in connection therewith or incident to any
such removal, exercise of dominion over and/or disposition of such property by
Landlord.
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10. Assignment and Subletting
10.1. Neither the Tenant nor Tenant's legal representatives or
successors in interest by operation of law or otherwise shall assign this Lease
or sublease the Demised Premises or any part thereof, or mortgage, pledge, or
hypothecate its leasehold interest or grant any concession or license within the
Demised Premises without the express prior written consent of Landlord which
consent will not be unreasonably withheld and any attempt to do any of the
foregoing, without the express prior written consent of Landlord, shall be null,
void, and of no force and effect. In the event Tenant should desire to assign
this Lease or to sublet the Demised Premises, Tenant shall give Landlord written
notice of such desire at least sixty (60) days in advance of the date on which
Tenant desires to make such assignment or sublease (and Tenant shall deliver to
Landlord with such notice true and correct copies of any written proposal,
memorandum, offer, sublease, or assignment which Tenant has received or which is
proposed) and Tenant shall also deliver to Landlord the names and addresses of
all proposed subtenants or assignees, together with financial statements,
certified by a certified public accountant, and other credit information as
required by Landlord to determine the credit worthiness of the proposed
subtenant or assignee. Landlord shall then have a period of thirty (30) days
following receipt of such notice and information within which to notify Tenant,
in writing, that Landlord elects either (i) to terminate this Lease as to the
space so affected as of the date so specified by Tenant (as to when the proposed
assignment or sublease would take effect), in which event Tenant shall be
relieved of all further obligations hereunder as to such affected space (and in
such event; and at the request of Landlord, Tenant agrees to execute and deliver
to Landlord a written instrument acknowledging that this Lease has been
terminated): or (ii) permit Tenant to assign this Lease or to sublet the
affected space, subject however, to the written approval of the proposed
assignee or sublessee by Landlord; and further subject to the requirement that
Tenant shall enter into a written agreement with Landlord and with such assignee
or sublessee providing that any profit realized by Tenant as a result of such
assignment or sublease ("profit" meaning the consideration agreed upon between
Tenant and the assignee, or the difference between the rental rate agreed upon
between Tenant and sublessee and the rent then required to be paid under this
Lease multiplied by the number of months in the term of the sublease) shall, to
the extent such profit is immediate, be due and payable by Tenant to Landlord
upon the execution of an assignment or sublease, and, to the extent such profit
is deferred, shall be payable to Landlord by the assignee or sublessee as it
accrues; or (iii) to refuse to consent to Tenant's assignment of this Lease or
sublease of the Demised Premises and to continue this Lease in full force and
effect as to the entire Demised Premises. If Landlord should fail to notify
Tenant in writing of its election within the aforesaid thirty (30) day period,
Landlord shall be deemed to have elected option (iii) above. No consent by
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Landlord to any assignment or sublease shall be deemed to be consent to a use
not permitted under this Lease, to any act in violation of the terms of this
Lease, or to any other subsequent assignment or sublease; and no assignment or
sublease by Tenant shall relieve Tenant of any obligations under this Lease. Any
attempted assignment or sublease by Tenant in violation of the terms and
covenants of this Article 10 shall be void and of no force and effect. Landlord
hereby consents to an initial subtenant who will take possession at the
commencement date without further compliance with this paragraph.
10.2. No permitted or consented to assignment or sublease
shall be effective or valid for any purpose whatsoever unless and until a
counterpart of the assignment or a counterpart of the sublease shall have been
first delivered to Landlord, and in the event of an assignment, the Tenant shall
have delivered to Landlord a written agreement, in form and substance acceptable
to Landlord, executed and acknowledged by Tenant and such assignee, in
recordable form, wherein the assignee shall assume, jointly and severally with
Tenant, the due and punctual performance of all of the terms and provisions of
this Lease on Tenant's part to be performed through the end of the term of this
Lease notwithstanding any other or further assignment. Tenant agrees to pay to
Landlord the attorney's fees incurred by Landlord in connection with any
approved sublease or assignment, and any agreements or documents related
thereto.
10.3. If this Lease is assigned, or if the Demised Premises is
sublet or occupied by any person or entity other than Tenant, Landlord may,
after default by Tenant, collect rent and other sums directly from the assignee,
subtenant or other occupant, and apply the net amount collected to the rent
herein reserved; but it is understood and agreed that no such assignment,
subletting or occupancy, or any such collection, shall be deemed a waiver by
Landlord of any of Tenant's covenants contained in this Article 10 or otherwise
under the terms of this Lease, or acceptance of such assignee, subtenant or
occupant as "Tenant," or a release of Tenant from further performance by Tenant
of the covenants on the part of Tenant herein contained.
10.4. Any sublease agreement as permitted under this Lease
shall contain a provision specifying that upon termination of the Lease by
reason of eviction, Landlord shall have the option to either terminate any
sublease permitted hereunder, or to require the subtenant thereunder to enter
into a new lease directly with Landlord on the same terms and conditions as the
sublease. At Landlord's request, the subtenant under any sublease permitted
hereunder shall enter into a written agreement with Landlord confirming the
provisions of this Subarticle 10.04.
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10.5. If Tenant is a corporation, then any transfer of this
Lease from Tenant by merger, consolidation or dissolution or any change in
ownership or power to vote a majority of the voting stock in Tenant
outstanding at the time of execution of this Lease shall constitute an
assignment for the purposes of this Article 10; provided however, that the
acquisition of all stock of a corporate tenant by any corporation, the stock of
which is registered pursuant to the Securities Exchange Act of 1934 or the
merger of a corporate tenant into such a corporation, the stock of which is so
registered shall not itself be deemed a violation of this Article 10. For the
purposes of this Article 10, the term "voting stock" shall refer to shares of
stock regularly entitled to vote for the election of directors of the
corporation involved. If Tenant is a general partnership having one or more
corporations as partners, or if Tenant is a limited partnership having one or
more corporations as general partners, the provisions above shall apply to each
of such corporations as if such corporation had been the Tenant hereunder. If
Tenant is a general partnership (whether or not having any corporations as
partners) or if Tenant is a limited partnership (whether or not having any
corporations as general partners), the transfer of partnership interests
constituting a majority [fifty one percent (51%) or more of the ownership
interest in the partnership] shall be deemed an assignment for the purposes of
this Lease.
10.6. It is understood and agreed by Tenant that no sublease
or assignment shall be permitted to any party which is currently a tenant in the
Building, or any partners, associates, officers, directors, shareholders,
affiliates, or employees of any current tenant in the Building.
10.7. The Tenant agrees that Tenant shall not, under any
circumstances, advertise the space it desires to sublet or assign for a rental
rate less than the "market rate" (as that term is hereafter defined). The term
"market rate" for the purposes of this Subarticle 10.07 is defined to mean the
per square foot rental rate for similar office space in similar buildings
situated within a five-mile radius of the Building.
11. Compliance With Laws
11.1. Tenant, at its own cost and expense, shall comply with
all federal, state, municipal and other laws, ordinances, rules, and regulations
applicable to the Demised Premises and the business conducted therein by Tenant
(including specifically, without limitation, any temperature control
restrictions, or environmental requirements); and Tenant shall not engage in any
activity which would cause Landlord's fire and extended coverage insurance to be
canceled or the rate therefor to be increased (or, at
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Landlord's option, Tenant will pay such increase on demand). Further, Tenant
shall not commit any act which is a nuisance or annoyance to Landlord or to
other tenants, or which might, in the exclusive judgment of Landlord,
appreciably damage Landlord's goodwill or reputation or tend to injure or
depreciate the Building, and Tenant will not commit or permit waste in the
Demised Premises or the Building and will comply with all rules and regulations
applicable to the Building from time to time promulgated by Landlord. The
initial Rules and Regulations of the Building are attach hereto as Exhibit "C"
and made a part hereof for all purposes. Tenant will not paint, erect or
display, any advertisement, placard, or lettering which is visible in the
corridors or in the lobby of the Building or from the exterior of the Building
without Landlord's express prior written approval.
12. Fire Or Other Casualty
12.1. If at any time during the term of this Lease, the
Demised Premises or any portion of the Building shall be damaged or destroyed by
fire or other casualty, then Landlord shall have the election to terminate this
Lease or to repair and reconstruct the Demised Premises and Building to the
condition in which they existed immediately prior to such damage or destruction
and Landlord shall give Tenant notice of such election within sixty (60) days
from the date of such damage or destruction.
12.2. In any of the circumstances provided for in Article 12.1
above, rental shall abate proportionately during the period and to the extent
that the Demised Premises are unfit for use by Tenant in the ordinary conduct of
its business. If Landlord has elected to repair and restore the Demised
Premises, this Lease shall continue in full force and effect and such repairs
will be made within a reasonable time thereafter, subject to delays arising from
shortages of labor or material, acts of God, war, or other conditions beyond
Landlord's reasonable control. In the event this Lease is terminated as herein
permitted, Landlord shall refund to Tenant any prepaid rent (unaccrued as of the
date of damage or destruction) less any sum then owing to Landlord by Tenant. If
Landlord has elected to repair and reconstruct the Demised Premises, then the
Lease term shall be extended by a period of time equal to the period of repair
and reconstruction.
13. Eminent Domain
13.1. If any part of the Demised Premises or the Building
shall be taken by the exercise of the power of eminent domain during the term of
this Lease, Landlord may elect to terminate this Lease or to continue the same
in effect. If Landlord elects to continue this Lease, the rental shall be
reduced in proportion to the area of the Demised Premises so taken and the
Landlord shall repair any damage to the Demised Premises or Building resulting
from such taking. All sums awarded or agreed upon between
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Landlord and the condemning authority for taking of the interest of Landlord or
Tenant, whether as damages or compensation, will be the property of Landlord
without prejudice however, to the claims of Tenant against the condemning
authority on account of the unamortized cost of leasehold improvements paid for
by Tenant taken by the condemning authority. If this Lease should be terminated
under any provision of this Article 13.1. rental shall be payable to the date
that possession is taken by the condemning authority, and Landlord will refund
to the Tenant any prepaid unaccrued rent less any sum then owing by Tenant to
Landlord.
14. Indemnity
14.1. Except for injury, death, or property damage resulting
solely from the negligence of Landlord for which Landlord is legally liable,
Tenant agrees to expressly indemnify and save Landlord harmless from all claims
(including costs and expenses of defending against such claims) arising or
alleged to arise from any act or omission of Tenant or Tenant's agents,
employees, contractors, or invitees, or resulting from any injury to any person
or damage to any property of any person occurring during the term of this Lease
in the Building or in the Demised Premises. Tenant agrees to use and occupy the
Demised Premises and other facilities of the Building at its own risk and hereby
releases Landlord, its agents or employees, from all claims for any damage
or injury to the full extent permitted by law.
14.2. Tenant agrees that Landlord shall not be responsible or
liable to Tenant, its employees, agents, customers or invitees for bodily
injury (fatal or nonfatal) or property damage occasioned by the acts or
omissions of any other tenant or such tenant's employees, agents, contractors,
customers, or invitees within the Building.
14.3. Tenant shall, at its sole cost and expense, procure and
maintain throughout the term of this Lease, a policy of general comprehensive
liability insurance insuring Landlord (Landlord shall be a named insured) as
well as Tenant, against any and all liability for injury to or death of a person
or persons and for damage to or destruction of property occasioned by or arising
out of or in connection with the use or occupancy of the Demised Premises or by
the condition of the Demised Premises. Such policy shall contain a blanket
contractual liability endorsement (including the contractual liability of Tenant
to indemnify Landlord) and shall contain a combined single limit of not less
than $1,000,000.00 with respect to injuries to or death of any person(s) or
property damaged or destroyed or such other limits as may from time to time be
required by Landlord, and shall be written by an insurance company or companies
satisfactory to Landlord and licensed to do business in the State of
Connecticut, with the Landlord named as an additional insured. Tenant shall
obtain a written obligation on the part of
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the insurance company issuing such policy to notify Landlord at least thirty
(30) days prior to cancellation of such insurance. Such policy or duly executed
certificates of insurance relating thereto, shall be promptly delivered to
Landlord and renewals thereof shall be delivered to Landlord at least thirty
(30) days prior to the expiration of the term of such policy. If Tenant shall
fail to comply with the foregoing requirements, or any of them, Landlord may,
but shall not have the obligation to, obtain such insurance for Tenant and
Tenant shall pay to Landlord, upon demand, the premium cost thereof as
additional rental hereunder.
15. Waiver of Subrogation
15.1. In the event that either Landlord or Tenant sustains a
loss by reason of fire or other casualty which is a type of risk covered by such
parties fire and extended coverage insurance policy and such fire or casualty is
caused in whole or in part by acts or omissions of the other party, its agents,
servants, or employees, then the party sustaining such loss agrees that to the
extent that the party sustaining such loss is compensated for such loss by its
aforesaid insurance proceeds, the party sustaining such loss shall have no right
of recovery against the other party, or the agents, servants, or employees of
the other party; and no third party shall have any right of recovery by way of
subrogation or assignment or otherwise.
16. Subordination
16.1. This Lease is and shall be subject and subordinate to
all ground or underlying leases which may now or hereafter affect the real
property of which the Demised Premises is a part, and to all deeds of trust and
mortgages which may now or hereafter affect any such leases or such real
property, and to all renewals, modifications, replacements, and extensions
thereof. Tenant agrees that any such ground lessor or any mortgagee and/or
beneficiary of any deed of trust or other lien shall have the right at any time
to subordinate such lease, mortgage, deed of trust or other lien to this Lease
on such terms and subject to such conditions as they shall deem appropriate, in
their sole discretion. Upon demand, Tenant agrees to execute any further
instruments subordinating this Lease as Landlord, or any ground lessor or
mortgagee or beneficiary of any deed of trust affecting the Demised Premises may
request. The provisions of this Article 16 shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver, at its cost and
expense, any instrument, in recordable form if required, that Landlord, the
lessor of any ground lease, or the holder of any mortgage, or the beneficiary of
any deed of trust or any of their respective successors in interest may request
to evidence such subordination.
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17. Access By Landlord
17.1. Landlord, its agents, representatives and employees
shall have access to and the right to enter upon the Demised Premises at any
reasonable time and with 24 hour notice to examine the condition thereof, to
make any repairs or alterations required to be made by Landlord hereunder, to
show the Demised Premises to prospective purchasers or tenants, and for any
other purpose deemed reasonable by Landlord and the Landlord may enter the
premises at any time for purposes of an emergency.
18. Landlord's Lien
18.1. To secure the payment of all rent due and to become due
hereunder, and the faithful performance of all of the other covenants of this
lease required by tenant to be performed, tenant hereby gives to landlord an
express contract lien on and a security interest in, all property, fixtures,
equipment, furnishings and merchandise which may be placed in the demised
premises and also upon all proceeds of any insurance which may accrue to tenant
by reason of damage to or destruction of any such property. The provisions of
this paragraph relating to said lien and security interest shall constitute a
security agreement under the uniform commercial code so that the landlord shall
have and may enforce a security interest on all property of tenant now or
hereafter placed in or on the demised premises, including, but not limited to,
machinery, equipment, fixtures, furnishings, and other articles of personal
property now or hereafter placed in or upon the demised premises by tenant.
Tenant agrees to execute, as debtor, such financing statements as landlord may
now or hereafter reasonably request in order that such security interest or
interests may be protected pursuant to the uniform commercial code. Landlord
may, at its election at any time, file a copy of this lease as a financing
statement. Landlord, as secured party, shall be entitled to all of the rights
and remedies afforded a secured party under the uniform commercial code in
addition to and cumulative of the landlord's liens and rights provided by law or
by the other terms and provisions of this lease. Tenant hereby waives all
exemption laws. Tenant hereby unconditionally agrees to execute, concurrent with
this lease and from time to time as required by Landlord, all forms necessary
for filing with the Secretary of State for the State of Connecticut to perfect
such lien and security interest. Tenant's failure to execute such forms shall
constitute a default hereunder.
19. Default and Remedies
19.1. If default be made in the payment of any sum to be paid
by Tenant to Landlord under this Lease, and such default shall continue for
ten(10) days; or default shall be made in the performance of any of the other
covenants or conditions which Tenant is required to observe and
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to perform, and such default shall continue for fifteen (15) days; or if the
interest of Tenant under this Lease shall be levied on under execution or other
legal process, or if any petition shall be filed by or against Tenant to declare
Tenant a bankrupt or to delay, reduce or modify Tenant's debt or obligations; or
if any petition shall be filed or other action taken to reorganize or modify
Tenant's capital structure if Tenant be a corporation or other entity; or if
Tenant be declared insolvent according to law, or if any assignment of Tenant's
property shall be made for the benefit of creditors; or if a receiver or trustee
is appointed for Tenant or its property; or if Tenant shall abandon the Demised
Premises during the term of this Lease or any renewals or extensions thereof,
then Landlord may treat the occurrence of any one or more of the foregoing
events as a breach of this Lease (provided that no such levy, execution, legal
process or petition filed against Tenant shall constitute a breach of this Lease
if Tenant shall vigorously contest the same by appropriate proceedings and shall
remove or vacate the same within thirty (30) days from the date of its
creation, or filing) and thereupon, at Landlord's option, Landlord may have any
one or more of the following described remedies in addition to all other rights
and remedies provided at law or in equity:
19.1.1. Landlord may terminate this Lease and forthwith
repossess the Demised Premises and be entitled to recover forthwith as damages a
sum of money equal to the total of:
19.1.1.1. The cost of recovering the Demised
Premises.
19.1.1.2. The unpaid rent earned at the time of
termination, plus interest thereon at the maximum applicable lawful interest
rate from the due date.
19.1.1.3. The balance of the rent for the
remainder of the term of the Lease, less the fair market rental value of the
Demised Premises for said period.
19.1.1.4. Any other sum of money and damages
owed by Tenant to Landlord.
19.1.2. Landlord may terminate Tenant's right of
possession (but not the Lease) and may repossess the Demised Premises by
forcible entry or detainer suit or otherwise, without demand or notice of any
kind to Tenant and without terminating this Lease, in which event Landlord may,
but shall be under no obligation to do so, relet the same for the account of
Tenant for such rent and upon such terms as shall be satisfactory to Land-
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lord. For the purpose of such reletting Landlord is authorized to decorate or to
make any repairs, changes, alterations or additions in or to the Demised
Premises that may be necessary or convenient, and if Landlord shall fail or
refuse to relet the Demised Premises, or if the same are relet and a sufficient
sum shall not be realized from such reletting after paying the unpaid Annual
Base Rent and additional rent due hereunder earned but unpaid at the time of
reletting plus interest thereon at the maximum lawful interest rate, the cost of
recovering possession, and all of the costs and expenses of such decorations,
repairs, changes, alterations and additions and the expense of such reletting
and of the collection of the rent accruing therefrom to satisfy the rent
provided for in this Lease to be paid, the Tenant shall pay to Landlord as
damages a sum equal to the amount of the rental reserved in this Lease for such
periods, or if the Demised Premises have been relet, the Tenant shall satisfy
and pay any such deficiency upon demand therefor from time to time and Tenant
agrees that Landlord may file suit to recover any sums falling due under the
terms of this Article 19 from time to time, and that no delivery to or recovery
of any portion due Landlord hereunder shall be any defense in any action to
recover any amount not theretofore reduced to judgment in favor of Landlord nor
shall such reletting be construed as an election on the part of Landlord to
terminate this Lease unless a written notice of such intention be given to
Tenant by Landlord. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for any such
previous breach.
19.2. Failure of Landlord to declare any default immediately
upon occurrence thereof, or delay in taking any action in connection therewith,
shall not waive such default, but Landlord shall have the right to declare any
such default at any time and take such action as might be lawful or authorized
hereunder, either in law or equity.
19.3. In the event of default by Tenant in any of the terms or
covenants of this Lease or in the event the Demised Premises are abandoned by
Tenant, Landlord shall have the right, but not the obligation, to relet same for
the remainder of the term provided for herein, and if the rent received through
reletting does not at least equal the rent provided for herein, Tenant shall pay
and satisfy the deficiency between the amount of the rent so provided for and
that received through reletting, including, but not limited to, the cost of
renovating, altering and decorating for a new occupant. Nothing herein shall be
construed as in any way denying Landlord the right, in the event of abandonment
of the Demised Premises or other breach of this Agreement by Tenant, to treat
the same as an entire breach and at Landlord's option to terminate this Lease
and/or immediately seek recovery for the entire breach of this Lease, and any
and all damages which Landlord suffers thereby.
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19.4. Pursuit of any of the foregoing remedies shall not
preclude pursuit of any of the other remedies herein provided or any other
remedies provided by law, nor shall pursuit of any remedy herein provided
constitute a forfeiture or waiver of any rent or other sums due to Landlord
hereunder or of any damages accruing to Landlord by reason of the violation of
any of the terms, provisions and covenants herein contained. No waiver by
Landlord of any violation or breach of any of the terms, provisions and
covenants herein contained shall be deemed or construed to constitute a waiver
of any other violation or breach of any of the terms, provisions and covenants
herein contained. Forbearance by Landlord to enforce one or more of the remedies
herein provided upon an event of default shall not be deemed or construed to
constitute a waiver of such default.
19.5. In the event of any default by Landlord, Tenant's
exclusive remedy shall be an action for damages (Tenant hereby waiving the
benefit of any laws granting it a lien or claim upon Landlord's property and/or
rent due Landlord), but prior to any action Tenant will give Landlord (and any
mortgagee of Landlord whose name and address is made known to Tenant) written
notice specifying in detail such default, and Landlord (or Landlord's mortgagee)
shall thereupon have forty-five (45) days (plus such additional reasonable
period as may be required in the exercise by Landlord or Landlord's mortgagee of
due diligence) in which to cure any such default. Unless and until Landlord
fails to so cure any default after such notice, Tenant shall not have any remedy
or cause of action by reason thereof. In the event Landlord's mortgagee elects
to cure any default by Landlord (which Landlord's mortgagee may elect to do, but
shall not be obligated to do), Tenant will accept such curative action as if
such action had been taken by Landlord. All obligations of Landlord hereunder
will be construed as covenants, not conditions; and all such obligations will be
binding upon Landlord only during the period of its possession and ownership of
the Building and not thereafter.
19.6. Paragraph deleted.
19.7. Landlord at any time and without notice, may, but shall
not be obligated to, cure any default by Tenant. All costs and expenses incurred
by Landlord in curing any such default by Tenant, including reasonable
attorney's fees and interest (at the maximum rate allowed by applicable law)
from the date such costs and expenses were incurred, shall be paid by Tenant to
Landlord on demand and shall be recoverable as rent.
20. Nonwaiver
20.1. Neither acceptance of rent by Landlord nor
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failure by Landlord to complain of any action, nonaction or default of Tenant
shall constitute a waiver of any of Landlord's rights hereunder. Waiver by
Landlord of any right for any default of Tenant shall not constitute a waiver of
any default of any right for either a subsequent default of the same obligation
or any other default.
21. Holding Over
21.1. If Tenant should remain in possession of the Demised
Premises after the expiration or termination of the term of this Lease, without
the execution by Landlord and Tenant of a new Lease, then Tenant shall be deemed
to be occupying the Demised Premises as a tenant-at-sufferance, subject to all
the covenants and obligations of this Lease and at a daily rental of two times
the per day rental provided hereunder (and which is applicable for the month
preceding the month in which the date of expiration or termination occurs),
computed on the basis of a thirty (30) day month.
22. Notice
22.1. Any notice which may or shall be given under the terms
of this Lease shall be in writing and shall be either sent by United States
Registered, Certified Mail, postage prepaid, with return receipt requested or by
third party courier, such as Federal Express, if for Landlord, to the Building
office, or if for Tenant, to the Demised Premises. Such addresses may be changed
from time to time by either party by giving notice as provided above. Notice
shall be deemed given when delivered or when postmarked.
23. Limitation of Landlord's Liability
23.1. Tenant agrees to look solely to Landlord's estate and
interest in the land and Building [or the (ground) lease of the Building, if
applicable] and the Demised Premises, for the satisfaction of any right or
remedy of Tenant or the collection of any judgment (or other judicial process)
requiring the payment of money by Landlord, in the event of any liability by
Landlord, and no other property or assets of Landlord (or the partners or
members thereof if Landlord is other than an individual or corporation) shall be
subject to levy, execution or attachment or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to this Lease, the
relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of
the Demised Premises or the Building, or any other liability of Landlord to
Tenant. The term "Landlord" as used in this Lease means only the owner, or the
mortgagee in possession, for the time being of the land and the Building (or the
owner of any lease of the Building or the land upon which it is situated and the
Building) so that in the event of any transfer of title to the land and Building
or said lease, or in the event of a
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lease of the Building or of the land and Building, upon notification to Tenant
of such transfer or lease the said transferor Landlord shall be and hereby is
entirely freed and relieved of any and all covenants, obligations and
liabilities of Landlord, hereunder and it shall be deemed and construed as a
covenant running with the land without further agreement between the parties or
their successors in interest, or between the parties or any transferee of title
to the land and Building (or any applicable ground lease, or any lease of the
Building) that the transferee or the lessee has assumed and agreed to carry out
any and all such covenants, obligations, and liabilities of Landlord hereunder.
24. Estoppel Certificate
24.1. At Landlord's request, Tenant shall execute, acknowledge
and deliver to Landlord (or any third party designated by Landlord), within five
(5) days after such request, a statement in writing certifying that this Lease
is unmodified and in full force and effect (or if there has been any
modifications, that the same is in full force and effect, as modified, and
stating with particularity the nature of each modification) and the dates to
which rent and other charges may have been paid in advance, it being intended
that any such statement delivered pursuant to this Article 24 may be relied upon
by any prospective purchaser, assignee or encumbrancer of the Building and/or
the Demised Premises. Any such statement shall contain, in addition to matters
set forth above, and upon the designation by Landlord, the following:
24.1.1. Any rent deposits, security deposits, or
advance rentals paid.
24.1.2. The fact that no default exists hereunder by
either Landlord or Tenant, or if any default is claimed, specify the nature of
such default.
25. Attorneys' Fees
25.1. In the event Tenant shall default in the performance of
any of the terms, covenants, agreements, or conditions contained in this Lease
and Landlord places the enforcement of this Lease, or a part thereof, or the
collection of any rent due hereunder or to become due hereunder, or recovery of
possession of the Demised Premises in the hands of an attorney, or files suit
upon the same, Tenant agrees to pay to Landlord the reasonable attorneys' fees
incurred by Landlord in connection therewith, together with all court costs and
expenses related thereto.
26. Administrative Charge for Late Payment
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26.1. Any payment of Annual Base Rent received by Landlord
after the tenth (10th) day of the month shall be considered a late payment, and
an administrative charge of $25.00 (per late payment) shall become due and
payable to Landlord on demand, to compensate Landlord for the cost, time, and
inconvenience of collecting late rents, which administrative charge shall be
deemed as additional rent due hereunder. The date the payment is received, in
good and sufficient funds, shall be considered the effective date for purposes
of determining the administrative charge. Any payments made by check shall be
considered late, and the terms of this Lease shall be considered breached by
Tenant, should such check not be paid upon first presentation to Tenant's
indicated bank. Acceptance by Landlord of late rent and administrative charges
due therefor shall not constitute a waiver of Landlord's rights and remedies
available in connection with any subsequent failure of Tenant to pay the Annual
Base Rent (or any additional rents due hereunder) or to make any other payment
due Landlord hereunder in the manner or time provided for herein. Landlord shall
have the same remedies for default for the payment of additional rent as are
available to Landlord in the case of a default in payment of Annual Base Rent.
27. Relocation and Substitution of Premises
27.1. Landlord shall have the right to relocate Tenant in
other space within the Building, provided that such space is comparable in size
and sufficient for Tenant's intended use in Landlord's reasonable judgment. In
the event Landlord shall elect to relocate Tenant pursuant to the provisions of
this paragraph, Landlord shall give Tenant not less than sixty (60) days'
written notice, indicating the location of Tenant's new space and the date on
which Tenant shall move to Tenant's new space in the Building. Upon receipt of
notice from Landlord that Landlord elects to relocate Tenant pursuant to the
provisions hereof, Tenant shall notify Landlord, not later than twenty (20) days
after receipt of such notice, that Tenant will move to the space designated by
Landlord in the Building or will not accept such move and elects to terminate
this Lease, such termination to be effective thirty (30) days after Tenant so
notifies Landlord. If Tenant does not so notify Landlord that Tenant either
accepts relocation designated by Landlord or terminates this Lease, all within
twenty (20) days after receipt of notice from Landlord that Landlord has elected
to relocate Tenant, then this Lease shall terminate effective thirty (30) days
after Tenant receives notice from Landlord to relocate. Landlord agrees to pay
the cost of moving Tenant's furniture and equipment to the new space. In the
event Tenant elects not to relocate and to terminate this Lease, Landlord shall
have no liability to Tenant for earlier termination of this Lease or for any
cost or expense of moving from the Demised Premises. When Tenant has moved, the
new space shall be the "Demised Premises" which is the subject of this Lease.
Otherwise, neither the terms and provisions hereof nor Tenant's duties and
obligations
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hereunder shall be affected by relocation of Tenant to other space in the
Building.
28. Miscellaneous
28.1. In any circumstance where Landlord is permitted to enter
upon the Demised Premises during the lease term, whether for the purpose of
curing any default of Tenant, repairing damage resulting from fire or other
casualty or an eminent domain taking or is otherwise permitted hereunder or by
law to go-upon the Demised Premises, no such entry shall constitute an eviction
or disturbance of Tenant's use and possession of the Demised Premises or a
breach by Landlord of any of its obligations hereunder or render Landlord liable
for damages for loss of business or otherwise or entitle Tenant to be relieved
from any of its obligations hereunder or grant Tenant any right of set-off or
recoupment or other remedy; and in connection with any such entry incident to
performance of repairs, replacements, maintenance or construction, all of the
aforesaid provisions shall be applicable notwithstanding that Landlord may elect
to take building materials in, to or upon the Demised Premises that may be
required or utilized in connection with such entry by Landlord.
28.2. Landlord may restrain or enjoin any breach or threatened
breach of any covenant, duty, or obligation of Tenant herein contained without
the necessity of proving the inadequacy of any legal remedy or irreparable harm.
The remedies of Landlord hereunder shall be deemed cumulative and no remedy of
Landlord, whether exercised by Landlord or not, shall be deemed to be in
exclusion of any other.
28.3. Except as may be otherwise herein expressly provided, in
all circumstances under this Lease where prior consent or permission of one
party ("first party") is required before the other party ("second party") is
authorized to take any particular type of action, the matter of whether to grant
such consent or permission shall be within the sole and exclusive judgment and
discretion of the first party; and it shall not constitute any nature or breach
by the first party hereunder or any defense to the performance of any covenant,
duty or obligation of the second party hereunder that the first party delayed
or withheld the granting of such consent or permission, whether or not the delay
or withholding of such consent or permission was prudent or reasonable or based
on good cause.
28.4. In all instances where Tenant is required hereunder to
pay any sum or do any act at a particular indicated time or within an indicated
period, except as expressly otherwise provided herein, it is understood that
time is of the essence.
28.5. The obligation of Tenant to pay all rent and
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other sums hereunder provided to be paid by Tenant and the obligation of Tenant
to perform Tenant's other covenants and duties hereunder constitute independent,
unconditional obligations to be performed at all times provided for hereunder,
save and except only when an abatement thereof or reduction therein is
hereinabove expressly provided for and not otherwise. Tenant waives and
relinquishes all rights which Tenant might have to claim any nature of lien
against or withhold, or deduct from or offset against any rent and other sums
provided hereunder to be paid Landlord by Tenant. Tenant waives and relinquishes
any right to assert, either as a claim or as a defense, that Landlord is bound
to perform or is liable for the nonperformance on any implied covenant or
implied duty of Landlord not expressly herein set forth.
28.6. Absent intentional, willful or reckless conduct,
Landlord shall not be liable for consequential damages or special damages.
28.7. Tenant agrees that no food, soft drinks, or other
vending machine will be installed within the Demised Premises without the
written consent of Landlord first received which consent will not be
unreasonably withheld.
28.8. All monetary obligations of Landlord and Tenant
(including, without limitation, any monetary obligation of Landlord or Tenant
for damages for any breach of the respective covenants, duties or obligations of
Landlord or Tenant hereunder) are performable exclusively in South Norwalk,
Connecticut.
28.9. If any provision of this Lease shall ever be held to be
invalid or unenforceable, such invalidity or unenforceability the remainder
shall not affect thereby and each and every other term, covenant and provision
of the Lease shall be valid and enforceable to the fullest extent permitted by
law.
28.10. Landlord shall have the right, at any time and from
time to time, to change the name of the Building.
28.11. Nothing herein contained shall be deemed or construed
by the parties hereto, or by any third party, as creating the relationship of
principal and agent or of a partnership or joint venture between the parties
hereto, it being understood and agreed that neither the provisions hereof nor
the acts of the parties shall be deemed to create any relationship between the
parties hereto other than the relationship of Landlord and Tenant.
28.12. Tenant hereby acknowledges that landlord
25
<PAGE> 32
makes no warranties of any kind or nature, express or implied, not specifically
set forth above in this lease, whether with respect to the physical condition of
the demised premises or the building or any other matter whatsoever. To the
maximum extent permitted by law, landlord disclaims any such warranties,
specifically including, but not limited to, any warranty of habitability or
fitness for any particular purpose.
28.13. If there be more than one person or entity named as
"Tenant" in this Lease, the obligations imposed upon Tenant shall be joint and
several. If there shall be any Guarantor(s) of Tenant's obligations hereunder,
the obligations hereunder imposed upon Tenant shall be joint and several
obligations of Tenant and such Guarantor(s); and Landlord need not first proceed
against Tenant hereunder before proceeding against any such Guarantor(s) nor
shall any such Guarantor(s) be released from its, or their, guarantee, for any
reason whatsoever.
28.14. This Lease and any work letter, exhibits or addenda
signed by the parties and attached hereto constitute the entire agreements
between Landlord and Tenant. No prior written or prior contemporaneous oral
promises or representations shall be binding.
28.15. This Lease shall not be amended, changed or extended
except by written instrument signed by Landlord and Tenant.
28.16. The provisions of this Lease shall be binding upon and
inure to the benefit of the heirs, executors, administrators, successors and
assigns of the parties hereto, provided however this provision shall in no way
whatsoever alter the restriction herein regarding assignment and subletting by
Tenant.
28.17. Paragraph captions herein are for convenience only and
shall neither limit or amplify the provisions of this Lease.
28.18. The submission of this Lease by Landlord for
examination shall not constitute a reservation or option for the Demised
Premises and this Lease shall become effective only upon execution hereof by all
parties hereto and delivery of a fully executed copy to Landlord.
28.19. If any guaranty of this Lease by a third party
designated by Landlord is required by Landlord, such designated third party
guaranty shall be of the form and substance of Exhibit "E" attached hereto and
made a part hereof for all purposes. Landlord may terminate this Lease at any
time after Landlord requests such guaranty to be delivered by Tenant until
Landlord receives such guaranty fully executed by the third party Guarantors
designated by Landlord.
26
<PAGE> 33
29. Signage
29.1. It is understood and agreed that all other aspects of
Tenant's signs, including but not limited to size, materials and color, must be
first approved by Landlord, in writing, and is also subject to all restrictions,
codes, regulations and ordinances which affect the property upon which the
Building is situated. The cost and maintenance of Tenant's signs shall be paid
by Tenant.
30. Parking
30.1. Landlord shall make available to Tenant the number of
Parking Permits listed on the Lease Cover Page.
31. Redevelopment Regulations
31.1 The Tenant understands that the premises is subject to an
Urban Renewal Act, as amended and as such agrees to be bound by these
regulations as enforced by the Norwalk Redevelopment Agency or any other
governmental agency.
32. Mechanics Liens
32.1 If any act or omission by Tenant, its successors or
assigns, sub-lessee or any other party occupying the Demised Premises, results
in any mechanics lien or other lien, being filed against Landlord or the Demised
Premises, Tenant shall at its sole cost, discharge or bond the same within
thirty (30) days after Tenant receives written notice thereof or Landlord
receives written notice thereof and Landlord notifies Tenant in writing. Tenant
hereby indemnifies and holds Landlord harmless against all costs, liabilities,
suits, penalties, claims and demands, including reasonable attorney's fees,
which may result therefrom.
33. OPTION TO RENEW
33.1 Landlord hereby grants to Tenant the option to extend
this Lease for such renewal terms as are shown at 1.(d) on the lease cover page
upon the same terms, conditions, covenants and provisions as are herein
contained except for this Option to Renew and for the Annual Base Rent specified
on the lease cover page. This option to renew shall be exercised by the Tenant's
delivery to the Landlord a written notice of the Tenant's uncon-
27
<PAGE> 34
ditional exercise of this option, prior to the day specified at 1.(e), Option
Date. The Annual Base Rent for the Renewal Term shall be in accordance with the
calculation or Annual Base Rent at 1.(f) on the lease cover page.
28
<PAGE> 35
EXECUTED on this 4th day of April, 1997
LANDLORD:
50 Washington St. Realty Corp.
By: /s/ Illegible signature
Name: /s/ Illegible signature
Title: President
TENANT:
Pequot Systems, Inc.
Cybernet Data Systems, Inc.
By: /s/ Juergen Goersch
Name: /s/ Juergen Goersch
Title: Vice President
Cybernet Data Systms, Inc.
By: /s/ Marc Strausberg
Name: /s/ Marc Strausberg
Title: CO-CEO
29
<PAGE> 36
EXHIBIT "B"
RULES AND
REGULATIONS
1. Tenant will refer all contractors, contractors representatives and
installation technicians rendering any service for Tenant to Landlord's
supervision and/or approval before performance of any such installation
of telephones, telegraph equipment, electrical devices and attachments,
and installations of any and every nature affecting floors, walls,
woodwork, trim, windows, ceiling, equipment or any other physical
portion of the Building. None of this work will be done by Tenant
without Landlord's prior written approval which consent will not be
unreasonably withheld.
2. The work of the janitor or cleaning personnel shall not be hindered by
Tenant after 5:30 P.M., and such work may be done at any time when the
offices are vacant. The windows, doors, and fixtures may be cleaned at
any time. Tenant shall provide adequate waste and rubbish receptacles,
cabinets, bookcases, map cases, etc,. necessary to prevent unreasonable
hardship to Landlord in discharging its obligation regarding cleaning
service.
3. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by Tenant of any merchandise or materials which
requires the use of elevators or stairways, or movement through the
Building entrance or lobby shall be restricted to the hours designated
by Landlord from time to time; all such movement shall be as directed by
Landlord and in a manner to be agreed upon between Tenant and Landlord
by prearrangement before performance; such prearrangement initiated by
Tenant shall include determination by Landlord and subject to its
decision and control of the time, method, and routine of movement.
Limitations imposed by safety or other concerns which may prohibit any
article, equipment or any other item being brought into the Building.
Tenant expressly assumes all risk of damage to any and all articles so
moved, as well as injury to any person or persons or the public engaged
or not engaged in such movement, including equipment, property and
personnel of Landlord if damaged or injured as a result of any acts in
connection with carrying out this service for Tenant from the time of
entering property to completion of the work, and Landlord shall not be
liable for the act or acts of any person or persons so engaged in, or
any damage or loss to any property or persons resulting directly or
indirectly from any act in connection with such service performed by or
1
<PAGE> 37
for Tenant.
4. No sign or signs in any form will be allowed on the exterior of the
Building or on any window or windows inside or outside of the Building;
and no sign or signs will be permitted in any atrium, plaza, hallway,
tunnel, public corridor or on corridor doors or entrances to the Demised
Premises, except for those signs which receive the prior written
approval of Landlord; and no signs shall be permitted on the interior of
the Demised Premises which are visible from the exterior of the Demised
Premises, without the express, prior written approval of Landlord.
Notwithstanding the foregoing, it is understood by Tenant that all
signage in the Demised Premises or on any portion of the Demised
Premises must first receive the written approval of Landlord.
5. Tenant shall not place, install or operate on the Demised Premises or in
any part of the Building, any engine, stove or machinery, or conduct
mechanical operations or cook thereon or therein, or place or use in or
about the Demised Premises any explosives, gasoline, kerosine, oil,
acids, caustics, or any other flammable, explosive, or hazardous
material or conduct activities that produce loud or obnoxious sounds, or
cause any odors whatsoever without the prior written consent of
Landlord.
6. No portion of any Tenant's leased area shall at any time be used for
cooking, sleeping, or lodging quarters. No birds, animals or pets of any
type, with the exception of guide dogs accompanying visually handicapped
persons, shall be brought into or kept in, on or about Tenant's leased
area.
7. Landlord may permit entrance to Tenant's offices by use of pass keys
controlled by Landlord or employees, contractors, or service personnel
supervised or employed by Landlord.
8. None of the entries, passage doors, elevators, elevator doors, hallways,
or stairways shall be blocked or obstructed, or any rubbish, litter,
trash or material of any nature placed, emptied or thrown into these
areas, or such areas be used any time except for access or egress by
Tenant's agents, employees or invitees.
9. Tenant shall obtain Landlord's and mortgagee's approval for structural
changes and/or alterations of the Building exterior or interior of any
nature.
2
<PAGE> 38
10. The location, weight and supporting devices for any safes and other
heavy equipment shall in all cases be approved by Landlord prior to
initial installation or relocation.
11. Corridor doors, when not in use, shall be kept closed.
12. To insure orderly operation of the Building, Landlord reserves the right
to approve all concessionaires, vending machine operators or other
distributors of cold drinks, coffees, foods or other concessions, water,
towels, or newspapers.
13. Landlord shall not be responsible to the Tenant, its agents, employees
or invitees for any loss of money, jewelry or other personal property
from the Demised Premises or public areas or for any damages to any
property therein from any cause whatsoever whether or not such loss or
damage occurs when an area is locked against entry.
14. Tenant shall exercise reasonable precaution in the protection of its
personal property from loss or damage by keeping doors or unattended
areas locked. Tenant shall also report any thefts or losses to the
Building Manager and security personnel as soon as reasonably possible
after discovery.
15. Tenant, its employees, guests and invitees may be called to show
suitable identification and sign a building register when entering or
leaving the Building at times other than normal building operating hours
and all tenants shall cooperate fully with building security personnel
in complying with such requirements.
16. Tenant shall not solicit or circulate advertising material among other
tenants of the Building except through the regular use of U.S. Mail
Service. Tenant shall notify the Building Manager or the building
security personnel promptly if it comes to Tenant's attention that any
unauthorized persons are soliciting from or causing annoyance to
tenants, their employees, guests or invitees.
17. Landlord reserves the right to deny entrance to the Building or remove
any person or persons from the Building in any case, where the conduct
of such person or persons, in the sole opinion of Landlord, involves a
hazard or nuisance to any tenant of the Building, tenants or the general
public.
18. Landlord shall not be liable for any damages from the stoppage of
3
<PAGE> 39
elevators for necessary or desirable repairs or improvements, or delays
of any duration in connection with the elevator service. Temporary
inconvenience occasioned in connection with construction shall not be
deemed to disturb Tenant as a part of the covenant of quiet enjoyment
and possession.
19. Tenant shall not alter any lock or install any new locks or bolts on any
doors or windows of the Demised Premises, without the prior written
consent of the Landlord.
20. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and
no foreign substance of any kind whatsoever, shall be thrown therein and
the expense, stoppage or damage resulting from the violation of this
rule shall be borne by Tenant who, or whose agents, officers, employees,
contractors, servants, invitees or guests, shall have caused such
damage.
21. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Demised Premises, or permit to suffer
the Demised Premises to be occupied or used in a manner offensive or
objectionable to the Landlord or other occupants of the Building by
reason of noise, odors, and/or vibrations, or interfere in any way with
other tenants or those having business therein.
22. All requests for overtime air conditioning or heating must be submitted
in writing to the management office by 2:00 P.M. on the prior business
day for weekday requests and by 2:00 P.M. Friday for weekend requests.
23. All tenant modifications resulting from remodeling in or to the Demised
Premises must conform to all local and governmental laws and codes.
24. Tenants shall not tamper with or attempt to adjust temperature control
thermostats in the Demised Premises. Landlord shall adjust thermostats,
as necessary, to maintain the Building standard temperature.
25. Rules concerning parking:
(a) All tenants must park in the designated area.
(b) With the exception of certain designated, reserved,
handicappedpersons and car-pool areas, there will be no
assigned parking spaces.
4
<PAGE> 40
(c) Vehicles must be parked within the marked spaces.
(d) Persons using the parking area do so at their own risk. The
landlord specifically disclaims all liability, except when
caused solely by its gross negligence or willful misconduct,
for any personal injury incurred by users of the parking area,
their agents, employees, family, friends or guests, or as a
result of damage to, theft of, or destruction of, any vehicle
or any contents thereof as a result of the operations of
parking vehicles in the parking area.
26. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further rules and regulations as
in its judgment shall from time to time be necessary for the safety,
protection, care and cleanliness of the Building, the operation thereof,
the preservation of good order therein and the protection and comfort of
the tenants and their guests, employees and invitees, which rules and
regulations, when made and written notice thereof is given to the
Tenant, shall be binding upon it in like manner as if originally herein
prescribed.
27. Landlord desires to maintain high standards of environment, comfort and
convenience for its tenants. It will be appreciated if any undesirable
conditions, lack of courtesy or attention by its employees is reported,
in writing, to Landlord.
28. Smoking: we would like to remind everyone that the building common area
shall be free from smoking. Smoking can be done either in the offices or
outside the building.
29. Waste: No waste is allowed to be left in the common area at any time.
30. Access cards: The access card is the only means to enter the building
after hours. It automatically turns on and off the alarm and allows
access to the building. The following instructions are essential for the
access to the building, please make sure you follow the instructions
carefully.
(1) In the event of a lost or stolen card, please contact the
management immediately so we can terminate the card. In the
event that you the employer eliminates any of your employees
please so the same.
(2) Assign the employees the exact cards that will be designated
to them based on the number printed on the card, this is
important for it will be easier to identify the card later
on.
(3) If you wish to transfer a card from one employee to another
contact the management so we can upgrade our file.
(4) The cost of a replacement card is $15.00.
Operation of the access system:
(1) Use only the main lobby door, since all other doors will be
locked and alarmed.
(2) Slide your card in the card reader located on your right hand
side.
(3) Enter the building and make sure that the door behind you is
locked.
(4) When you leave the building press the push bar on your left
hand side, and when you leave please make sure that the door
is locked behind you.
5
<PAGE> 41
AGREEMENT
Made this 24 day of June, 1997 by and between Cybernet Data Systems,
Inc. acting herein by Marc Strausberg its President duly authorized ("Cybernet")
and Pequot Systems, Inc., acting herein by its President. Stefan Chopin, duly
authorized ("Pequot"), wherein the parties agree as follows:
WHEREAS, Cybernet Data Systems, Inc. is an on-line computer service
provider previously operating out of offices in Wilton, Connecticut;
WIHEREAS, Pequot Data Systems, Inc. is a computer service company
previously operating out of offices in Westport, Connecticut;
WHEREAS, Cybernet and Pequot have leased office space on the 9th floor
of 50 Washington Street, Norwalk, Connecticut;
WHEREAS, Cybernet and Pequot will each be jointly and severally liable
on all obligations to the landlord pursuant to the lease for the premises; and
WHEREAS, Cybernet and Pequot desire to fix their rights and
responsibilities under such lease.
NOW, THEREFORE, inconsideration of the mutual promises and obligations
undertaken herein, the parties agree as follows:
1. All rents, expenses, common area maintenance charges and assessments
required under the terms of that certain lease by and between 50 Washington
Street Realty and Cybernet/Pequot ("Lease") shall be borne equally by Cybernet
and Pequot and each shall be responsible for Fifty (50%) Percent of all of such
expenses, charges and assessments.
<PAGE> 42
2. Cybernet and Pequot will each be responsible for Fifty (50%) Percent
of the monthly utility operating expenses for the premises, said utilities
including electricity, water and gas only. Telephone charges and internet
connections are specifically excluded from the foregoing sentence. Cybernet and
Pequot shall each be responsible for their respective telephone and internet
connection charges.
3. Cybernet and Pequot shall each be solely responsible for all loss,
damage, cost, or expense caused by it to the other arising out of or relating to
use or occupancy of premises at 50 Washington Street, Norwalk, Connecticut
pursuant to the Lease, and each shall indemnify, hold harmless, and defend the
other from all loss, damage, cost, or expense to the other (including, but not
limited to, court costs and attorneys' fees) arising out of or relating to such
use or occupancy, whether such loss, damage cost, or expense is from an act of
commission or omission, whether negligent or intentional, and whether or not
such act constitutes a default under the terms of the Lease.
4. In the event that either Pequot or Cybernet vacates the premises
prior to the expiration of the lease term, such company shall continue to be
responsible and liable for Fifty (50%) Percent of the rent and operating
expenses of the premises as aforesaid, notwithstanding the fact that such
company is not utilizing the utilities or space at such time.
5. Cybernet and Pequot shall each maintain a premises liability
insurance policy in the amount of $1,000,000.00, each naming the other company
as an additional insured.
6. In the event that a dispute arises under the terms of the lease or
this agreement, the parties agree that any and all disputes shall be resolved by
arbitration as follows:
Cybernet appoints Attorney Neal L. Moskow as its representative, Pequot
appoints Attorney James Brooks as its representative, and each of them
shall choose a neutral third arbitrator. Thereafter, the Companies will
present their
<PAGE> 43
arguments within thirty (30) days and such a panel shall resolve same
within fourteen (14) days thereafter.
WHEREFORE, the parties have hereunto set their hand and seal this 24
day of June, 1997
Cybernet Data Systems, Inc. Peguot Systems, Inc.
By: /s/ Marc Strausberg By: /s/ Stefan Chopin
------------------------------- -------------------------------
Marc Strausberg Stefan Chopin
President President
<PAGE> 44
ADDENDUM TO LEASE
Agreement made this 4th day of April, 1997, by and between 50
Washington Street Realty Corp. (hereinafter "Landlord"), Pequot Systems, Inc.
and Cybernet Data Systems, Inc. (hereinafter collectively "Tenant") wherein the
parties agree as follows:
1. Paragraph "O" on page 3 of the Lease Cover Page is hereby deleted in
its entirety and replaced as follows:
Tenant will renovate part of the office space to enable the build out
of two (2) additional (new) offices ("Tenant's Work"). The cost of the
Tenant's Work is estimated to be $13,451.00, which amount and any
additional amounts shall be Landlord's responsibility and obligation.
Tenant hereby agrees to pay to Landlord $13,451.00 in thirty-six (36)
monthly payments of $373.64 each commencing with the first rent
payment on May 1, 1997 and ending with the last rent payment on April
1, 2000 (See Exhibit C). Notwithstanding the foregoing, should the
cost of Tenant's Work be less than $13,451.00, then Landlord shall
credit to the Tenant an amount equal to the difference between the
reduced amount and $13,451.00.
2. Paragraph 2.2.1.4. is hereby added to the Lease as follows:
Notwithstanding anything herein to the contrary, Landlord shall
complete all of Landlord's Work and Tenant's Work on or before April
30, 1997. In the event that either or both of Landlord's Work and
Tenant's Work is incomplete on May 1, 1997, then all payments due
under the terms of the Lease (including, but not limited to, rent,
maintenance charges and repayment of the cost of Tenant's Work) shall
abate and be forever discharged on a per diem allocation basis until
such time as both the Landlord's Work and Tenant's Work is complete.
The parties expressly agree that Tenant may take possession of the
Premises on May 1, 1997, provided, however, that such possession does
not interfere with the completion of either or both of Landlord's Work
and Tenant's Work.
50 WASHINGTON STREET REALTY CORP. PEQUOT SYSTEMS, INC.
/s/ Illegible signature /s/ Juergen Goersch
- ---------------------------------- -----------------------------------
By: /s/ Illegible signature By: /s/ Juergen Goersch
Its: President, duly authorized Its: , duly authorized
CYBERNET DATA SYSTEMS, INC.
/s/ Marc Strausberg
-----------------------------------
By:/s/ Marc Strausberg
Its: , duly authorized
<PAGE> 1
EDGAR DISSEMINATION SERVICE
Subscription Agreement
This Subscription agreement (the "Agreement") is made the 11th day of September
1998 between TRW Inc., Systems And Information Technology Group (TRW), One
Federal System Park Drive, Fairfax, Virginia 22033, and Cybernet Data Systems,
Inc. ("Subscriber"), a Delaware corporation with its principal office located at
50 Washington Street, Norwalk, CT 06854 under the following circumstances:
A. The United States Securities and Exchange Commission (the "SEC") has
established the operational Electronic Data Gathering, Analysis and Retrieval
System (the "EDGAR" System) for the electronic filing of information required
pursuant to the federal securities laws and the rules and regulations
thereunder.
B. TRW is distributing electronically certain SEC filings filed through the
EDGAR System as part of the EDGAR System Dissemination Service operated by TRW
and Subscriber desires to subscribe to such service.
NOW, THEREFORE, the parties agree as follows:
TRW follows a series of protocols to insure that the EDGAR filings distributed
by TRW as part of the EDGAR Dissemination Service and derived from the EDGAR
Filing System reflect the content of the machine-readable EDGAR Filings used by
the SEC as official custodian of these records. This does not mean that the
EDGAR Filings distributed by TRW are free of errors. TRW endeavors to reproduce
the official machine-readable version of the EDGAR Filings. TRW does not attempt
to correct errors which may occur in the official version.
Subscriber hereby subscribes to and TRW agrees to provide the EDGAR
Dissemination Service (as hereinafter defined) in accordance with the terms and
subject to the conditions set forth in this Agreement, including those set forth
below and on the reverse side hereof. This Agreement incorporates by reference
the terms and conditions of the Broadcast Service Details and Price Schedule
dated (the "Price Schedule"), a copy of which has been provided
to Subscriber and is attached hereto.
TRW Inc. (S&ITG) SUBSCRIBER
By: By: /s/ Tom Vos
-------------------------------- --------------------------------
Print Name: Print Name: Tom Vos
------------------------ ------------------------
Title: Title: Chief Operating Officer
------------------------------ ------------------------------
Date: Date: September 11, 1998
------------------------------ ------------------------------
==================================== ====================================
SECTION 1, DEFINITIONS.
(a) "EDGAR Filings" - public filings made in the EDGAR System. THIS PERTAINS TO
ONLY THOSE COMPANIES REQUIRED TO FILE REPORTS WITH THE SEC. CERTAIN SEC FILINGS
MADE BY THE COMPANIES THAT DO PARTICIPATE MAY NOT BE FILED BY MEANS OF THE EDGAR
SYSTEM, MOREOVER, FILINGS THAT ARE MADE IN THE EDGAR SYSTEM MAY NOT BE COMPLETE.
(b) "EDGAR Dissemination Service" -- the service operated by TRW more fully
described in the Price Schedule which endeavors to make available to the
Subscriber EDGAR Filings.
SECTION 2, SUBSCRIPTION PRICE; PAYMENT PROCEDURES.
(a) Charges payable by Subscriber for the EDGAR Dissemination Service are set
forth in the Price Schedule. Payment shall be made by Subscriber upon receipt of
the invoices.
(b) Subject to any necessary approval by the SEC, TRW may increase or decrease
the charges payable hereunder by giving Subscriber not less than 30 days prior
written notice of such change.
(c) The charges specified in this Agreement are exclusive of all state and local
taxes which shall, to the extent such taxes are applicable, be paid by
Subscriber.
SECTION 3, WARRANTIES; REMEDY; LIMITATION OF LIABILITY; INDEMNIFICATION.
(a) NOT WITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT TRW HEREBY DISCLAIMS
ALL WARRANTIES OF ANY TYPE NOT EXPRESSLY STATED IN THIS AGREEMENT, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES WITH RESPECT TO THE
EXACTNESS, COMPREHENSIVENESS, ACCURACY OR ADEQUACY OF THE EDGAR DISSEMINATION
SERVICE OR THE EDGAR FILINGS, INCLUDING WARRANTIES OF MERCHANTABILITY OR
<PAGE> 2
FITNESS FOR A PARTICULAR PURPOSE, OR ANY WARRANTY FOR YEAR 2000 COMPLIANCE.
SUBSCRIBER HEREBY WAIVES ALL RIGHTS WHICH IT MIGHT HAVE (NOW OR IN THE FUTURE)
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TO THE LESSER OF THE AMOUNT OF SUBSCRIBER'S ACTUAL DIRECT DAMAGES OR THE
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in such amount shall be exclusive of all other remedies which Subscriber may
have at law or in equity against TRW, any affiliate of TRW, or any officer,
director, employee, subcontractor, agent, successor, or assign of TRW or any
such affiliate (hereinafter jointly referred to as a "related party").
(d) IN NO EVENT SHALL TRW OR ANY RELATED PARTY BE LIABLE TO SUBSCRIBER FOR
ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING OUT OF, OR AS
THE RESULT OF, THE EDGAR DISSEMINATION SERVICE OR THE EDGAR FILINGS PROVIDED BY
TRW UNDER THIS AGREEMENT, OR THE PROVISION OF ANY EQUIPMENT OR FACILITIES BY TRW
IN CONNECTION THEREWITH, OR ANY CHARGES OR EXPENSES OF ANY NATURE INCURRED
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RECKLESS CONDUCT OF TRW OR A RELATED PARTY.
(e) Subscriber assumes sole responsibility for its use of the EDGAR
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Either party may terminate the EDGAR Dissemination Service upon 30 days written
notice to the other party. In addition, Subscriber acknowledges that, in the
future, TRW may change the media and format of the EDGAR Dissemination Service
and make certain other changes in connection with the introduction of expanded
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TRW shall have no liability to Subscriber for any damages whatsoever arising out
of or as a result of the failure by TRW to provide the EDGAR Dissemination
Service as provided in this Agreement: (i) because the EDGAR Filings are not
made available to TRW at its EDGAR Dissemination Service facility; (ii) because
of actions taken by the SEC (or required by the SEC to be taken) or actions not
taken by the SEC (or required by the SEC not to be taken); or (iii) as a direct
or indirect result of any other use or circumstance beyond the reasonable
control of TRW (including, without limitation, acts of God, acts of public
enemy, war, accidents, fires, electrical or equipment failures, strikes, postal
delays, explosions or governmental orders or regulations).
SECTION 6, NOTICES.
Any notice or demand required or permitted under the terms of this Agreement
shall be sufficiently given to either party if sent by certified or registered
United States mail to such party at its address appearing at the beginning of
this Agreement, or to such other address as such party may have designated for
such purpose by notice given in accordance with this Section 6.
SECTION 7, ASSIGNMENT.
This Agreement may not be assigned, in whole or in part, by Subscriber without
the prior written approval of TRW.
SECTION 8, ENTIRE AGREEMENT.
This Agreement, which includes the Price Schedule, contains the entire agreement
between the parties with respect to the matters set forth herein and superseded
all negotiations, representation, warranties, commitments, offers, and
contracts, whether oral or written, prior to the date hereof.
SECTION 9, GOVERNING LAW.
This Agreement shall be construed according to, and the legal relations between
the parties shall be governed by, the laws of the State of Virginia.
<PAGE> 3
EDGAR DISSEMINATION SERVICE Ver. 9/1 9:45 am
BROADCAST SERVICE DETAILS AND PRICE SCHEDULE
NOVEMBER 1998
This Price Schedule sets forth terms under which TRW, Inc. (TRW) agrees to make
available to Subscriber the EDGAR Dissemination Service
1. BROADCAST SERVICE (LEVEL I)
TRW shall provide Subscriber with a broadcast stream of data which contains the
EDGAR Filings as they are made available to TRW by the SEC for public
dissemination at TRW's EDGAR Dissemination Service Facility. Subscriber shall
take delivery of the data F.O.B. at TRW's EDGAR Dissemination Service Facility.
The data format may change from time-to-time and TRW shall use its best efforts
to give Subscriber prior notice of any such change.
2. CHARGES (11/1/98-12/31/99)
Subscription charges (includes appropriate copy of FastCopy) $
--------
Additional Line Charges $
--------
3. NETWORK EQUIPMENT
Subscriber shall provide line and line termination equipment that shall
terminate on dedicated communications ports on the computer located at TRW's
EDGAR Dissemination Service facility. This facility is located at TRW, 7915
Jones Branch Rd., Suite 6B, McLean, VA 22102.
4. PEAK PERIOD SERVICE
Subscriber is responsible for acquiring and paying for a line with sufficient
speed to handle the Peak Period Volume. A T1 line is recommended. Peak Periods
and Peak Volumes are discussed in TRW's Technical Specification that is
provided to subscribers separately. If a Subscriber fails to provide lines with
sufficient line speed to support the Peak Period Volumes, TRW may not be able
to provide broadcast service to them during these periods. Subscribers may
download Filings from TRW's designated Internet Service Provider (ISP) as
described in item 9.
5. COMMUNICATIONS PROTOCOL
Subscriber will be provided with an appropriate version of FastCopy which has
its own proprietary communications protocol. The cost of FastCopy is included
in the subscription price.
6. DATA COMPRESSION/ENCRYPTION
TRW shall compress and encrypt the broadcast data stream.
Decompression/decryption software shall be provided to Subscriber at no
additional charge. From time-to-time, as necessary during the term of this
agreement, TRW may modify the decompression/decryption software.
7. TECHNICAL SUPPORT
TRW shall provide Subscriber with Technical Specifications and up to five hours
of telephone consultation in order to establish the broadcast link between
Subscriber's office and the TRW EDGAR Dissemination facility. Additional or
other consultation hours shall be at the charge per hour in 12D.
8. TAPES
TRW is not offering tapes of any kind, at this time.
9. BACKUP
Subscriber may download Filings from TRW's designated Internet Service Provider
using the instructions, telephone number, User ID and Password issued to
Subscriber by TRW.
<PAGE> 4
Ver. 9/1 9:45 am
10. TEST BROADCAST
Prior to the availability of the live broadcast, TRW shall make available to
Subscriber a test broadcast.
11. ADDITIONAL LINE
Subscriber may acquire an additional line to be used as backup in the event
that the primary line fails. Subscriber is responsible for the acquisition and
payment for the additional line and line termination equipment. If a second
line is used, TRW will simultaneously transmit EDGAR Filings to two different
Dissemination Receipt Servers located at Subscriber's site. The Pricelist (item
12) contains TRW's additional charge to accommodate the second line.
12. PRICELIST
A. Broadcast Service Subscription Charge
This charge will be set on October 1, 1998 based on the number of signed
contracts received by that date. The table below contains a 14-month price at
various subscription levels:
<TABLE>
<CAPTION>
SUBSCRIBERS AS OF
OCTOBER 1, 1998 PRICE
<S> <C>
1 to 8 $152,172
9 to 15 92,967
16 to 25 55,346
25+ 42,179
</TABLE>
B. Subscribers choosing to begin service after November 1, 1998 will be
charged a prorated amount based on dividing the appropriate 14-month price by
14 and then multiplying that number by the number of months remaining in the
14-month period.
C. Additional Line Charge $__________
In addition to Subscriber being responsible for the cost of the additional line
and line termination equipment, TRW shall charge Subscriber the above amount to
recover the costs of an additional copy of FastCopy and other expenses related
to supporting the additional line.
D. Consulting Charge Per Hour $__________
Subscriber is provided up to five hours of telephone consultation in
connection with initially establishing the link between Subscriber site and
TRW's EDGAR Dissemination Service facility. Subscriber may acquire additional
consulting services at the above hourly rate. This may become particularly
desirable during the period prior to the SEC's permitting filing in HTML with
PDF attachments.
<PAGE> 1
Report on Schedule and Consent of Independent Accountants
The Board of Directors
EDGAR Online, Inc.
The audits referred to in our report dated February 12, 1999, except for
note 13a, which is as of March 25, 1999 and notes 13b and c, which are as of
March 30, 1999, included the related financial statement schedule as of
December 31, 1997 and 1998 and for each of the years in the three-year period
ended December 31, 1998 included in the registration statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based or our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG LLP
Stamford, Connecticut
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 148
<SECURITIES> 0
<RECEIVABLES> 166
<ALLOWANCES> 31
<INVENTORY> 0
<CURRENT-ASSETS> 290
<PP&E> 600
<DEPRECIATION> 188
<TOTAL-ASSETS> 785
<CURRENT-LIABILITIES> 731
<BONDS> 0
0
0
<COMMON> 63
<OTHER-SE> (2,284)
<TOTAL-LIABILITY-AND-EQUITY> 785
<SALES> 2,003
<TOTAL-REVENUES> 2,003
<CGS> 1,046
<TOTAL-COSTS> 1,046
<OTHER-EXPENSES> 3,046
<LOSS-PROVISION> 62
<INTEREST-EXPENSE> 132
<INCOME-PRETAX> (2,221)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,221)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,221)
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
